Podcast: How Jabil drives procurement + supply chain as a cost driver

In this episode of Great Question, IndustryWeek Senior Editor Laura Putre talks with Frank McKay and Graham Scott, Supply Chain Officer and Chief Procurement Officer at Jabil respectively, about how they transformed procurement to a cost driver at the global contract manufacturer—offering their own optimized supply-chain technology to customers as a service. They also discuss how they’ve tackled recent procurement challenges—such as tariffs and memory constraints in the AI market—and built a pipeline to develop procurement talent.

Below is an excerpt from the podcast:

LP: Let's start off by talking about how Jabil's mindset around procurement is perhaps different from other manufacturers and how that came about.

FM: I can take that one. So yeah, I think first and foremost what we are doing is servicing about 450 of the most premier innovative brands on the face of the planet, many of them well-known household names who have trusted Jabil to take their manufacturing in many times in a global way, as in we're building their products for and on their behalf in multiple Jabil sites around the globe. And as you mentioned, we are responsible then for about 100 different Jabil facilities that we are importing to and exporting from, and they are spread throughout—I think it's actually about 30 different countries that we're in today. So it's a very, very complex global supply chain. And we kind of looked and said, so these household brands that are pushing the boundaries in tech and innovation, trust Jabil to not only manufacture their goods, but they also trust us with their supply chain. And if we can do that, from that set of customers, is there a right to play beyond those customers, beyond those end markets, beyond those industries that we serve? 

And could we take what we think we do pretty well, which is manage complex supply chain and operate a very efficient procurement organization, and face the market externally and monetize that, the buildup that we've had for decades around the experience, the relationships that we've cultivated just the size of the spend that we have. I think we're spending, Graham can correct me if my numbers are all, but I think we're spending about 26, 27 billion dollars on an annual basis. And that's across a supply chain network and network of supplier partners, about 30,000 suppliers. So take those insights, those that leverage, those relationships I experience and monetize it and turn it into some service offerings and we've done that over the last few years. 

So the company decided to leave that responsibility with this organization. So we not only have the responsibility for managing that complex procurement supply chain ecosystem, but we also have the commercial arm in terms of the ownership for the P&L as well. So we just think that's just a little bit of a differentiator. And I think the other thing I would maybe just mention is maybe just a little bit different as well for most organizations, although I would certainly recognize that we're not unique, is the fact that I report directly to our CEO as a result of just the size of the organzation, the amount of spend that we're responsible for and having that commercial responsibility as well. So those would be the things I think would maybe differentiate us a little bit from traditional procurement and supply chain organizations.

Graham, is there anything you want to add about your role in the mix here?

GS: Yeah, I mean, I think Frank covers the push towards more of a services play and an offering out to the market that's different from our manufacturing side. But I would also say, I think that procurement and supply chain, certainly over the last couple of decades have been vital to Jabil as we look at the growth that we've had through those last 20 years or so, making sure that we can deal with the turbulence that we see in the markets, the volatility the shortage situations that we've been through that you then add into that geopolitical issues events that are happening all over the world. whether it's weather related, earthquakes, etc. Just  making sure that we have a strong foundation around our procurement and supply chain teams enabled by our supply base and our supply partners that Frank mentioned has really helped Jabil getto the scale we're at today without those partners.

And without the experts that we have within the supply chain and procurement organization, it might have been a more difficult story to tell. I think there have been plenty of companies who have faltered over the last number of years just having to deal with some of the complexities that we've met within the markets.

LP: Can you talk more about what the synergy is between the two of you and your roles and how it adds up to competitive advantage?

GS: Yeah, I mean, I've been fortunate enough to work beside Frank very closely for the last 22 years. So obviously, we know each other fairly well. I think from a strategy perspective, the things that Frank's been pushing the team to be responsible for I'm fully on board with. I believe that we do have capabilities and talents within our organization that we should absolutely monetize and find ways to differentiate ourselves again within this space. So it's been helpful for me that there's been somebody there beside me that has got that vision. And really for me, it's became more of a procurement focus, making sure that we're doing all the right things with our supply partners. We're making sure that we can support the business, make sure that we can continue to grow through these volatile times and really focusing on making sure that Jabil has the material that it requires to enable that constant growth that we've seen over the last number of years. 

So that's then enabled Frank to kind of look at, okay, what else can we do and how can we help the company from a margin perspective, from a revenue perspective, and help grow some of those businesses that he mentioned before. I'm sure he's got a different take on it, but that was my take on it.

FM: I think I would just echo what Graham said, Laura. The thing that it comes down to, if you just summed it up in one word, actually, it would be trust. And Graham referenced the fact that we've been working really closely together for 22 years. And you're probably saying, hey, these accents are a little bit different.

We’re both from Scotland. And the simple reason for the simple reason for that is if you look at Jabil's history, it was a Michigan company that moved headquarters to Scotland, and now the headquarters is in Florida. The first international site was over in Scotland, and Graham and I joined that Scottish operation and then over the course of our careers at Jabil moved over to headquarters and then we spent some time in Singapore at different times as well and then moving back to the US. So we've been working very closely together and we both come from Scotland. So we have that as an advantage and we've just built up a level of trust and I think we, as Graham also mentioned, we have a very similar vision on how things should be run, how you should lead, and the characteristics I think a leader should have. We're super aligned on that. There's no daylight between us, and that just serves as well when we're messaging what we want to do with the organization and it's worked well so far. Hopefully it will continue to.

