The Future of Supply Chain: a Dynamo Ventures Podcast

*From time to time we’ll re-air a previous episode of the show that our newer audience may have missed.* On this episode, Santosh interview Bill Driegert, Head of Operations and Co-Founder of Uber Freight. We discussed surge pricing, understanding the market, and building a sustainable supply chain business.

Topics include: David’s early years, life struggles, & turning points (1:25)The wild career ride from nearly being fired to CEO of Honeywell (6:15)Top 3 lessons for growth-stage CEOs (20:55)The one thing David is most proud of from his time at Honeywell (30:45)What will change (and stay the same) in the “new normal” ((38:00) Thanks to David for joining the show! We enjoyed the exciting and insightful conversation together. You can learn more about David and his brand new book by visiting www.winningnowwinninglater.com. About The Future of Supply Chain:During each episode of The Future of Supply Chain, we sit down with a different entrepreneur, investor, or industry veteran to discuss their story, views on the industry, and how we can collectively build the future of supply chain together.

TranscriptionSantosh Sankar  0:40  Hey ladies and gents Welcome Back to the Future Supply Chain podcast. I'm your host Santosh Sankar. And joining me today: our very own James Coombs, CEO/Fo founder of Vector AI. Welcome!James Coombes  0:53  Thanks Santosh. Great to be here. Santosh Sankar  0:54  Yeah, so you're joining us from across the pond, and I would say You're a portfolio company that we talk a lot about when it comes to the industry. Equally, our listeners might not all be aware of what you're building. So we'd love to just kick it off with a quick, you know, two-minute overview of what Vector AI is and what you do.James Coombes  1:20  Yeah, sure. We often talk about the elevator pitch, right? So maybe you guys have total buildings, but for me, an elevator pitch goes like three or four floors. So we are Vector AI. We are we're a paperwork copilot, we help to automate paperwork and logistics space. And by paperwork, we mean all sorts of things from bills of lading, invoices, packing lists, and so on. We do about 20 different documents. 200 different data points across 20 different docs and growing, growing over time. And in terms of the scale of what we do, on aggregate. Our customers process about $130 million dollars every year at the moment,  that's obviously growing. So it's a huge space and one that I think we can look obviously objectively or not objectively, I think we can make a big difference.Santosh Sankar  2:11  Tell us about the founding story behind Vector. Because you know, I remember first meeting you and Nisar back in 2017 on a trip to London in like this swanky or I guess I remembered as swanky it might not have actually been... coffee shop in Shoreditch. How did this even come to be?James Coombes  2:33  Yeah, so I don't know how swanky it was. I can't remember exactly the name of a hotel, but it was just a coffee shop. Every coffee shop in Shoreditch is pretty swanky I guess. We saw this massage. So I met my partner at an event called Entrepreneur First. And we met in Mid 2017 and we've been working together ever since. You and I met on some random Slack channel started by a guy called Sam Cropper. I believe his name was from In Motion. And I think you were on the chat as well. And it wasn't a very active chat. And I remember seeing your name and I remember you had basically said you are going to be in the UK at some point would love to meet interesting people. And I was like, yeah, you know, I think I'm interesting. I'll meet. So I dragged my partner along to this random meeting and just random coffee shop slash hotel review with a random dude. You. You put us in touch with a bunch of people literally from having just met. And I just remember being really impressed that you kind of go to those lengths to kind of work, work with us and help us out, given that you'd only just met us. And for us, that meant a lot and I obviously kept on, kept on going away and kept on. I kept the discussion up a review over weeks and months afterward.Santosh Sankar  4:24  You explored a lot of different ideas around the supply chain. What was that 'aha' moment where you realized we want to go be the co-pilot around paper and paper communication.James Coombes  4:38  I'm not sure if it was a moment specifically. I mean, my previous career work, I worked in a big bank. I worked in commodities and trade. A lot of my customers when I trade houses, they're doing a lot of trade finance. And so I was just very aware of all the kind of paperwork issues of around that business alone, I'd also set up had also set up a furniture company as well. At the same time, I was at some point in '08, ended up importing a lot of furniture from around the world into the US and Europe. And had so it was pretty, pretty aware of kind of all the moving parts around supply chain and freight forwarding as a result of that experience. So I felt like I had a pretty good overview of not just the kind of finance and the kind of trade and the trade finance world, but also just general operational aspects of the supply chain. And I think I've been able to combine those in a way that kind of gives us abasing an edge. And that that was how we kind of got onto this. And it was a problem and I think it's one of those spaces that is is a huge problem, but not that many people know about it, and that's exactly where I want to be as a company.Santosh Sankar  5:56  Mm hmm. I think the interesting thing our listeners might have picked up on is that the one thing you and the team at Vector hold to be true? Is that paper is a mainstay of the global supply chain? Explain that expand on that, because we obviously agree as investors that that's true.James Coombes  6:15  Yeah. Yeah. It's something we get, you know, occasional pushback on. Really what we're addressing is a standard problem run with supply chain and the very definition of a fragmented industry. I mean, you've got everything from mom and pop shops and kind of manufacturers around all around the world customs, houses, government agencies, banks, insurance companies, shippers, I mean, you've got so many different players in the space. And the idea that they're all going to be on one standard, it just doesn't ring true to me. I think given they all have their own systems, standardization is going to be very hard to come by, as much as it is kind of the holy grail but kind of like the target the end. The end goal, I think, given the constraints of the moment, and the constraints of the moment rely on the kind of lowest common denominator. And that common denominator is often just paperwork, right? It's just communication, whereas the method of communication between all these different players, and it's the only kind of standard they have, and we think that's gonna, that's gonna persist. And really, I mean, I could go on for a long time about this, but we're a company we solve problems. And the problem, real problems today, I'm basically saying like, okay, we accept that this is the status quo. How do we help companies do a bit better? And that's, that's really a core belief. In many ways, you can think of us as being like, the universal adapter. We're agnostic, we don't care what comes in, we deal with it. And we help enterprises around the world have taken that nonstructured kind of data and deal with it and analyze it to that format. And I think that's really powerful. I think another great analogy that like I again, I don't want to like belabor this point. But a great analogy is that people talk about blockchain and stuff in the space. And the big problem that that that kind of approach has is what I call the Oracle problem is how do you get something from like, the physical world onto the digital into digital? And I think