|By Dana Gardner||
|May 27, 2014 01:00 PM EDT||
The next BriefingsDirect case study interview explores the new face of customer engagement and procurement modernization by examining how MSC Industrial Supply is improving how they define and relate to their customers in the manufacturing sector.
MSC has been using the Ariba Network to innovatively bolster customer engagements, and to provide new solutions to their customers based on increased collaboration, information flow and buying trends analysis.
BriefingsDirect had an opportunity to uncover more about about such new, agile business services at the recent 2014 Ariba LIVE Conference in Las Vegas when we spoke to Erik Gershwind, President and CEO of MSC Industrial Supply in Melville, New York. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
Here are some excerpts:
Gardner: What procurement pressures are your customers facing? Why are they looking to change things? What's wrong with the status quo?
Gershwind: Most of our customers are North American manufacturers. One of the sea changes that we have seen occur, particular since the 2008-2009 global recession, is if you look back for the past two decades, there was a heavy focus by procurement, supply chain, and finance organizations on price, on cost.
Of course, that's still critically important, but since the 2008-2009 recession, businesses around the world, and certainly manufacturers in North America, now have a much greater awareness on the importance of cash flow and speed through the supply chain.
That's probably the biggest thing that we’ve seen in the past few years. Our customers are telling us that speed of the supply chain, getting to market faster, so they can have more of their products into their customers’ hands faster, is becoming a much bigger priority.
Gardner: So to be swift, agile, and lean in the way you go to market requires that you look at your internal processes, and get lean there. Is that right?
Gershwind: Dana, that’s exactly right. Leaner supply chains turn into shorter lead times. Shorter lead times mean faster speed to market. And all of that requires really tight dependency from every single link in the supply chain.
What we’ve found is that everything that’s happening in our supply chain right now is driven by the end-user, what's happening with the customer, but that customer’s needs are working their way back very quickly.
And collaboration, which is enabled by technology, is making it critically important in order to be effective in leaning things out.
Gardner: I certainly want to learn more about how you’re modernizing procurement and bringing benefits, but first, tell us a little bit about MSC, for those of our listeners and readers who are not familiar with you.
Over a million items
Gershwind: MSC is a distributor of industrial supplies. We sell over a million items, primarily into manufacturing or any maintenance environment. That could be anything from a safety glove, to an abrasive, to the most advanced metal cutting tools that are used in the manufacturing process.
We exist so that we can help businesses focus on their business. We do that by ensuring that supply chains run smoothly. Our small part in that bigger mission is around taking the complexity, the obstacles, and the inefficiencies out of maintenance, repair, and operations (MRO) materials.
We were founded over 70 years ago in a tiny storefront on the lower East Side of Manhattan, and everybody at MSC, including myself, has been part of what's been an amazing growth story.
We focus on anything that's an indirect part of a production process. So not the raw materials, not the direct stuff, but all of the other things that keep plants running. That’s what we specialize in.
Gardner: Another thing that’s going on, in addition to business pressure to be lean and agile, are some technology improvements over the past several years. One of those is a topic of the day, a hot topic, big data and the analytics that you can derive from more and more types of content and gain more and more insight.
How do you get information or acquire insights or analysis that can allow you to then bring better approaches to your customers in helping them be lean and efficient?
Gershwind: Historically, when I look at the core assets of MSC as a distributor, there were three things I would highlight: our people, first and foremost; our inventory; and our distribution centers, our physical assets.
What we’re quickly realizing is that there's a fourth one that’s every bit as important as the other three assets. That's information. You’re absolutely right. With every transaction that occurs, especially because of technology now, there's learning in there.
To answer your question, we’re using technology to help us harvest that data, use it to drive improvements within our own four walls, but more importantly, with our customers and with our suppliers.
I’ll give you two examples of how we’re employing technology. One is Ariba. Ariba is the perfect platform for connecting buyers and sellers. It's a network, but it's a network that leaves footprints. With every transaction, there’s a footprint left behind that’s waiting to be mined for operational improvements.
