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April 11, 2024

Key Supply Chain Insights from Davos 2024 (aim10x digital 2024)

Ian Cronin, serving as the community curator for the World Economic Forum’s Center for Advanced Manufacturing and Supply Chains, shares his insights from the recent World Economic Forum Annual Meeting at Davos 2024, which centered around three critical questions for business leaders: “How do I become more resilient, sustainable, and profitable?”

Ian, thanks for joining N10X, and, you know, great, seeing you again. Let's start over the introduction.

Yeah. Thank you so much. It's a pleasure to be here. I really appreciate, being included, and it's extremely exciting for this topic. So Ian Cronin, I help lead the World Economic Forum's work on advanced manufacturing and supply chains.

In particular, you know, how we can work with with great leaders from chief operating, chief supply chain, chief procurement officers to really look at what are the big challenges facing production ecosystems, everybody involved in them, all the workers in there, and how we can try to address some of the challenges that we're all facing.

Awesome. Now, obviously, last time we met, I was actually in Davos at the World Economic Forum. From a supply chain perspective, what were some of the key takeaways?

Supply chains were front and center as I think they they have been, fortunately, and I think for all those involved in the world, rightfully so, for the last five, three, four years now. But, again, right right back in it, I think everyone is seeing the the connections that it's not just about managing my supply. It's about the full ecosystem of of trying to accomplish how do I become more resilient, the role in in resilience. How do I become more sustainable? How do I drive my business?

And so looking across all of these these three facets, every single element of it was present in conversations whether people were talking about net zero, whether people were talking about how do we manage and work with some of these geopolitical tensions, these trade realignments. The world is is a complicated place right now, and and how is that gonna impact our supply chain? So the topic was everywhere for sure. And I think the the question everyone in operations always thinks about is, okay. The thing that matters then is how across all of those topics. How do we address them?

Awesome. And also the World Economic Forum recently published sort of what are the big topics for two thousand twenty four.

Supply chain was, you know, definitely, right there in terms of digitization of supply chains, you know, AI in supply chains. You already talked about resilient supply chains. Can you talk a little bit more about those big topics?

Yeah. I mean, they're they're all interrelated. I think that's the the piece that we we learned. I think the the biggest aspect that we we sort of continue to talk about was very fortunate to to have quite a few leaders in operations and supply chain and procurement. And I think technology is always central as sort of an interconnecting piece of what's gonna be the role of technology in addressing these challenges, but making sure that that's not kept within sort of a small group. So I think the big topic when we talked about technology, when we talked about supply chains and all these other areas is we're seeing large companies, innovative companies making this shift, adopting them, thinking about how they can leverage the technologies to make them more sustainable, to make them more resilient. But at the end of the day, it is an ecosystem.

We're only as resilient as as the weakest link in our supply chain. And so we can't just think we're gonna make ourselves better. We're gonna continue to grow and expect that if everybody else in our supply chain doesn't have that same mentality that we're going to be effective in in our main objective there. And so one of the big topics of conversation was, yes, we need to continue to develop.

We need to think about AI and generative AI and the industrial metaverse and and all the different elements that are really gonna shape where the management of operations supply chains go. But we have to bring everybody along on that journey. And so how do we make sure that we're making those those learnings available, that we're actually supporting suppliers and and those who are maybe don't have the understanding of which technologies they should look at. They don't necessarily have the capacity to to run new pilots.

They don't necessarily have the financing to say, how do I how do I make these CapEx investments in in my operations? And so that was a a big source of conversation, particularly on we can't think about this within our own four walls, but we have to think about this as as partnerships.

A hundred percent. What I also liked is, that the World Economic Forum did a big study, that sort of put people front and center. Right? So there's one thing to talk about technology, but then, obviously, you know, what is the impact on actually people that have to work with technology or, you know, are being impacted by technology.

Can you talk a little bit more about that study and then specifically about adopting new technology and the people side of that? And then second is, you know there is a challenge when it comes to global workforce in terms of re education, new skills, the global workforce is aging. What are some of the insights of that study?

Yeah. I mean so look.

People have to be at the center of what we're talking about. And I I think, I was almost reticent to say that sentence because if I go back five or six years to some of the conversations we're having globally, I think there was a a conversation where we said, well, it's a human centric fourth industrial revolution. And I felt at the moment when that was being said five, six years ago, it was a hope. It was we hope people are at the center of this, but we're not really sure if that's gonna happen, if it's gonna materialize.

And what is really exciting now is, as I mentioned before, the the how of that. I think people have very concrete ideas of what does it mean to actually keep people at the center of this. And we see leaders who are who are making those steps. And so, I I mean, to your point, if we look sort of historically in operating environments and companies, in corporate environments, I think there's always been a very good road map in most environments for if I come in and I start, my job, how do I progress here?

How do I grow it within my role, and where can that take me within my organization?