that's, that's a large part of what we do. We take the status quo, and we bring it into that kind of digital future. And I think that concept is super powerful. And it's obviously something that resonates with a lot of our customers.Santosh Sankar  8:32  Yeah, and putting a bow on the paper bit. When people ask me and try to push on it. The beauty of paper across languages, borders cultures, is that it's the most flexible medium. So as long as you know, we have this fragmentation just around the people’s side of things. Paper is going to be a big part of it. And I love that you know how you talked about being the adapter? And I think something that people often mistake this for is Hey, is it just, you know, OCR? I think it's lost on people what it means to be the adapter. Could you expand on that?James Coombes  9:17  Yeah, yeah, for sure. And I also think, like some of the previous kind of previous points that you've done, you've made right in terms of kind of a universal adapter approach. Or, let me kind of take a step back. What we see like what kind of paperwork aspect is really is really in many ways. It's like the content of a contract that people are kind of passing in between each other. And you see this in so many spaces. You see this in a kind of a swift kind of world and then kind of you see it in GDI. You see that even though you've got a bunch of standards, there's always a bunch of like freeform areas where you kind of need to capture the nuance of that communication on that paperwork. I think that's also something that shouldn't be kind of ignored and forgotten that the huge amount of nuance is involved in the paperwork as well. But we capture. Now to your point on the OCR side. Absolutely. I mean, though, OCR on itself is... it comes up a lot. We talked about it in terms of, it's probably like 5% of what we do with a product. But it is really, it's really important to control. We spent a lot of our time. Actually, I mean, a huge amount of time actually building and training our own AI, so we don't use anything else. We use our own. We train them around on literally millions of images. And we've done it specifically in the supply chain space because supply chain paperwork is always really painful. There are watermarks everywhere. People like to print on top of stuff. We do handwriting so it's important to get that right. And so we trained and built our own so we have control and then that feeds the rest of what we do. The balance and this is a kind of a hard bit is more kind of the extraction site is, is to be able to say, you know what it's not just about extracting the text it's about specifically extracting kind of poor learning is why over contain a number of acts. And doing that in a meaningful way but doesn't involve you know, kind of historical approach are like templates and stuff has to do it in a smart way that can adapt and learn with an operator. And that's kind of where the machine learning part of what we do kind of reality comes into the picture. So that is the lion's share of what we do in terms of the extraction site. But you're right, it's leaps and bounds above OCR, and kind of embedding all of that stuff in a workflow as well is super important.Santosh Sankar  11:48  Yeah, yeah. It's it's basically taking the physical and turning it into a digital fabric of sorts.James Coombes  11:54  Yeah, but I would add quickly before as well is that like on the I think MLS has often overused an overused term in the space or not just a space in every space. And I think I think that's also something, whilst it is, I believe in the future where people will talk about it in the same way they'll talk about like, React. Like nobody builds a website now and says, you know, we're a react based website like nobody cares, right. And machine learning will be that in the future. But at the moment it is still important as an important part of our platform. And I think it's, it's important to differentiate ourselves as well because often use you see every company out there that says they do machine learning in some, some form. And I think it's really important to look at the team. Like if, if one of the founders and ml specialists, then probably not a real a proper Machine Learning Company. We built it and in the call, since we started, ML has been kind of been competitive in everything we do. And I just like it's important not to underplay that I think in what we do as a company.Santosh Sankar  12:59  Yeah, no, that's spot on. And as an investor, that's one of the first telltale signs. If you don't have that town at the table, you're, you're likely not an ml company or a vision expert or whatever else. Yeah.James Coombes  13:17  Look at the team, just about the look of the team, where we're super lucky to a bunch of other guys on the team who do justice. We live and breathe that.Santosh Sankar  13:30  Yep, yep. Shifting focus here. You have some noteworthy customers, we're not going to mention them by name, but you know, we have a major global bank, a top-five freight forwarder that you're fortunate enough to count as your customers. How have they dealt with, you know, this issue of the paper and then stitching, you know, trade credit and freight forwarding process together, like what is the status quo you're competing against?James Coombes  14:00  I think I'd probably go back to my kind of my, my banking background. Banks kind of think of this as kind of split things into like a back office, some middle office, and a front office. And the way I think about it, and the way we kind of describe what we do is actually, we've got, you've got the back office, which is kind of database stuff. But we don't really, we don't really touch that. You've got our front office, which is how do you interact with the customer at some point in some shape or form. And really, what gets ignored is that kind of middle space, that kind of a middle office, and if anything, I think what we're doing and what we're helping to build here is it's kind of a new middle office because that's where everything that comes into a bank to a freight forwarder to the carrier to any large enterprise kind of gets lost in that kind of middle ground. That's where all the unstructured stuff or stuff you don't really know what to do with kind of goes towards that middle office. And at the moment, like the only solution all these companies have is just to throw manpower at it, because there's no standardization. It's a standardization problem. When I think about what we do, that's what we saw. We thought about the middle office layer for enterprises. And I think that's probably the best way of thinking about it. Santosh Sankar  15:19  When a customer adopts vector. What is that experience like,? What are the benefits that they're seeing as you're taking them from an analog world to a digital world? James Coombes  15:33  We'd like to that we take them on a happy path, right? So we spent a lot of time with our customers to make sure that the way we work and interact with the kind of fits into their workflows. And we have measurable results. So one of our customers, we've directly measured it and so with them, we basically lead to 92% time saving, which is a huge amount of taking something from. It's taking something from 40 minutes before and just put it in those terms. It's, you know, it's not a tough sell, because you can point to genuine productivity.Santosh Sankar  16:19  We haven't used the word automation or RPA. But you know, what, what happens from here? Is this the baseline for that type of an effort?James Coombes  16:30  Yeah, I mean, I think I think a lot of what we do is we've created like this contained solution, where you can do things that people generally associate with a classic like RPA in one area, right? So if you control that kind of platform, and that that ability to work with your customers, then you can slowly