|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
Software AG helps organizations transform into Digital Enterprises, so they can differentiate from competitors and better engage customers, partners and employees. Using the Software AG Suite, companies can close the gap between business and IT to create digital systems of differentiation that drive front-line agility. We offer four on-ramps to the Digital Enterprise: alignment through collaborative process analysis; transformation through portfolio management; agility through process automation and integration; and visibility through intelligent business operations and big data.
Sep. 30, 2014 10:30 AM EDT Reads: 1,399
There will be 50 billion Internet connected devices by 2020. Today, every manufacturer has a propriety protocol and an app. How do we securely integrate these "things" into our lives and businesses in a way that we can easily control and manage? Even better, how do we integrate these "things" so that they control and manage each other so our lives become more convenient or our businesses become more profitable and/or safe? We have heard that the best interface is no interface. In his session at Internet of @ThingsExpo, Chris Matthieu, Co-Founder & CTO at Octoblu, Inc., will discuss how these devices generate enough data to learn our behaviors and simplify/improve our lives. What if we could connect everything to everything? I'm not only talking about connecting things to things but also systems, cloud services, and people. Add in a little machine learning and artificial intelligence and now we have something interesting...
Sep. 29, 2014 06:45 AM EDT Reads: 1,855
Last week, while in San Francisco, I used the Uber app and service four times. All four experiences were great, although one of the drivers stopped for 30 seconds and then left as I was walking up to the car. He must have realized I was a blogger. None the less, the next car was just a minute away and I suffered no pain. In this article, my colleague, Ved Sen, Global Head, Advisory Services Social, Mobile and Sensors at Cognizant shares his experiences and insights.
Sep. 28, 2014 09:45 AM EDT Reads: 1,517
We are reaching the end of the beginning with WebRTC and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will want to use their existing identities, but these will have credentials already that are (hopefully) irreversibly encoded. In his session at Internet of @ThingsExpo, Peter Dunkley, Technical Director at Acision, will look at how this identity problem can be solved and discuss ways to use existing web identities for real-time communication.
Sep. 27, 2014 11:30 PM EDT Reads: 1,881
Can call centers hang up the phones for good? Intuitive Solutions did. WebRTC enabled this contact center provider to eliminate antiquated telephony and desktop phone infrastructure with a pure web-based solution, allowing them to expand beyond brick-and-mortar confines to a home-based agent model. It also ensured scalability and better service for customers, including MUY! Companies, one of the country's largest franchise restaurant companies with 232 Pizza Hut locations. This is one example of WebRTC adoption today, but the potential is limitless when powered by IoT. Attendees will learn real-world benefits of WebRTC and explore future possibilities, as WebRTC and IoT intersect to improve customer service.
Sep. 27, 2014 10:30 PM EDT Reads: 1,807
From telemedicine to smart cars, digital homes and industrial monitoring, the explosive growth of IoT has created exciting new business opportunities for real time calls and messaging. In his session at Internet of @ThingsExpo, Ivelin Ivanov, CEO and Co-Founder of Telestax, will share some of the new revenue sources that IoT created for Restcomm – the open source telephony platform from Telestax. Ivelin Ivanov is a technology entrepreneur who founded Mobicents, an Open Source VoIP Platform, to help create, deploy, and manage applications integrating voice, video and data. He is the co-founder of TeleStax, an Open Source Cloud Communications company that helps the shift from legacy IN/SS7 telco networks to IP-based cloud comms. An early investor in multiple start-ups, he still finds time to code for his companies and contribute to open source projects.
Sep. 27, 2014 10:30 PM EDT Reads: 2,264
The Internet of Things (IoT) promises to create new business models as significant as those that were inspired by the Internet and the smartphone 20 and 10 years ago. What business, social and practical implications will this phenomenon bring? That's the subject of "Monetizing the Internet of Things: Perspectives from the Front Lines," an e-book released today and available free of charge from Aria Systems, the leading innovator in recurring revenue management.
Sep. 27, 2014 09:45 PM EDT Reads: 2,459
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges.
Sep. 27, 2014 08:45 PM EDT Reads: 2,337
There’s Big Data, then there’s really Big Data from the Internet of Things. IoT is evolving to include many data possibilities like new types of event, log and network data. The volumes are enormous, generating tens of billions of logs per day, which raise data challenges. Early IoT deployments are relying heavily on both the cloud and managed service providers to navigate these challenges. In her session at 6th Big Data Expo®, Hannah Smalltree, Director at Treasure Data, to discuss how IoT, Big Data and deployments are processing massive data volumes from wearables, utilities and other machines.
Sep. 27, 2014 01:00 PM EDT Reads: 2,020
All major researchers estimate there will be tens of billions devices – computers, smartphones, tablets, and sensors – connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo in Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be!