That's not always been the same in in operations for operators on factory floors with the the people sort of driving this and and having that same sort of understanding of where we can go. And so I think there's a couple elements that we sort of learned is, one, there are leaders who are in industry who are helping their their manufacturers, their operators understand what what is that road map for them? If I do training x, where does that take me? If I do training y, what are my opportunities there?

And so it creates also excitement, some incentives for the the the individuals in those roles to sort of see where where they can go, where they can progress. And and I think probably the biggest thing that we also learned is at the center of this whole conversation is is people and technology and and how we drive that effectively together. And from our study, we we found time and time again that efficient digital transformation has to involve conversations from the beginning with factory workers. Almost a perfect recipe for disaster is companies who just come in, decide what it's going to be, and implement it without ever talking to the operators.

And I think that when you begin those conversations early with with the folks, they see the ROI. They see people actively engaged in this transformation process.

But at the same time, it is a transformation. And so the other piece we learned is change is it's human nature. Change is difficult for us. And so how do you manage that?

And one of the there's there's, sorry, a few different aspects that came out of that. One is sort of expectation management. I think all of us, that can apply to anything we're doing. But do people understand the timelines of the transformation?

When you say we're gonna make this change. Okay. By when? How fast do I have to do these things?

That understanding from the beginning is incredibly helpful. The other piece is that not everybody learns in the same way. Do you have capacity to train in different ways? Because just because someone doesn't learn in one way doesn't mean they can't be just as effective as everybody else with that new technology if they're given different resources to to learn.

I think the third aspect that we really looked at in that that particular study was that you will have champions, or we call them sort of super users, with these new technologies. People who just get really excited, they gravitate towards it, and they love it. There's sort of a a dual benefit to that. If you can leverage those people, one, they feel more valued.

They feel like they're actually helping to drive the transformation the company is aiming for and and contributing in a new and different way. And then you're also able to to have people who understand the role who are also helping to train others. And so you create a bit of a feedback loop.

And and so I think all of these things come together to to really help enable the change in on the the factory floor. And sort of the the last piece to a lot of what came out of that that study was this notion that it's iterative. You have to you can't say, okay. Well, we did the training.

Now we're sort of ready to go. So you have to be prepared to have this. And, I mean, we generally talk about lifelong learning, and that that's something that's going to enable workers to to continue to progress. But that even in in implementation of a new technology.

And so do you have the right incentives in place, and do you have a a process that's iterative to help people continue to understand? And so I think that was some of the big things from from that particular report that we found. And now it's how do you take that forward? With that, we were in factory floors talking with operators around the world to understand their experience with this transformation, and that needs to happen.

That needs to continue to happen. So we're excited for where that's going also.

Excellent. Now the other, sort of key discussion topic that was was how supply chain and sustainability are being super connected.

Mhmm.

What is your advice or what are some of the thoughts that you can share with chief supply chain officers on how to think about those two in a much more connected fashion?

Partnerships, partnerships, partnerships. I think we were looking at sort of the big enablers of I mean, for us, the elephant in the room for for everybody, which is scope three emissions.

It depends on the industry sector, but it can range in some industries fifty percent. But in most, it's seventy to ninety five percent of their total carbon footprint is from scope three. So the emissions from the rest of their supply chain outside of their direct control. And the only way that you can do that is with partnerships.

Now that is sort of a very common trend in in talking with leaders of operations and supply chains that I'm certainly not the first person to ever say that out loud. And and I think there's almost some frustration among our partners where they say, I need to address scope three emissions. My CEO has made a commitment that we're gonna be net zero by twenty thirty, twenty forty, twenty fifty, whatever the marker is. I have no idea how to get there, and your advice to me is that I need to partner with other people.

I need to collaborate with my supply chain partners. Thank you. I know that. But but to do what?

How? And so I think one of the things that we actually we put out we put out a couple different frameworks in the last year and a half, particularly around net zero. So one was a a no excuse framework to net zero that really outlined if you're thinking about making a commitment, if you have it, you need to execute across these ten pillars in order to achieve net zero in general. And now we're looking sort of deep dives into some of those pillars.

One of them is particularly on scope three, and really, the idea there is we need tangible examples. So we've built a use case repository of people who have actually moved the dial on reducing their scope three emissions. And then pulling up the learnings, what were the commonalities? What did they all do that was similar?

There's not a a panacea to solving this, but I think it is it it's one of those things where the more examples people have of of what is a partnership, what is collaboration is key. So sustainability and supply chains, it it's critical. I think it also is it's becoming ingrained in in the business model of most companies. I think when you think about even if it's on technology or if it's on sustainability, there was a propensity not that long ago.

You go back, you know, ten years to sort of say, I'm gonna wait and sort of see what my competitors are doing on this. And if they're adopting a new technology, if they're sort of thinking about sustainability in a different way, I'll consider sort of what that means for me. I think what we're seeing is is some company shifting and some companies needing to shift faster to being proactive on that. Because if you wait, you might not be around in five years to catch up.