start. You can start kind of chipping away at the other stuff that they do, but that should be more streamlined. I think like we're working on a ton of these. But, I think one really good example from the finance world, is that often you'll get things that are phrases. And so it will be literally prose that says, you know, you must have three copies or three copies of a commercial invoice or a bill of lading. And they have to be signed. And it will say that it won't, it won't be like a digital event statement. It's literally a phrase. And so what we do is we actually understand that phrase, we understand what it means in the context of what we do. And we kind of helped drive kind of an understanding and automate the understanding of that in the context of all of its documentation. And that is just the tip of the iceberg. So that's where we're going. There are so many other things if, if this was longer, we could get into it.Santosh Sankar  17:56  I would love to kind of close it off with how you see a solution, such as a Vector improving the freight forwarding world. Because it's one of those industries, right intermediary long tail, people think you can very easily collapse the intermediary, we've come to realize that that's just untrue. But you can work smarter. So I'd be curious, you know, what some of your freight forwarder customers have seen or benefited from?James Coombes  18:27  Yeah, I think it's exactly what you mean, what you just said, right? It's that intermediary level where you, you don't really have control over the way your customers interact with you. And in fact, control over that kind of standard comes at a premium, right? Because nobody wants to give that power away. So you're kind of stuck as a freight forwarder to kind of dealing with this level of complexity and non-standardization and I think that's where the next step in freight forwarding is. I think there's been obviously a lot of great work in terms of how, where the customer-facing side is. And the back end, but I think that interaction with this kind of diverse, fragmented supply chain, you know, touchpoint. I think that's where you can really add value, and really change things as a freight forwarder. And, you know, we're seeing that across all markets. There's a huge demand for what we do.Santosh Sankar  19:31  So I'm gonna shift gears on us a little bit here. And I'm going to talk about, you know, startups and building a business. You've been in the fortunate position where you're London based, but you have customers on both sides of the pond. And it's something you know, many European founders ask us about. So I'd be curious, what would your recommendation or advice be how, how can a European business start playing sales into the US?James Coombes  20:02  That's a good question. I don't know if I have the most representative opinion on this. We have to because we work with supply chain and supply chains by definition international. So that's always going to be a focus for us. So we're not too limited to working with a company based in the UK versus somewhere else. I think it also helped that I live in the US. I've lived in the US for 10 years. Yeah, I've, I've always found that not so easy, but I've always enjoyed working with us customers. They really kind of adapt and get excited about new tech and, and for me, I you know, obviously make it any easier and easier sell and so it's always been enjoyable. So, I guess the advice would be not to be scared of it. For us, it's it you know, yeah, I've enjoyed every every every part of working with us customers. And I imagine that Continue. Yeah, that's a skewed perspective.Santosh Sankar  21:05  Follow up to that would be you mentioned, you've had time, in this part of the world. You've been able to appreciate, you know, the culture and the requirements around dealing with that culture as a salesperson. Very curious, you know, taking a step back. If there was one skill you think a founder should have, as they tackle a supply chain problem, or build a business in supply chain? What would that skill be?James Coombes  21:37  Yeah, I mean, to me, I think, again, I can only speak to my own experiences. But I think the one thing that I knew made a difference from my perspective, is the ability to have a kind of a holistic view of how all of this stuff fits together. I don't think the supply chain can ever be taken in isolation. I think you have to consider it in the same kind of space as finance, insurance, general enterprise, and all the kind of moving parts around it. I don't think supply chain exists in isolation very well. So I think you, I think it's important to have an overview. Again, from but from my perspective is something I find really important. And I think I'd advise potential founders in the budget.Santosh Sankar  22:26  Yeah, last thing for you here. You've been on this journey for about three years now. Or at least three years since we originally met. What would be one piece of advice you wish you had back in 2017, as you set out on this journey to build vector?James Coombes  22:47  I've been asked this question before, and I've always struggled with it mostly because I always believe in kind of path dependency. And I think it's just something that you, you just can't enter with it. And that's okay. I don't think it was you, you will always have imperfect information. And I think it's important to accept that. And it's important to not the kind of like over-optimize for having all the information. And I think that as a founder, you have to live in a world where you have to make decisions on very incomplete information. So, like, my answer to that is always like, yeah, nothing. There's, there's not really anything that I would do differently. And that's not to say, I didn't make any mistakes. I haven't done anything wrong. I mean, I completely would definitely have but I just think at the right at the time, I thought this was the right thing to do. And I think I think that's the best approach, right? And it's kind of like serendipity is kind of going through and trying to make the best, the best calls with the amount of information you have is the way to go. And, you know, like, if I look back from where we are now I'm super grateful that we, we have an amazing team, we've got amazing customers. I think we were in a great position here where you can really change things and change how people do stuff. And I, like, it's hard to look back and say I would do anything. Santosh Sankar  24:22  No, I think that's, that's certainly sound advice. I‘ll say, you know, having had the good fortune of working with you. You always look to gather as much data as possible at each juncture before making a decision and that sounds like what you're alluding to, and provided one is comfortable with the framework that they're using and the inputs they're using around a decision. You shouldn't have to look back and really have too many regrets.James Coombes  24:59  Yeah, because the cost of making that, like the cost of making a decision usually isn't that bad. So it's almost worse than not making the decision. So just make the decision and if it's wrong, adjust. Santosh Sankar  25:10  Awesome. Well, James, I appreciate you joining us this morning, or rather this afternoon for you. And I look forward to seeing Vector continue to change the future supply chain. Transcribed by https://otter.ai

*From time to time we’ll re-air a previous episode of the show that our newer audience may have missed.* In this episode of the Future of Supply Chain podcast, Santosh sits down with Jon Bradford, Dynamo’s newest partner, to talk about investment opportunities in the supply chain industry. They discuss the shift from startup to B2B, fundamental similarities between supply chain and other industries, building great startup teams, and the vast array of opportunities in the industry right now.