Sep. 27, 2014 11:00 AM EDT Reads: 2,182
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at Internet of @ThingsExpo, Erik Lagerway, Co-founder of Hookflash, will walk through the shifting landscape of traditional telephone and voice services to the modern P2P RTC era of OTT cloud assisted services.
Sep. 26, 2014 11:45 PM EDT Reads: 1,519
While great strides have been made relative to the video aspects of remote collaboration, audio technology has basically stagnated. Typically all audio is mixed to a single monaural stream and emanates from a single point, such as a speakerphone or a speaker associated with a video monitor. This leads to confusion and lack of understanding among participants especially regarding who is actually speaking. Spatial teleconferencing introduces the concept of acoustic spatial separation between conference participants in three dimensional space. This has been shown to significantly improve comprehension and conference efficiency.
Sep. 26, 2014 10:45 PM EDT Reads: 1,455
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, will discuss single-value, geo-spatial, and log time series data. By focusing on enterprise applications and the data center, he will use OpenTSDB as an example to explain some of these concepts including when to use different storage models.
Sep. 26, 2014 07:45 PM EDT Reads: 2,273
SYS-CON Events announced today that Gridstore™, the leader in software-defined storage (SDS) purpose-built for Windows Servers and Hyper-V, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Gridstore™ is the leader in software-defined storage purpose built for virtualization that is designed to accelerate applications in virtualized environments. Using its patented Server-Side Virtual Controller™ Technology (SVCT) to eliminate the I/O blender effect and accelerate applications Gridstore delivers vmOptimized™ Storage that self-optimizes to each application or VM across both virtual and physical environments. Leveraging a grid architecture, Gridstore delivers the first end-to-end storage QoS to ensure the most important App or VM performance is never compromised. The storage grid, that uses Gridstore’s performance optimized nodes or capacity optimized nodes, starts with as few a...
Sep. 26, 2014 06:15 PM EDT Reads: 1,634
The Transparent Cloud-computing Consortium (abbreviation: T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data processing High speed and high quality networks, and dramatic improvements in computer processing capabilities, have greatly changed the nature of applications and made the storing and processing of data on the network commonplace. These technological reforms have not only changed computers and smartphones, but are also changing the data processing model for all information devices. In particular, in the area known as M2M (Machine-To-Machine), there are great expectations that information with a new type of value can be produced using a variety of devices and sensors saving/sharing data via the network and through large-scale cloud-type data processing. This consortium believes that attaching a huge number of devic...
Sep. 26, 2014 06:00 PM EDT Reads: 1,567
Innodisk is a service-driven provider of industrial embedded flash and DRAM storage products and technologies, with a focus on the enterprise, industrial, aerospace, and defense industries. Innodisk is dedicated to serving their customers and business partners. Quality is vitally important when it comes to industrial embedded flash and DRAM storage products. That’s why Innodisk manufactures all of their products in their own purpose-built memory production facility. In fact, they designed and built their production center to maximize manufacturing efficiency and guarantee the highest quality of our products.
Sep. 26, 2014 05:00 PM EDT Reads: 1,567
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. Over the summer Gartner released its much anticipated annual Hype Cycle report and the big news is that Internet of Things has now replaced Big Data as the most hyped technology. Indeed, we're hearing more and more about this fascinating new technological paradigm. Every other IT news item seems to be about IoT and its implications on the future of digital business.
Sep. 26, 2014 10:00 AM EDT Reads: 2,043
Can call centers hang up the phones for good? Intuitive Solutions did. WebRTC enabled this contact center provider to eliminate antiquated telephony and desktop phone infrastructure with a pure web-based solution, allowing them to expand beyond brick-and-mortar confines to a home-based agent model. Download Slide Deck: ▸ Here
Sep. 26, 2014 10:00 AM EDT Reads: 1,518
BSQUARE is a global leader of embedded software solutions. We enable smart connected systems at the device level and beyond that millions use every day and provide actionable data solutions for the growing Internet of Things (IoT) market. We empower our world-class customers with our products, services and solutions to achieve innovation and success. For more information, visit www.bsquare.com.
Sep. 26, 2014 09:45 AM EDT Reads: 1,417
With the iCloud scandal seemingly in its past, Apple announced new iPhones, updates to iPad and MacBook as well as news on OSX Yosemite. Although consumers will have to wait to get their hands on some of that new stuff, what they can get is the latest release of iOS 8 that Apple made available for most in-market iPhones and iPads. Originally announced at WWDC (Apple’s annual developers conference) in June, iOS 8 seems to spearhead Apple’s newfound focus upon greater integration of their products into everyday tasks, cross-platform mobility and self-monitoring. Before you update your device, here is a look at some of the new features and things you may want to consider from a mobile security perspective.
Sep. 26, 2014 09:00 AM EDT Reads: 1,394