Another example is our vending initiative. We at MSC will take a little piece of ourselves and put a vending machine on the plant floor of our customers to store tools and let them take responsibility for procurement. Certainly, one advantage is security and inventory optimization, but there is information to be mined in each one of those machines, and we’re using that to help our customers.
Gardner: Tell me about your history of working with Ariba. How long have you been doing it, and what are some of the chief benefits that you see in using Ariba's Network and various cloud-based services to conduct your own procurement and tighten up your own processes?
Gershwind: MSC has been a seller on the Ariba Network for well over a decade. If you’ll bear with me, I’ll share a quick story, a trip down memory lane. One of our very first Ariba interactions was close to 15 years ago. One of our customers at the time, a big manufacturer, asked us if we could get up and running on the Ariba Network in less than a month's time.
The three partners together -- the customer, MSC, and Ariba -- rolled up our sleeves. We had teams working on the same side of the table for a month straight. It was a great example of collaboration.
And I still remember us huddled around the computer screen, waiting for that first transaction to go through. I’m proud to say that that customer relationship is one of the best we have still today.
In terms of the benefits that we as a seller see, there are three things I would point to.
Number one is certainly enhanced revenue growth. Number two is cost savings, because transactions are now done electronically. But I would call out the third one as the most important. Ariba is helping us collaborate. It’s bringing business networking to happen faster, more efficiently, and more frequently. And those collaborations are resulting in innovations to our supply chains collectively and are driving improvements.
Gardner: Erik, I’d like to return to this notion of the vending machines that, as you said, was an extension of your business into the actual physical plant of your customers. This reminds me of what happens in technology on the Internet. For big bundles of objects and data, rather than going from the server of the originator down to the individual user, we have what we call content delivery networks (CDNs), where we put those objects out as far toward the last mile as possible.
It seems to me that this is an interesting development for physical goods, and you also, of course, get the data back on how they are used. Explain to me your rationale and how far you’ve taken this into the market, this concept of the extension of your physical distribution capabilities into the very physical plant of your customers.
Gershwind: Vending and the idea of extending ourselves into our customers’ supply chains is a critical element of fulfilling our mission of helping supply chains run more effectively.
I’ll share a quick example with you. This is a customer that uses vending machines for us. This customer has about 150 vending machines installed as part of an MSC system across 75 locations in North America, and that system is yielding tremendous benefits for them.
Recently their MRO category manager was in New York and shared with me that at one site in Alabama, one of this company’s locations, their people were doing a mile-long walk there and back just to get to a centralized storeroom and get a supply replacement or part of a tool.
Think about that for a second, a mile walk. If somebody is doing that just once a day, and by the way, many are doing it multiple times a day, they’re walking a marathon by the end of the month. So by bringing inventory closer to where work is getting done, this company is saving time and they are translating that time savings into real dollar savings.
Gardner: I suppose there is also a common thread here with mobility, where people can use their mobile devices or smartphones to conduct businesses, activities, and processes and allow for check-offs, okays, and so forth, reducing that last mile and compressing the distance.
It also reminds me of being able to, in a sense, cross organizational boundaries. They become fuzzy. Your organization is inside another, for example.
Let's take this to a theoretical level. As we look three, four, or five years down the road, is the nature of buyer and seller changing? Are we really combining them into a common supply-chain ecosystem, where there isn’t necessarily an adversarial relationship, but something different, more collaborative?
Gershwind: Dana, you just hit the keyword. It's collaboration. The way we look at it, we’re all part of one supply chain. There's no such thing anymore as "my" supply chain and "your" supply chain. It’s one supply chain, and we are all interdependent parts of the one bigger supply chain. The reality is that we can't be effective without each other, and that's how business is going to be run. The beauty of Ariba, more and more, is that it's making that collaboration happen faster, more efficiently, and more effectively.
Gardner: Now, what about the data, returning to that subject. It’s okay with you to share data with Ariba and Ariba to share data with you. Then, we extrapolate that across industries, verticals, and go global. The amount of information we’re gathering, even anonymized and private, gives us great insights. We can start to be more predictive. That is to say, you know your supply chain, what your customers will demand maybe quite a bit before, or we can identify risks when things go amiss, sooner rather than later.