In this episode, we sit down with Ed Clarke, Co-Founder and CEO of Yojee to talk about smart dispatching, route optimization and accountability and control with logistics.

Transcription:Santosh Sankar  0:00  Hey folks, welcome back to The Future of Supply Chain podcast. I'm your host Santos Sankar and joining me today from Ahold Delhaize is Dan Kovar. Welcome! Dan Covert  0:50  Thanks, Santosh. Thanks for having me.Santosh Sankar  0:52   Ahold Delhaize is a big name behind a lot of everyday brands that our listeners are likely familiar with. Could you give us the overview of the business so we can level set the playing field here?Dan Covert  1:06  Yeah, definitely. It's it's very confusing even even for us to work here, so I'll try my best to explain it. So  Ahold Delhaize is a global company. So we've got a bunch of brands in Europe, Indonesia, and the US. the US parent companie is called  Ahold Delhaize USA. Of that there's five brands that we support. And then there's two service organizations. So people that eat groceries that go to grocery stores that are familiar with food on the East Coast, probably now one of our brands. So we've got in the northeast of Hannaford going south, we've got Stop and Shop which is in sort of the Boston Market, the New York Metro market, a little bit upstate New York and Connecticut, throughout that area. Further south, we've got Giant company, which is based in Carlisle, Pennsylvania, that kind of services a lot of Pennsylvania market. From there, we have Giant Foods headquartered in Landover, Maryland, and then our further south brand is Food Lion which makes up a lot of the southeast. I think in in Tennessee Santosh, you've got probably a Food Lion somewhere nearby. Santosh Sankar  2:11  Oh, yeah. Dan Covert  2:12  Those are the five brands. Then we've got two service organizations. The one that I work for is called Retail Business Services, which isn't isn't the most isn't the flashiest name, but it's got our supply chain group, finance group, IT group so anything that would be a shared service amongst those five brands sits in retail business services. And then we've got a digital eCommerce arm as well. Pea Pod Digital Labs is the seventh component of the US business. All of the confusing PDL does all of our digital eCommerce. Anything home delivery, anything on the internet, where you're interacting with brands, buying groceries online, you can all think PDL for that sale. It's a little bit complicated but hopefully that helps. Santosh Sankar  3:05  How did you get into the world of supply chain grocery logistics?Dan Covert  3:11  Yes it's not exactly what everyone thinks they want to be when they grow up. But it's been great for me so far. So I started when I went to undergrad I was a physicist, and I thought that I was going to do something with that. I did some research and avalanche dynamics and snow science thinking. It turns out people don't really want to pay you to do that. So I I saw this offer from  Ahold Delhaize at the time, which was just Hannaford food line brand. And it was first international training program that you got to work for some of the European brands and you got to come back. Get exposed to a bunch of different things. And supply chain seems like the right application for what I had studied so I have a liberal arts degree. I have a Bachelors of Arts in math and physics, which is kind of silly. But they let me use some of those skills, but also get to work with people, which is super important. So that's I think one of the one of the cool things about supply chain, especially food retail supply chain is you're, you're one of the customers of your work. So if you make a wrong forecasting decision, and you're starting to get product because of that, then you're ultimately the end consumer of that. So you might not be able to get the product you need for your family. So I really liked that component of it, just the connectivity to society, I guess. And it's super analytical, which I really like. So that's kind of how I got into it. And then I've really kind of dug my heels into supply chains. And I started six or seven years ago and went back to graduate school for supply chain and, now just like fully, fully in love with the space. It's so dynamic, especially in this time, we're seeing, you know, stuff that we've never seen before and our ability to react and play important role in the communities I think, really critical and a really cool part of this company.Santosh Sankar  5:05  And your oversight now in your current role is around supply chain R&D. So what does that entail?Dan Covert  5:12  Yeah, so it's kind of an interesting team. So it's a really cool opportunity when I came out of grad school, they're like, we're going to start a supply chain R&D team. We want you to go figure out who should be on the team and then go figure out what you guys should do. This is what you're called to kind of a weird opportunity but a great opportunity to bring in a bunch of different people. I think I have the most diverse team in the company. We got people from Russia, Kazakhstan,  India...it's it's a great team. Really, our focus was was on innovation for supply chain. So innovation, super cliche word nowadays, but it's really helping us plan for the future for what supply chain should be. We've got one of the biggest food retail networks on on the east coast. So trying to figure out what what sort of technology we should use, what our strategy is going to be, how we work with, you know, how you and I met through the startup community, how we work with people like you and through your founders camp. It's all of that it's really propelling our supply chain. The future, a lot of it recently has been supply chain analytics. So we saw that as a huge gap when we're doing a lot of our research is that we don't have really robust analytics. That's where a lot of the, you know, exciting new technology is for supply chain. And it's not necessarily physical technology, but in a new software, new way to think about all the data that we have in our supply chain. So we've been we've been really focused on that for the last six months or so. Standing up a team to support that, working with a lot of a lot of cool startups in that space as well. So that's been a super big priority, but I think it's also really important for my team to stay connected to people like you also to any new technology happening in supply chain. Because there's there's so much innovation happening right now. And it's what we think is our is our mission and in this company is to bring that to our company.Santosh Sankar  7:07  Sure. And I'm gonna come back to that theme around innovation and startup engagement. But we'd love to kind of do a grocery logistics one on one. So people understand what we're dealing with here. A lot of folks who have been in our audience and our listener base, to your point, are consumers of the grocery supply chain. They've likely faced kind of stock outs on shelves or longer lead times when they want essential products. But