1660318795446 Johncaltabiano

Tariffs, tech, and your supply chain

Sept. 12, 2018
In this Big Picture Interview, learn how better data and predictive models can help steer through supply-chain volatility.

John Caltabiano is VP, Global Supply Chain, at St. Petersburg, FL-based Jabil, a global manufacturing services company that works with 27,000 suppliers worldwide. He spoke recently with Plant Services managing editor Christine LaFave Grace about the mounting trade-related uncertainties that supply-chain professionals are contending with – on top of evergreen concerns about natural disasters and other supply-chain disruptions – and how new technologies can help manufacturers better predict and deal with the impacts of supply-chain changes.

PS:  How are new analytics tools offering greater visibility into manufacturers' supply chains, and what's the real implication of these?

JC: We have an analytics and decision-support platform that we call InControl; this is an analytics platform that basically sits on top of all of our systems. We say, "Look, we have the ability to allow you to see all parts of your supply chain." Customers can see the order backlog; they can see the flow of parts, material coming into the factory; they can see the performance of the suppliers; they can see their forecast fidelity; they can see a lot of things that they may not have been able to see in an aggregated manner before.

We had an event in China where a supplier had a pretty large problem due to a mudslide. With our tool, within minutes of knowing we had a problem, we had a parts list, a customer list, and alternative-supplier lists, and we were able to immediately start executing against alternative supplies. If you had to do that manually, it would have taken a week. We were able to recover; we didn’t miss any shipments.

Just the speed with which you can move in getting the analytics that allow people to take action drives a lot of value. Another example is we have a tool that can do the simulation of total supply-chain costs, so if you have a globally distributed product and you want to know where the lowest-cost location to manufacture your product is, our tool allows for those analytics to take place with a lot of variables, with currency variables, labor-cost variables, with energy-cost variables. Once you build the tool, then you can simulate what happens if things change. If you pick one location, for example, and you change the currency by 20% and logistics costs by 20% and, say, there’s tariffs, and that’s still the lowest-cost location, you go, "Wow, that’s a pretty resilient location." If you pick a location and you change the variables just slightly and it starts to change the location of where you should manufacture, it gives the management team a lot of information about, "Wow, that’s kind of risky," because we know the world changes.

PS: How are supply-chain challenges continuing to evolve?

JC: We have disruptions that are really challenging supply-chain professionals right now. No. 1 is the supply market: Economies are good everywhere and suppliers are really busy; lead times are very long; supply costs are going up. So the challenge of still generating value by the supply-chain team is really, really tough. I think the No. 2 challenge is answering the questions around trade and the different kinds of regulations in the global market. I think everybody’s kind of in a new world now, understanding the implication of changes to NAFTA, changes in the EU, to trade relationships, the trade war between the U.S. and China, challenges in India, where they’re making changes to become more of an open economy. It also makes it a great time to have good partners.

PS: Given all of this volatility, what’s some general guidance you offer to people?

JC: I’ll say this tongue in cheek because I tell some people this: Early retirement is probably a good idea (laughs). It’s really challenging. What we're communicating is really three things: First of all, you need really good people and expertise. You have to understand things in detail to make sound business decisions, whether it’s tariff and trade issues or commodity cost breakdowns, the best locations, (or) supplier evaluations. The second is you need what we call bimodal management. You have to manage for today because you have to ship product today; you have to have people focused on keeping the business running. And then in the other mode, you really must have people focused on the future and making the changes to keep the business moving forward. There’s a lot of change coming, and if you don’t start now, you won’t be ready for those changes and to take advantage of them. That’s a challenge for a lot of companies to operate in two modes. It takes different kinds of people, different kinds of leadership.

PS: You recently returned to the U.S. from a three-year assignment in Singapore, and you previously were VP of global sourcing a Jabil. From your experiences, how are issues pertaining to supply-chain strategies and challenges approached differently in other parts of the world?

JC: I’ll give you two different answers. One, not that much differently, because it’s still a global economy, and everything’s connected, and you really have to have kind of a global view. So I don’t think it’s different, but I do think that the business climate in Singapore has always had a global view; the business climate in Asia has always had a global view. People look at problems a little bit differently than a Westerner does, and that’s because they’ve had to operate in a very collaborative, global, connected world. The U.S. economy is the largest economy in the world; what do we have to worry about? Now it’s different. Businesses in Asia, they’ve always had to rely on exports and collaborative trading relationships and long-term partnerships because they didn’t really have a market close by that was going to be beneficial to them. Now they do. But I think that mentality is a little bit different there.

PS: “Globalization” isn’t the loaded term that it is here.

JC: Exactly. Because they haven’t lost jobs; they also never had large margins to serve. (For them), global trade is a good thing. In the Western Hemisphere, certainly at least in today’s world, there’s a little bit of a different connotation. It takes a while to have a global mindset. Companies today that are successful have global mindsets, no matter where you find them. And (it’s the same for) the supply chain, too—they’ll go anywhere, anytime, if it’s the best supply chain.

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