So do you have any thoughts about the future of analysis and intelligence when we apply it to the supply chain equation?
Gershwind: It goes back to the idea that, as a distributor, we used to think of ourselves as being in the hard goods business, and of course, we still are, and always will be, but we’re also in the information business.
The biggest change and trend that I would point to is the idea that information is now being used beyond our own four walls. At MSC, we always did a fairly decent job of mining our own data for supply chain improvements, forecasting, and understanding what to purchase.
What’s now happening, and it all starts because of our customers’ needs, that’s working its way back through the supply chain, is data and information is now being used to help our customers, and even our suppliers run their businesses better.
So the vending example I gave you is a great one. As I said, each one of those electronic transactions is a footprint. It’s the same thing with our website. E-commerce now represents nearly 50 percent of MSC’s revenues. Every single one of those transactions leaves behind little breadcrumbs that give us insights that we can then use and share with our customers and further back in the supply chain with our suppliers.
Gardner: It seems to me, Erik, that it requires a third party like the Ariba Network to aggregate and bring intelligence to bear on this massive data. I know that they’re leveraging the HANA platform from SAP more and more to do that sort of big-data analysis and intelligence gathering.
How important is it for you to look at that third party and see them in a trusted fashion? Could you do this alone, and are there many other organizations that can fill the role like Ariba Network is?
Gershwind: I don't think anybody can do it alone anymore. That's really the nature of the supply chain that we just talked about. What Ariba does is bring businesses together.
Think of it as a virtual networking forum. It used to be that, in the old days, you were able to network when you got together maybe once a quarter. Ariba is letting that happen in real time, all the time.
Are there others doing it? Maybe, but none that we trust more than Ariba. As I said, we’ve been doing it for well over a decade with them and we view them as an extension of ourselves into our customers.
Gardner: We’re about out of time, but let’s look to the future. Do you have any ideas about what you’d like to see from your unique position in the supply chain business, in manufacturing, and in indirect goods? What would you like to see for the next revolution?
Gershwind: The one thing I would point to that we haven't talked about is the opportunity that’s sitting right in front of procurement and supply chain, when it comes to indirect materials. For the last decade or so, procurement has done a wonderful job cleaning up direct materials, getting clear line of sight, optimizing the supply chain, and taking cost out.
Earlier this morning, in the general session, I referred to direct materials as the garage of the house, because everybody goes in, it’s a high profile spot, everybody is in it, it’s core to your operations, and it’s gotten a lot of attention.
Indirect materials is like the attic of your house. If it's anything like my attic, it’s neglected, the light bulb hasn't been replaced. So it’s dark and you can't see what's going on.
What we do know is that today, sitting in North American businesses, is $145 billion of MRO inventory alone, let alone broader indirect materials. We also know that 70 percent of that is likely never to be used.
So sitting in front of procurement is a $100 billion opportunity. It's not just the job of procurement, but all of us as a supply chain. It's sitting there waiting for us.
Gardner: What do you mean? How do we attack this problem, clean up the attic, as it were? Do we need to have better inventory? Do we have just-in-time supply chain, ordering and fulfillment? What is it that we need to bring to indirect that’s missing?
Gershwind: There are three things that we want to bring to indirect procurement and get at the attic. Number one is looking for time. The natural bias is to focus on cost, but what we’ve come to learn with our customers who are doing it well is that, if you focus on time savings, the cost savings does follow. That's number one.
Number two, we need light. We need light up there and we need to bring a flashlight with us. That flashlight is technology -- technology like Ariba. Use technology as the flashlight.
And the third thing, and we’ve been hitting on it all morning here, is collaboration. Get another set of eyes. It's hard to see things by yourself. You can't be successful on your own. So bring partners in and help you attack that $100 billion.
Gardner: So we are really talking about modernizing indirect procurement in ways that we have already established. We know these things work and we just have to establish the will and then bring it into that part of the business.