stepping back, how is the grocery supply chain structured at a high level? What should people know about the way food is moved?Dan Covert  7:45  Yeah, so it's definitely one of the most interesting supply chains and I think anyone that works in supply chain thinks, you know, a widget is a widget and supply chain fundamentals are kind of the same. When your widgets expire and have to be thrown out after two or three days. It's a little different from, you know how you deal with that. So it's structured kind of like any major supply chain. We work directly with manufacturers, we have many different distribution centers segregated by temperature state, and by movement class. So we might have the need to pick a facility for super slow movers, whereas you might have fast moving facilities for super high velocity products. So, really fundamental on that side. We've got many different distribution centers that deliver directly to our stores. We also work with a lot of local suppliers, and manufacturers to deliver directly to our stores. So many big food suppliers like beer and soda and chips are all delivered DSD, direct store delivery, to our stores. But then we also work with a lot of local produce suppliers and farmers to get fresher product to our stores. It's obviously more efficient to go right from a farm to a store then, you know cross docking through a distribution center or even slotting into distribution center. One thing that we do some of that, to all those USA brands is vertical integration. So we've got a couple different vertical integration plants. We have one meat processing facility in Pennsylvania and really what that does is brings in sides of beef and cuts into steaks and shipped out to stores. There are a lot more efficient that way than having a butcher in every store. So whenever we're vertically integrated you see a huge growth in that that category in store. So trying to deliver different options for customers and kind of standardize across the company. So it's really a fascinating spot changes because of that perishability and the different sort of order cycle times are really quick. If people work in fashion retail or something like that you're planning like six months to year horizons. Whereas we're planning, you know, what's going to be on sale next week? How about how do we get this product into our stores as quickly as possible? It's it's definitely dynamic, very fast paced, which is exciting, especially in these times. Santosh Sankar  10:25  And I recall in your prior role, you're involved with demand planning. And I'd be curious, like, how is demand planning and equally supply planning conducted in the grocery world?Dan Covert  10:37  Yeah, so it's similar to a lot of a lot of industries. We we plan for promotions. And the thing is that if you're working in fashion, you might have a promotion a few times a year for holidays. We're promoting different products every week. So we're planning for exactly what product is going to be on promotion. How big of a display or store is going to build. How much inventory did I need to support that much inventory. They already have one or alternative channels to buy that product, especially in fresh, where you, you might have a tier one supplier and that supplier might have a bad crop, you might have to go to another, another supplier to the spot market, there's a lot of that sort of demand shifting that I think is pretty dynamic, and definitely can be a challenge. So I think from a planning perspective, you know, we generally plan on a two to four week horizon for our promotions to make sure that we have the right product in stock prior to promotions, work really closely with kind of the retail merchandising teams so that we understand their merchandising strategy. So that if they're going to build a display, or something like that, that we have the right amount of product, you also work really closely with suppliers, especially if it's private label to make sure that you know they're manufacturing the amount of product that we're going to need. So it's really in the food, retail space or in our space you kind of in the middle there where we're supporting ourselves. Stores, because that's where the customers are, we've got to make sure that they have enough product. But we also have to look at the manufacturers to make sure that if it's fresh that the crop is good enough that we can get what we need for a promotion. And if it's a private label product, that they're manufacturing, sufficient quantities that we can get what we need for our stores. So definitely a juggling game. One of the other things too, is just the amount of items that you have. It's so much different than a lot of other industries in that we might have 50,000 or 60,000 SKUs in store.Santosh Sankar  12:29  Wow.Dan Covert  12:32  You can't you can't individually manage every store item combination, there's probably something like 50 or 60 million store item combinations if you take all of our stores times all of our items. So you rely a lot on on algorithms to do this effectively. And then you focus on you know those those key promotions, those critical items, but then you rely a lot of math and to make sure that you have the right inventory in the plant right for for the rest of the items.Santosh Sankar  13:00  Sure. And you know, I'd be a bit curious like, how does one account for the sudden demand spikes that we've experienced in the last month like around the holidays? You can you get planned for but how do you deal with an event that you just weren't expecting?Dan Covert  13:18  Yeah, it's it's a challenge for sure. We've got a great team here. And I think people have done a great job of responding. But, to your point when you're going into Christmas, you know, Christmas is coming on the 25th. Every year, you know what products people are going to buy. There wasn't a sort of 2019 global pandemic SNMP session to say no, when the global pandemic hits this year, this is what we need to go have. It was just oh, wow, we're out of toilet paper flour, rice. People are buying on it that how do we quickly respond? So from a supply chain perspective, everybody always wants to be proactive versus reactive, but certainly in this, we saw some of the writing on the wall and tried to get as much inventory on critical items as we could, but then it hit really suddenly. And now your sales drop dramatically and it's tough to recover. So I think some of the some of the things that I do here is like the strong partnerships with our suppliers are, are really critical here. One of the big dynamics that we're seeing right now is to be more efficient manufacturers are scaling down production on the amount that's used. So there's a lot of rationalization going on in the CPG world where they might have made, you know, 1000 SKUs for us previously, and now they might be making 100. So just so their lines can be more efficient. They don't have to switch over their lines, their assortment is, is kind of much narrower, but they're able to produce a