Leveraging Big Data for Supply Chain Business Intelligence Insights with Paul Bingham

Francis Adanza

Welcome to the Down to Freight podcast, where we sit down with transportation, logistics, and supply chain subject matter experts to discuss digital transformation projects. I’m the host of the show Francis Adanza, and it’s a pleasure to welcome Paul Bingham, Director of Transportation Consulting for IHS Markit. Paul, it’s great to have you here today.

Paul Bingham

It’s great to be here, Francis. Thank you so much for having me today.

Francis Adanza

Absolutely. So can you please tell the listeners a little bit about yourself, your company, and what you’re responsible for at IHS Markit?

Paul Bingham

So I’m in transportation consulting in the economics and country risk portion of the information and analytics firm, IHS Markit. IHS Markit is a very large vendor and supplier of information and analytics used by businesses around the world, covering most industries.

And my position within that company is within a group that is bounded by an understanding and following of the economies of the world and assisting with risk management by companies that are engaged in supply chain activities globally.

And then in consulting, which is what I’m part of, we provide customized solutions rather than just subscription information products or raw data to apply the information in the context of what those companies can use, say, in risk management or in determining their own forecast or in analysis of freight transportation markets.

Francis Adanza

Great. Thank you for providing that overview. It’s super helpful. So as you know, we’re here to talk about technology. Is there a recent project or a current project that you’d like to share?

Paul Bingham

Yes, there is. I think the best example I can give is work we have been doing with clients to leverage their own data, layered together with our data, to help them make planning decisions for where they are now and where they want to go to. Because in many cases, they’re not where they want to be given what’s happened from the pandemic. But also to take advantage of opportunities that might be available to them coming in the future. So not just reactive, not just tactical, but also very much strategic.

And the example I’ve got in mind is in the consumer retail sector, where large retailers have been reviewing with some urgency, and some of which predated the pandemic, but has been accelerated by the pandemic on their source supply chains. This is where many retailers have found that the risks associated with single-source supply chains for certain skew categories have led to them suffering stock-outs. They’ve disappointed in terms of revenue. They’ve had markets in which they’ve not been able to serve adequately.

This has been a bad-news story for many of these supply chain managers, as a result of the severe disruptions from the pandemic and all of the issues which have flowed from it affecting the performance of supply chains, especially transportation and logistics in that time.

So what we do, and what we’ve done in this example I’m going to give you, is that we provide a big picture, full spectrum of assessment of country risk. This is looking at the large scale profile of a supply chain from the perspective of which countries are we sourcing from. It can drill down to the individual company level, but understanding even importantly the context of country-by-country. And this is a process that is an ongoing one. It can be done one time and provide input to say a particular point decision, but we tend to work with companies more of on an ongoing basis where they’re monitoring conditions as they change. Because obviously, conditions in countries across the board, however you’re looking at it, whether it’s the health conditions of the pandemic for the workforce or the consumers or if it’s government policy, or even if it’s things like disruptions from weather events or other disruptions from introductions of reactions of policies that affect industries within those countries, all of that is a moving target, is changing over time.

And what we provide are metrics of those industry risks, country risk categories, country by country, that are updated frequently so that they can be used in models that have a consistent framework, but also provide a constant updated set of weightings of those weights to be able to manage and to judge the current risk profile that those companies are facing, not one looking backwards in the past where they were before.

Our company also provides forecasts for many of these same markets and much of this information, to be able to understand the opportunities that can be revealed in that. And that is key to the context of the decision-making from the strategic level, often to put those country risk [inaudible 00:04:14] and the monitoring of country risk information in the context of decisions that will benefit those companies in the future. So as they revise their supply chains or they decide to enter or leave even certain markets, that information is forward-looking as to making those decisions based on anticipated market conditions, not where they were in the past.

Francis Adanza

Got it. That makes a lot of sense. I can definitely see how this is important to your client’s business. But for the companies out there who are not your clients yet, how do they make these decisions without this level of analysis?

Paul Bingham

Well, it varies tremendously. I think some companies are fairly sophisticated in their attempts to manage their risk management profile, including for international country sourcing. Sometimes that’s really done at a company level or at a supply chain partner level where they acquire information through their vendors, or perhaps some advisors that focuses in on the countries in which they are active, or maybe a limited set that they’re considering perhaps an expansion or a shift in terms of the country sourcing or market entry in terms of export sales or even production for domestic markets to sell in those.