Gershwind: That’s it. It’s about taking what we have already done in the garage and applying it to the attic. That’s right.
You may also be interested in:
- Ariba's roadmap points to instant, integrated and data-rich business cloud services
- Dynamic discounting allows American Electric Power to bring new efficiency to procurement terms
- Case study: How ACP simplifies and speeds its billing and payments using the new AribaPay cloud service
- Business success increasingly hinges on supply chain innovation and procurement advantages
- Workforce of the Future -- and Why Preparing Means Rethinking Human Resources Now
- Ariba announces business network analysis enhancements, first transactions conducted under AribaPay
- Spot buying automated by Ariba gives start-up KooZoo a means to shop more efficiently
- Combining big data and cloud capabilities for ecommerce matches buyers and sellers like never before
- Here's Why Healthcare Businesses Must Efficiently Manage Their Suppliers, Purchases, and Processes
- Ariba LIVE roadmap debrief: Cloud data analytics
Join us at Cloud Expo | @ThingsExpo 2016 – June 7-9 at the Javits Center in New York City and November 1-3 at the Santa Clara Convention Center in Santa Clara, CA – and deliver your unique message in a way that is striking and unforgettable by taking advantage of SYS-CON's unmatched high-impact, result-driven event / media packages.
May. 29, 2016 10:00 AM EDT Reads: 2,489
SYS-CON Events announced today that BMC Software has been named "Siver Sponsor" of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2015 at the Javits Center in New York, New York. BMC is a global leader in innovative software solutions that help businesses transform into digital enterprises for the ultimate competitive advantage. BMC Digital Enterprise Management is a set of innovative IT solutions designed to make digital business fast, seamless, and optimized from mainframe to mo...
May. 29, 2016 09:30 AM EDT Reads: 2,297
In the rush to compete in the digital age, a successful digital transformation is essential, but many organizations are setting themselves up for failure. There’s a common misconception that the process is just about technology, but it’s not. It’s about your business. It shouldn’t be treated as an isolated IT project; it should be driven by business needs with the committed involvement of a range of stakeholders.
May. 29, 2016 08:15 AM EDT Reads: 2,651
SoftLayer operates a global cloud infrastructure platform built for Internet scale. With a global footprint of data centers and network points of presence, SoftLayer provides infrastructure as a service to leading-edge customers ranging from Web startups to global enterprises. SoftLayer's modular architecture, full-featured API, and sophisticated automation provide unparalleled performance and control. Its flexible unified platform seamlessly spans physical and virtual devices linked via a world...
May. 29, 2016 07:00 AM EDT Reads: 2,292
SYS-CON Events announced today that Alert Logic, Inc., the leading provider of Security-as-a-Service solutions for the cloud, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Alert Logic, Inc., provides Security-as-a-Service for on-premises, cloud, and hybrid infrastructures, delivering deep security insight and continuous protection for customers at a lower cost than traditional security solutions. Ful...
May. 29, 2016 06:45 AM EDT Reads: 2,943
When I talk about driving innovation with self-organizing teams, I emphasize that such self-organization includes expecting the participants to organize their own teams, give themselves their own goals, and determine for themselves how to measure their success. In contrast, the definition of skunkworks points out that members of such teams are “usually specially selected.” Good thing he added the word usually – because specially selecting such teams throws a wrench in the entire works, limiting...
May. 29, 2016 06:30 AM EDT Reads: 1,625
Automation is a critical component of DevOps and Continuous Delivery. This morning on #c9d9 we discussed CD Automation and how you can apply Automation to accelerate release cycles, improve quality, safety and governance? What is the difference between Automation and Orchestration? Where should you begin your journey to introduce both?
May. 29, 2016 06:15 AM EDT Reads: 1,445
SYS-CON Events announced today TechTarget has been named “Media Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY, and the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. TechTarget is the Web’s leading destination for serious technology buyers researching and making enterprise technology decisions. Its extensive global networ...