lot more of those fast selling items. So that I think from a supply chain planning perspective becomes a really interesting dynamic is that your shelf when you know you look at a shelf of ketchup, you might have 100 choices. Now he might only have 10 choices and how do we correspondingly work with our retailers to say, we need to change the merchandising in our store so they're not empty because you're only getting, you know, six types of ketchup for the next five months. But it's that's kind of the flavor of it right now. Santosh Sankar  15:17  Sure. Dan Covert  15:18  So really being able to work buyers to understand what they're going to make, try to get those strong partnerships so that they're efficient on production. We're getting our trucks there as soon as the product is ready. We're getting into our stores as quickly as possible. And really working with our merchants with a lot of our planning teams on now, what's continuing to sell. How can we start to build inventory on those products? Because what we see is, you know, shelves might be empty, but it's not like this products aren't, aren't coming. They're just selling at, you know, four or five x what they normally sell at. So the when the demand is happening, I think there's there's sort of an interesting shift. That I think a lot of people are experiencing is you want to get to the store first thing in the morning, right when that truck arrives, get toilet paper, flour and beans and all those things that people want so badly right now because they might be gone by day. So sort of trying to tailor delivery schedules to make sure that people get what they want. It's it's a wild time, I think the team has done a super good job responding to it trying to find alternative ways to get a product when some of our key suppliers or you know, if they have an outbreak at one of their, their plants, how can you switch alternative channels quickly? That's that's certainly a tactic that we've tried to deploy as much as possible. But yeah, I think that the partnerships are like in anything in supply chain are really critical. So both with the retailers, with the brands that we're supporting and with the manufacturers to make sure that we were working together to help them out as well.Santosh Sankar  16:54  Sure just listening to you articulate the nature of the supply side. I kind of forgot that there's this dynamic nature to produce and meats and perishable products where you just might not have the yield you expect versus the demand forecast and that adds a different level of complexity. Related to that, how does food safety play into this? I'd be remiss you know, as we're giving a primer on grocery logistics and food logistics. You know, where does food safety play into it? is it relevant throughout how how should people think about it and walk away educated about it?Dan Covert  17:35  Sure. I'm know by no means an expert in safety, but I'll try to try to give you my my thoughts on this. Of course, it's it's one of the most critical obligations as a retailer for selling food to people to bring home to their familie. It better, be safe, better be fresh, better be something that that they feel confident in feeding to their family. So yeah, absolutely top of mind for us in all of our products. Every thing from private label too, if it's a big CPG. If it's produce, if it's local, it's shipping from the west coast, it's critical to make sure that everything that we're shipping, we have top competence and the safety of that product. So to get sort of tactical on that, and there's tons of checks that we do, you know, inbound product at our distribution centers, making sure that the product is coming in correct if it's not meeting our specifications, and it's not something that we feel good selling to our customers, then we can reject the trucker or anything like that. So, you know, we check diligently when product comes into our warehouse check diligently when it comes into our store, people in the stores especially in fresher, going around multiple times a day making sure that the product on the shelf is still at the right temperature that the produce isn't bruised and still something that we feel feel competent. Selling to our customers a fresh product, especially in grocery stores is really the differentiator like you can buy Cheerios or candy the same at any store. But if we take a lot of pride and all of our, all the brands that retail business services supports, we take a ton of pride in making sure that, you know, they have the best best quality impression that we're really comfortable selling that to our customers. So I think kind of pivoting this a little bit into sort of the startup world and in emerging technology, there's a huge opportunity there. With fresh technology, you know, we've looked at a lot of different ways to make sure that you know, product is we can track the temperature of product isn't when it's coming all the way across the country and then use predictive analytics to say, you know, this product went above temperature for this amount of time, you either need to reroute that truck or you need to automatically reject the load. So there's a ton of, I think opportunity there in the startup space to improve, to use technology to make or you can say for its traceability, if it's, you know, getting more information on humidity and shock and temperature, time out of tempo all those things are really important so this is this is something that we spend a ton of time on. I've got someone on my team that's specifically focused on fresh supply chain strategy and innovation in that space so it's very much a top priority for our supply chain and for all the brands that we support to make sure that we got the best product for our customers.Santosh Sankar  20:23  And you know, I'd be curious you know if from your vantage point how our priority shifted from you know, Gen One to sitting here today on the podcast. Have the last several months of turbulence changed your priorities are you still pretty much kind of business as usual as it was set out to be at the start of the year?Dan Covert  20:45  I would say it's a little bit better. So I think when you when you look at the food retail supply chain, you're you're constantly balancing costs and services grocery is inherently very low margin. So you're trying to reduce your cost as much as possible. Still delivering the highest service you can to your customers. And that's the classic supply chain trade off of customer service. Throughout the pandemic, we've focused very heavily on service. Maybe sometimes being willing to pay more for product because we can provide greater service.I think more critical than ever was the need for for grocery stores and the role that they play in the community. Like, I've worked in this for this company for six or seven years. And I've never been in a time where like, well, I actually feel like we're really impacting the community with what we're doing. People are dependent on us to get the products. So I would say from a priority