But oftentimes, that sourcing of intelligence is piecemeal. They may be missing out on opportunities from countries that they’ve not considered to look at. And at the same time, they also may be missing some of the threats that exist in some of those countries, in terms of knots, perhaps. Companies specific supply chain risks, but risks that are affecting the performance of their supply chains from a sovereign level, a country level in terms of policies that may be affecting the performance or the cost for a file that they face in their supply chains.

Those decisions that are then made with partial information, there’s some optimal. Oftentimes, they result in perhaps more of a short-term outlook than perhaps to the medium and long-term cost to those companies in ways that they should have been able to better anticipate. Or conversely perhaps through a limited number of alternatives that they’ve considered, they ended up with a suboptimal arrangement of supply chains that ended up costing them more, or conversely, make them more susceptible to supply chain risk disruptions to the performance of their supply chains.

Francis Adanza

Wow. It sounds like a lot of work trying to draw conclusions with the amount of data you’re describing. Typically, how long does something like this take?

Paul Bingham

Well, it really depends on the intensity and the scale of the effort. For some companies whose supply chains are not quite so complex, perhaps in the number of skews or the layers, hierarchies of providers, it may not be so complex to do that if there’s a limited number of countries, sources for the relevant commodities. Maybe something that could be done relatively simply with the information that we have at hand combined with their own company information to be done in a few weeks.

On the other hand, there are those companies for whom the scope of their supply chains are quite complex and that they have hundreds of skews or thousands of skews that they’re managing with many hierarchies of supply chain participants in those supply chains across numbers of countries, where the complexity of the analysis to really do it right warrants a bigger effort. And that may take much more time in terms of many months or even years, if they’re thinking about it iteratively in terms of making some adjustments and then monitoring the results and then making further adjustments to the supply chains.

That can extend into those real long-term decisions, such as where you’re going to have a factory established and operating, or maybe you have to train a workforce in a new country in which you’ve decided to diversify or shift your sourcing. That obviously, can take a tremendously long time. And some of the guidance that we provide is some of the context for that, about what the expectations about timing might be. Because in some countries, the institutional, the infrastructure regime may be such that it’s much quicker for companies to get up and running with a decision once they’ve made it to get to the point where they may actually have production operating.

In other countries, there may be institutional public sector impediments, such as permitting or other processes that have to be engaged in that take much longer. And part of the context that we provide in terms of that risk management is understanding that context when you’re making those choices. So not just making a choice based on say, a production cost or an individual supplier costs or a contract that somebody might be offering you, but understanding the circumstantial situation in which you may be trying to operate that can affect maybe advantage you, or maybe disadvantage you in terms of making that particular supply chain choice actually function.

Some of those changes can be matched up to a company’s budget years, pretty readily. We can scale the level of effort and the type of work to match iteratively, really to match the appetite of a company and their management to do that so that they’re not biting off more that they can chew in terms of how much they’re trying to change their current supply chain profile and the current way that they serve their customers. And maybe align it over several years, even. If it’s going to be a major effort, it may be one where you can lay that out with a strategic plan to say, “Okay, in year one, we’re going to attempt to do this. And in year two, depending upon the results of that, we’ll attempt to…” Additional increment in the sophistication and complexity and so forth.

And then really for some of the greatest relationships we have, it’s an ongoing relationship where it really doesn’t have an end to it, that we’re providing information, we’re getting feedback from our customers in terms of what’s proved to be relevant for them, where they would like some enhancement, perhaps in terms of the level of information or the speed with which it’s being updated, or perhaps sometimes adding to some of the metrics that are being provided in terms of additional information that can be found useful for those particular companies.

An example, I would give you is that IHS Markit around the world, manages a set of metrics called the purchasing managers, indexes. Those are an index set that is produced from surveys every month of individual company managers in the procurement side saying what they expect to be purchasing. It’s a near term set of metrics, but over time, we’ve been able to enhance those and expand those so that they better serve some of the clients that are using those indicators as leading indicators, as they try to take into consideration how circumstances are changing country to country around the world to do comparisons across country, across industry, and to understand what changes they may need to make in the short run to try to deal with that, or in some cases to have validation of the plans they already have made in place to say, “Yes, the expectations are matching what we expect.