LP: Where do you see procurement creating impact at Jabil beyond cost savings?

FM: Yeah, I can take that and I'm sure Graham can add on. And then by the way, I should absolutely point out that none of what we are doing here is from a strategic vision, from taking that differentiation approach that we'd mentioned earlier around moving the organization to also have a services spend to it. None of that works if we can't continue to be flawless in our execution. And one of those things still will remain cost reductions and our ability to have cost leadership at the forefront of what we do, because customers still expect that. So that never goes away. That understanding and that expectation from customers that we will find a way to ensure that they are as competitive as they can possibly be using that large scale footprint and the leverage and the insights and the intelligence and the relationships.

We kind of mentioned earlier that Jabil has built up over decades of working very closely with our suppliers. And one of the things that we also see is as we're creating that position of cost leadership is we will endeavour to treat our suppliers like customers along the way. So we care really, really deeply about those relationships and we've been fostering them and then nurturing them for decades. And we couldn't do this without those partners. So we're acutely aware that they have to be successful for us to be successful. So if you get that recipe right, which is not easy, then you can go do some of the things from a differentiation and you can actually go around not only ensuring that you're keeping your customers competitive, but we can also keep Jabil competitive then by bringing in the services arm and looking for ways to actually create these net new revenue and margin streams that we've been very fortunate to be able to do as a result of bringing up the various offerings across services. And just for a lot of back cover on that, Laura, these are things like supply chains of service, logistics of service, procurement  as a service, we've got an AI component in there with a 50-50 joint venture that we've started up. We call that ID8. So ID and then the number 8, and that's what a native AI company, and we're specifically addressing procurement and supply chain solutions that Jabil has utilized and deployed for our own needs and then convert that into an external offering for the marketplace. So coming all the way back to how I started, you only get to do some of those really cool things to go create those new opportunities for the company if you can continue to execute. So I always lead with saying, “hey, if we don't get to do the things that we were actually paid to do in the first place, then we don't get to go do the other fun stuff as well.”

LP: Tell me more about the AI initiative and who your customers are for that.

FM: So this is a nice thing because it takes us beyond the eight or nine end markets that traditional Jabil manufacturing customers utilize us for. So this then opens the aperture for us to go talk to any customer in any industry. So some of the customers that were involved in in the service side and include the AI component in here as well. It can be in the retail side, it can be in the oil and gas side, it can be in the municipalities side and pretty much any industry that has a complex procurement or supply chain organization that wants to use the power and the capabilities that AI now has given us the opportunity for. And we can help them understand, hey, what did Jabil do? What did we embark on? What are we doing today? How are we ensuring that we are taking advantage of the AI inside our own organization? And then offering that out to a whole host of different companies across different industries.

So it's a really cool part of the offering that we get to sell in addition to some of the more physical things like managing someone's entire supply chain and our orchestration as well. So it [resonates] really well with customers that we actually have a tech side as well as drawing on the 3,000 plus folks we have across the organization and the expertise that they then bring.

LP: These services, are they usually things that you've optimized within your own organization first, and then you offer them to other customers?

FM: Yeah, exactly. Maybe Graham can give you a couple of examples, Laura, on just some of the things that we are embarking on, especially within as an organization. And we should say, so Graham owns those 30,000 suppliers that Jabil uses on an annual basis, roll up and through Graham's organization, and that is on our direct side. So anything that would go on a customer's product and the indirect side, so all the goods and services to help support and maintain the current landscape of Jabil and obviously building out for the future. So it expands across commodity management and category management. So Graham, I'll let you maybe just touch on that a little.

GS: Yeah, a good example, Laura, would be probably 20 years ago, we were putting together a document to explain to our customers what was happening in the market and how we could help them navigate again some turbulent times. And that initial document has just evolved over time to the point we had customers coming to us saying, where's the report? and we were providing that report on a quarterly basis. And as it evolved and as we gained more experience within the organization, we quickly realized that this was something that we could sell out into the market. This could be an offering that Jabil provides. And so we started our market intelligence service. So giving an update on what's happening within the electronics markets, the metals markets, maybe even some of the indirect categories that we manage as well. So really providing information to perhaps customers of the market intelligence function that they wouldn't normally see that level of detail. They certainly wouldn't see it from a manufacturing company like Jabil. You know, you could potentially be seeing a report from one of the big consultancy firms and perhaps they don't have that same level of practitioner experience that Jabil would have. So it had a different spin on it. It felt more like a practitioner's point of view than a than a consultancy kind of memo. So we really doubled down on that and we'll be expanding that now into more of an online offering. And we basically pulled that in together with one of our other products that we call Resilience Hub. So this basically becomes a way for perhaps smaller companies to help understand what's going on in markets. You know, if there's an event risk, they're going to get a flag to tell them that some of those suppliers are being impacted. 

So we're really starting to use what we've developed internally, turn it into a service and find opportunities for us to sell it out into the market. And then as Frank said on the tech side with IBA [Jabil partner in industrial sterilization solutions], we are starting to use many of the products that we've developed within IBA , within our own procurement and supply chain technology stack that is really helping Jabil to again lift ourselves from a technology standpoint. Frank mentioned the rapid growth earlier and we're growing at such a rate, it's almost impossible to bring in supply chain and procurement experts at the same rate. So we have to double down on our investments in technology and make sure that we are moving as the company moves up, but perhaps we're not hiding at the same rate. We're just adopting more technology, including AI.