perspective, our priority has always been serving our customer and getting them the right products that they need. I think more than ever, we're focused on getting customers the product, keeping our pipelines full, making sure that you know, we don't we don't just have products today, but we have it tomorrow. And next week, and that you can count on all of our brands to be to have the product that that every customer needs. So I would say we've really focused on on that. We set out every year with a bunch of key strategic priorities that were, that we're going after. We're still focusing on those, but it's been for the last two or three months, kind of all hands on deck, making sure that we're doing everything we can to, to get product to the customer. So not another huge change in that regard. It's just really a heightened effort. You might scale back on some of the you might focus less on what's the greatest emerging technology, my team has pivoted a little bit from that sort of pie in the sky three year plan to what do we need to be doing right now? What analytics can we do to support our response, you know, in this month, so a little more operational and more tactical, maybe a little bit less long term strategic but ultimately trying to find the best ways to service our customers right now.Santosh Sankar  22:59  As you look through the supply chain like are there pressures being born on certain constituents or certain parts of the supply chain?Dan Covert  23:09  Yeah, I think so. So one of one of the big pressures is pressures on vendors, are they are they managing their inventory fairly? You know, when there's a big supply limitation on a lot of this, and I'm a big CPG, I've got to decide where I ship my products. So we're seeing definitely pressure on vendors to make sure that inventory is allocated correctly. There's one of the one of the biggest pressures and kind of the static pressure is when, you know, you'd see the pandemic hit some of our facilities and our association that is really, really hard to really hard to manage. They're not directly on on those lines, but it can be a huge challenge. If you've got a distribution center that gets many positive outbreaks, then that can be really challenging. So that's happening. To suppliers to, to pretty much every retailer, I mean, everyone's being impacted by this. And it's trying to figure out what what you can do how you can keep supporting our associates, like we talked about, you know, our priorities are to make sure our associates are healthy. Making sure that we're servicing our community properly. So I think we are seeing a lot of pressure on labor, being able to get people to feel safe, and you know, going outside like the, the real here then so that people in the grocery stores that are working every day, and it's easy for us to say, you know, this isn't a big deal. We're all working from home, but there's a huge amount of people, you know, we have thousands of associates every day, they're showing up to work, ticking boxes, making sure that that all of our customers are getting stores or getting food and then we have, you know, thousands of people in stores every day that are that are doing the same thing. If I was in that role, I would feel a lot of pressure, and I think that those people have absolutely risen to the occasion. We're super proud as a company of those associates because they're really making the difference.Santosh Sankar  25:08  Yeah, absolutely. hunkering down on the front lines. Yeah. So I'm gonna go back to a string of thoughts we had during the earlier part of our conversation around innovation. And I would specifically be curious about what your thoughts are around automation. So robotics, specifically, in terms of food and grocery logistics. Where's that going?Dan Covert  25:34  Yeah. So I think there's, there's huge opportunities there. One of the one of the things that, that we've been looking at is the automation is so expensive, and it takes so much time that you know, the full scale automation, the ASRS solution that people are thinking about, and it takes so much time and such a big capital investment, and there's a lot of there's so much work to be done in this case. So not saying that  there's obviously a ton of value in that one. One thing that my team has been working on that we're really excited about is sort of this, you know, flexible enhancement to improve a worker's productivity. Not to improve their productivity rather, but to just improve the working conditions. So we've been working with this company develops these suits that helps our our selectors. It reduces the fatigue on the selection process. Imagine if you're picking 50 pound cases, beef, eight hours every day, five days a week, sometimes longer than that. The amount of fatigue that that puts on your body is it's really taxing. That's kind of one of the projects that we're most excited about this for this year, because it's like automation often gets a stigma of like, you're going to replace the workers. And I think that what's so cool about this is now we're not we're not doing that we're actually making, we're allowing you to continue to do the same job but we're just improving the conditions that you're working in. Making it easier for you to do the same work. So I think that that's a really cool space. Something that we're really excited about is sort of this flexible or co-automation. I guess that's the term that people use to talk about that sort of thing. I think there's a huge opportunity there, because a lot of the work that still done in warehouses is you know, you need to be able to be flexible. And when you have to ramp up demand to 150% of normal, the automated solution can be sort of limited at that you can only get so much capacity out of that. So I think there's always going to be sort of a collaboration here where there's some products definitely make sense to automate where it can be really tedious and working in a freezer all days is very difficult. And people don't often want to do that. But in other areas, it's, you know, when you can rank on capacity really efficiently. There's there's a huge opportunity there. So I think it's kind of kind of a serpentine answer to your question, but I think I think there's a huge opportunity and it's not just sort of a replacement strategy. It's more of a collaboration strategy, which I think we're starting to see some really good benefits from this year.Santosh Sankar  28:07  Do you think the ROI around automation actually improves? As we've seen,  the fragility that having a lot of people in distribution sites brings around having to quit facilities with added safety and health precaution? Do you think that might actually bring the ROI story to a place where people say, yeah, let's accelerate this?Dan Covert  28:36  I think I think you could definitely make that case that it's becoming, you're seeing a lot of the impact. Now, as I was making the point earlier, that if you have a positive outbreak in your supply chain and facilities, especially