We’re going to continue and execute on the plan that we have.” The risks that we see with a lot of these clients is that they can try to make big decisions without having as close to as much information as they can possibly get to apply to that efficiently. And if they make the wrong decision to understand what will that cost them. What’s the downside if you have stock outs or you have a failed performance on the part of a supply chain vendor. Do you end up where the automakers have ended up this year with that supply chain of the semiconductors crippling their plant production, hurting their sales, hurting their revenues in ways that perhaps could have been a little bit better anticipated, had they done even a more holistic view of their supply chain dependency across country.

So that when we’ve seen the circumstances contribute to what they’ve suffered, perhaps they could have minimized that a little bit. There’s also circumstances where potentially there’s not a lot of slack in the supply chain. That’s been true prior to the pandemic quite a bit with lean manufacturing, lean supply chains, the discipline developed over the years of the just-in-time manufacturing. But one of the key lessons coming out of the pandemic now is perhaps, a little bit better sophisticated use of information, and maybe there’s some more sophistication that can be applied to the supply chain management discipline, where greater buffer stocks are justified.

And perhaps prudent more so than was thought in the past where there was just a drive to have as lean a supply chain across the board, as was possible. That’s made the smarter companies better able to deal with built in institutional and infrastructure issues around capacity. If they know they’re vulnerable because they have limited source supply both geographically and in terms of companies, perhaps then they can understand better, “Okay, that’s a risk that we can manage through the adoption of greater buffer stocks and incurring that greater inventory costs.

Whereas, in other inputs to the supply chain, they may still be able to say, “Well, we have appropriate redundancy. We have appropriate alternatives. We have relationships in place. If there’s a failure at a single point in the supply chain, we have our alternatives in place. We can switch over with minimal costs and we don’t need to maintain extensive buffer stock inventories to cover ourselves in case there’s a disruption.” And that requires a degree of sophistication and being able to analyze that supply chain by industry, by company, maybe by commodity to understand where the risks are and to be able to judge those appropriately in a model.

Francis Adanza

Got it. Those were some really good examples and very helpful. You touched a little on the results metrics and how engagements tend to grow and develop over longer periods of time. Typically, how do clients measure the before and after of these efforts?

Paul Bingham

Well, that’s a great question and it really depends on the scope of the projects and the scale of what they’re attempting to do, but it’s important to know the KPIs that they intend to be using for tracking that upfront. So part of the discussion early on is involved in that scoping of the project to say, “Okay, here are the kind of metrics that we’re going to be established. And then we’re going to agree upon to then be tracking it and making sure that we have the availability to collect that information.”

In some cases, that’s part of the project is to set up that information stream so that that information is available to be used on an ongoing basis. Those measurements of inventory, and turn times, measurements of land and costs, understanding how there maybe variability in pricing across the supply chain components and elements where you may be able to achieve some discounts as inventory ages or conversely understand that you’re going to be faced with rising costs if there are certain disruptions or certain interruptions in some of those supply markets and how you’re going to be able to deal with that.

And measure it in terms of ultimately back to the financial cost to the company, in terms of what that’s going to do to affect your P&L. Understanding trade finance costs is an important element of that. It’s not just the transportation cost itself, it’s what is the cost of funding that trade finance activity. And that varies with things such as exchange rate differentials. Depending upon which country you choose to operate in, or group of countries, those can be factors that need to be taken into consideration.

And part of that process of understanding it is to know which KPIs need to be used in managing that portion of your supply chain. And in some cases, it requires working more extensively with your supply chain partners, not just on the trade finance side, though, that can be part of it in terms of what it costs to fund you to participate with them in a supply chain or conversely you providing finding a system some supply chain partners, but perhaps also in the inventory, inventories that are being kept by your suppliers to understand more deeply as you go into those tier suppliers, what are their financial situation look like?

Especially if you want to make changes to it, to understand how that’s going to affect their ability to perform, their long-term status as a supplier to you, and also to be able to take advantage of opportunities that you see arise to say, “Well, here’s a particular change that we can make to our supply chain sourcing that would have lasting benefits to us based on the projections and the forecast that we see for particular end markets. A lot of these metrics are at the company level where you’re monitoring and matching and tracking specifically what’s happening within your own supply chain. But they’re also metrics that you capture in the context of your supply chain.