May. 29, 2016 05:15 AM EDT Reads: 3,272
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY, and the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management...
May. 29, 2016 04:30 AM EDT Reads: 3,250
Many banks and financial institutions are experimenting with containers in development environments, but when will they move into production? Containers are seen as the key to achieving the ultimate in information technology flexibility and agility. Containers work on both public and private clouds, and make it easy to build and deploy applications. The challenge for regulated industries is the cost and complexity of container security compliance. VM security compliance is already challenging, ...
May. 29, 2016 02:30 AM EDT Reads: 1,358
SYS-CON Events announced today that Tintri Inc., a leading producer of VM-aware storage (VAS) for virtualization and cloud environments, will exhibit at the 18th International CloudExpo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, New York, and the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
May. 29, 2016 01:30 AM EDT Reads: 2,483
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, wh...
May. 29, 2016 12:45 AM EDT Reads: 2,058
Application development and delivery methods have undergone radical changes in recent years to improve scalability and resiliency. Container images are the new build and deployment artifacts that are used to ship and run software. While startups have long been comfortable experimenting with and embracing new technologies, even large enterprises are now re-architecting their software systems so that they can benefit from container-enabled micro services architectures. With the launch of DC/OS, w...
May. 29, 2016 12:30 AM EDT Reads: 1,497
You might already know them from theagileadmin.com, but let me introduce you to two of the leading minds in the Rugged DevOps movement: James Wickett and Ernest Mueller. Both James and Ernest are active leaders in the DevOps space, in addition to helping organize events such as DevOpsDays Austinand LASCON. Our conversation covered a lot of bases from the founding of Rugged DevOps to aligning organizational silos to lessons learned from W. Edwards Demings.
May. 29, 2016 12:15 AM EDT Reads: 1,516
Just last week a senior Hybris consultant shared the story of a customer engagement on which he was working. This customer had problems, serious problems. We’re talking about response times far beyond the most liberal acceptable standard. They were unable to solve the issue in their eCommerce platform – specifically Hybris. Although the eCommerce project was delivered by a system integrator / implementation partner, the vendor still gets involved when things go really wrong. After all, the vendo...
May. 28, 2016 11:15 PM EDT Reads: 1,518
SYS-CON Events announced today that EastBanc Technologies will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. EastBanc Technologies has been working at the frontier of technology since 1999. Today, the firm provides full-lifecycle software development delivering flexible technology solutions that seamlessly integrate with existing systems – whether on premise or cloud. EastBanc Technologies partners with p...
May. 28, 2016 11:00 PM EDT Reads: 2,384
SYS-CON Events announced today that AppNeta, the leader in performance insight for business-critical web applications, will exhibit and present at SYS-CON's @DevOpsSummit at Cloud Expo New York, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. AppNeta is the only application performance monitoring (APM) company to provide solutions for all applications – applications you develop internally, business-critical SaaS applications you use and the networks that deli...
May. 28, 2016 10:00 PM EDT Reads: 2,589
While there has been much ado about interoperability, there are still no real solutions, same as last year and the year before that. The large EHR vendors who continue to dominate the market still maintain that interoperability is all but solved, still can't connect EHRs across the continuum causing frustration by providers and a disservice to patients. The ONC pays lip service to the problem, but that is about it. It is time for the healthcare industry to consider alternatives like middleware w...
May. 28, 2016 08:45 PM EDT Reads: 1,714
I have an article in the recently released “DZone Guide to Building and Deploying Applications on the Cloud” entitled “Fullstack Engineering in the Age of Hybrid Cloud”. In this article I discuss the need and skills of a Fullstack Engineer with relation to troubleshooting and repairing complex, distributed hybrid cloud applications. My recent experiences with troubleshooting issues with my Docker WordPress container only reinforce the details I wrote about in this piece. Without my comprehensive...
May. 28, 2016 07:15 PM EDT Reads: 1,957
SYS-CON Events announced today BZ Media LLC has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and Commercial Drone markets.
May. 28, 2016 07:00 PM EDT Reads: 3,657