then it could really, really cripple that. So I think that that's probably a competitive business case that people didn't really think about two years ago. And I think, yeah, the recent the recent A prevalence of that is really would be very positive for a business case is just sort of as a contingency. There's a lot of a lot of resilience that you can have with an automated facility. But, yeah, I mean, I think it's tough. Because we really value the people in our facilities. And I think that they're kind of critical to our business. So automation can often get the wrong impression, or I don't want to go too far down on that. I think that there's a huge opportunity to want to improve our workers well-being in the facilities. But yeah, I think that that could go in conjunction with the well being conversation with that. Yeah. If you're feeling unsafe being in a facility, then there's alternative solutions for that. Santosh Sankar  29:46  Yeah. We have one of our portfolio founders Eric Nieves at Plus One robotics says, robots work but people rule because there's a hell of a lot of things that humans will just always be better. So we need to augment our people. Out of curiosity, how do you balance internal R&D and then you know, external efforts such as you know, Dynamo's founders can find for participating in various ecosystem events.Dan Covert  30:14  It's an interesting balance, because what you want to do is think the external collaborations are super important, because then you're aware of what's going on in the industry. But at the same time, the the internal is really important because you want to be solving the right problem. Everyone loves like shiny objects, like autonomous vehicles and drones. And that sort of stuff, doesn't really solve that many problems that we have right now. They don't solve critical problems with the current state of the technology. So I think what my team tries to do is spend at least 20% of our week on the external side, understanding what's happening in the ecosystem, so we've got a good partnership with the incubator in Cambridge, Massachusetts that we work with quite a bit globally. Got the partnership with you, Dynamo and Founder's camp, we've been to a few times. So I think that that's really important having a pulse to what people are doing in adjacent industries, how the supply chain, startup space is changing. I think that's very important. But then it's also making sure that we're solving the right problems. So spending a lot of time with the operations teams in our company and understanding what problems they're trying to solve, so that we can get sort of imply that external research to the right, sort of problems internally.Santosh Sankar  31:29  Sure, sure. And for the entrepreneurs in our audience, is there an area of grocery food or just broadly in supply chain that you think is being overlooked? Or people are just unaware of and they should be building in that category? Dan Covert  31:49  Yeah, I think there's, I think the the almost almost question is looking at, you know, where there is a huge amount of startup activity taking taking place. Then spending time and interest to store and understanding what's really going on. So I think there's there's a ton of work being done ton of companies that are kind of solving the Uber freight type problem. You know, matching carriers and shippers, I think that that's, that's a space that's really heavily populated right now with a lot of a lot of companies doing doing really great stuff. I think really, on the product side is super interesting. Like, especially in the fresh product side, I think that that is going to become increasingly important for us it is kind of one of our one of the most critical parts of the food retail space. But how can we how can we get fresher product to our customers, it's really one of the questions that we think about all the time. So there's a ton of work being done on leafy greens here, like, especially on the East Coast, growing products inside. Growing leafy greens closer to the customer, instead of shipping them from one Valley in California. There's a huge opportunity there, but that's really the only space that we're seeing a lot of that happening. So anything that can shorten the supply chain, I think is very interesting. I think there's a cool opportunity there. Obviously, it's a very capital intensive business. The applications of analytics are obviously endless. And I think that we're spending a lot more time my team especially. Yeah, we have so much information or supply chain. How do we make sense of that? I think that that's a pretty popular space right now as well. I think one of the things that this isn't so much an opportunity, but it's just a way to work with big companies like ours, that we found to be very effective is the startups that we've been able to get stuff done with, like a simple product that people can see that doesn't necessarily involve having an IP integration team at all. I think a lot of the, you know, stuff more on the software side. It's obviously what people are developing. Now that can be really difficult to get a pilot done quickly with a large organization. The stuff that we've had the most success with, they're just like, hey, we've got this way to help pickers. more effectively, it looks like this, I've got it in my hand doesn't take it, you can go plug it into your DC right now give it to your workers help them work more efficiently, stuff like that. kind of the point I was making earlier around automation, where we're working with a company that to help make picking less fatiguing, and we're not going to worry, but less stressful enter on our pickers. So this is something that's been super impactful because we can just say, "Great. Let's go try it in our in our warehouse next week." It's just so easy to do stuff like that, versus Hey, I've got this cool algorithm that has this fancy UI. I need these 50 different streaming data sources. Can I work with your IT team?" And yeah, in three years maybe. So I think finding that that sort of area where it's really quick to test something that you don't have this, you know, this thinking about all the people that would have to be involved for a pilot to be successful is I think sort of the the mark of Are you going to have good traction with a big organization? The smaller the amount of people that have to be involved to get it off the ground, but the better?Santosh Sankar  35:08  Yeah, no, absolutely. Absolutely. I think those are great insights. Dan. We've had a awesome episode. I think folks who dial in and listen to this are surely going to understand how things get to their store shelves and on their kitchen table a lot clearer. But with that, hopefully can host you here in Chattanooga. I don't know if it'll be this year, but hopefully in the near future, nonetheless. Appreciate it. Cheers. Dan Covert  35:39  Wonderful. Thanks so much. Yeah. Great. Great to catch up.Transcribed by https://otter.ai

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