So your transportation costs in the context of what your competitors are paying for that same or comparable service through your supply chain or inventory management, or all the intermediaries that are providing services to you. That’s where the benchmarking comes in to provide information to be able to understand not just the alternatives for cost and structure of supply chain composition within your own network of supply chains, but those that you’re competing against, those of your rivals at some level or other somewhere in the world, so that you can understand where you stand in terms of how well you’re doing versus perhaps a company that’s better or perhaps worse managed than your particular supply chain is.

Francis Adanza

Got it. Well, I really like how you broke down the metric by company level versus business unit level and the relationship between the two. So what’s next for you and or IHS Markit in regards to other various technology initiatives that you might be working on?

Paul Bingham

Well, that’s a great question. I mean, some of them, I can talk about and some of them, I can’t. But just like our clients, we’re constantly innovating, we’re developing more solutions, we’re providing new revisions to the ones that have been proven useful with feedback from the customers. to say, how could they be improved to better serve them. We conduct some research. We experiment by gathering data that we’ve not used before, or perhaps not used in a particular way before to improve how we help clients make those strategic decisions.

I talked about what we’ve done in the retail sector earlier in this discussion. We’ve looked at a similar approach in other sectors where we’ve worked with other types of companies. And that can vary quite a bit. If you move from sort of the template for how retailers [inaudible 00:17:02] in their world of supply chains, that can be quite different from say an energy supply company or somebody in the chemicals business who’s primarily in manufacturing and selling wholesale. And we work with a range of companies across a whole multitude of industries.

In fact, there’s few that we don’t work with, at least on the side that actually produce physical goods. We have an agribusiness group and an autos group, and I’ve mentioned energy and others where we work very intensely with the companies, the suppliers and the customers of those industries specifically. And some of the innovation that we have developed came out of  an application that has become obvious or attractive to us to pursue for one  industry. then we find, well, it has application for companies in other sectors as well, perhaps with a different perspective applied.

I could give an example of, we have a product over in our maritime and trade division called commodities at sea, which is tracking vessels in their cargo in real time, across the world as vessels move. That’s used for benchmarking and competitiveness, KPI tracking by a number of companies. But that’s an area where we’ve expanded initially from some energy commodities into agriculture. And then we’ve taken that and extended it beyond some of the initial users, even into those that connect in the supply chains with those ocean born portions of activity.

Because obviously, most of those commodities are ending up somewhere inland from the actual port terminals, where we were tracking them just in that one product. And the risk assessments around that are able to then be more all encompassing to capture that element of the logistics portion of the supply chain risk and extended onwards so that we know, well, what’s the performance say of the connecting rail services or the connecting truck services or the pipeline network. It’s going to connect to that ocean born activity.

So that’s an example of where we are trying to do on an ongoing basis innovation work, where some of the developments really are not revolutionary, but they are logically innovative by applying lessons that we’ve learned from other sectors to benefit companies in new sectors that have not previously had that benefit from us. And that’s one of the, I think genius behind the expansion of IHS Markit over the years is to make that incremental change, but always be developing further to expand on out from the ever-growing foundation of analytical work and the data to drive that globally for all of the customers that we serve everywhere.

Francis Adanza

Fantastic. Well, Paul, this was super informative. I learned a lot about supply chain analysis, metrics and how some of these companies are making sound data-driven decisions. I’m sure our listeners will appreciate this episode. And for those folks who are interested in learning more about how you or IHS might be able to help them, what would be the best way to get in touch with you?

Paul Bingham

II think to start, go right to our website, IHSmarkit.com, that’s ihsmarkit.com. And then there’s a whole host of different options to pursue the capabilities and the information that’s available from the company to explore what’s most relevant for you. Because you can quickly drill down to those industry sectors that align with your business, perhaps ignore those that are a little bit further removed from your day-to-day responsibilities. That’s what I would encourage a place to start. And then you can contact me, feel free to reach me by email, it’s [email protected]. And I’d be happy to follow up with any of your listeners.

Francis Adanza

Awesome. Well, thanks again for your time today, Paul, really appreciate it.

Paul Bingham

Thank you so much, Francis.