And so, I think those are some of the big things that we've we've talked about is there's consumer demand. People want to to be more sustainable. There's regulatory demand that's coming in in this space. And then it's also there's so many opportunities.

And, again, not the first person to say this, but some some win wins on how you actually can drive the competitiveness of your organization and become more sustainable. And so if we can bring these together, we can actually move the dial on this. You know, with with all of that said, I think we found that something like fifty percent of the the companies who had made a scope three commitment are falling off track of that commitment.

So there's a lot of opportunity, but we're also we're we're not moving quick enough. And part of that is, I think, seeing the ecosystem is that there isn't sort of that true understanding of what's the business sense, that collaboration with the supply chain partner. It exists, but I think we we need to do a better story as and people involved in in sort of sharing some of the the industry knowledge of helping that narrative become more clear.

Makes total sense. Now, actually, the other thing, and to maybe build on this is policymakers and government bodies. They're also, you know, present in Davos, and I think they play a critical role in, you know, collaborating with enterprises, to get to more responsible sustainable supply chains. How can we accelerate that level of collaboration and what's your point of view on that?

Yeah. I mean, I think the dialogues in in a place like our annual meeting in Davos or or wherever they're happening is sort of the first step. I think you would I'm always shocked when I hear from policymaker. Like, policymakers are hungry for for insight, for for input from industry.

I think there's people in in general, we can be skeptical of of of policy design. And and if but I think with the full benefit of the doubt, policies are made, with the absolute best intentions. Sometimes they just don't work in the real world the way we anticipate. And so we need conversation to have that feedback loop to to say, look.

Here's what's working and here's what's not working. Here's the direction we see as as industry leaders, things going, whether it's from supply chain disruptions, or new models of whether it's regional production capability. It's spread between cost competitiveness and risk competitiveness and the models companies are thinking about. And and how does the current operating policy operating environment impact that?

And and how does it need to change for us all to be more effective? So that conversation has to start, but there's also some very concrete and tangible things, that I think, one, are happening from a policy perspective to help this and that that can. I mean, we we were talking about technology adoption earlier, particularly with small and medium sized enterprises.

Again, in a moment of uncertainty is usually not when people make large CapEx investments. And at the same time, if we go back to the pandemic, we saw the companies that had made those investments, that had invested in advanced technology solutions in their supply chains and in their operations fared much better through the pandemic than those who hadn't. And so how do we help them to to to make those types of investments? And I think policymakers play an enormous role in in in helping to come in to create incentives and to derisk some of those investments even when there are moments of uncertainty.

Because they they will provide dividends and and resilience that's gonna help economies and and help sort of the entire ecosystem flourish. So there's a lot to be done there, but I think that we're we're having the right conversations now. I think the other thing I would encourage everybody is we were talking with some policymakers to say, look. We we put out when we're thinking about a policy, we put out a call for comments.

But I hear from the same five companies every time. And so we need more people to to be engaging with us in that conversation. We put out official calls for comment. So I think there's the the conversations that can happen.

Mhmm. But then there's also sort of this direct engagement, and it doesn't always have to be this, well, I'm lobbying for my my position. It it can be much more, here's here's what we're seeing, and we see it's gonna be better if it's like this. And policymakers are are looking for that type of insight.

Mhmm. Excellent. Thanks for sharing that. I want to shift the conversation to the, lighthouses.

So first Monday, the World Economic Forum in Davos, you know, a lot of lighthouses were announced. Tell us a little bit more about, you know, what are those?

Yeah. So the the Global Lighthouse Network was a an initiative that we launched probably almost five years ago now.

It was originally a research piece of work, where we were just looking at what happens when companies try to implement new technologies in their operations and supply chains. And in that initial piece, we found that seventy to seventy five percent of companies, when they go through this this effort, get stuck in in pilot phase. They never they never reach scale. They never get an ROI. So we said, well, twenty five to thirty percent do. What if we could identify the one percent who are the very best at this, who have multiple integrated use cases?

And and since then, we've we've been in an effort to to identify these these factories, and and I think it's important. A company is not a lighthouse. A site or or perhaps a particular element of their supply chain is a lighthouse. We're looking from an end to end perspective.

But the the real goal is that we can, yes, recognize these folks as as sort of leaders. There's an award. There's a recognition.

But equally important or, actually, I would say far more important is that every single one of them agrees to go on a learning journey to share with the community what they've done and how they've done it.

So we now have one hundred and fifty three lighthouses. There's seventeen sustainability lighthouses.

And every month, we are in one of these either virtually or in person doing what we call a a go and see with with the community with the lighthouse community to talk with the people who drove the digital transformation, to see these use cases, and to really understand sort of what's happening in that environment.

And I think it's built on the premise, and I think often people are surprised when these lighthouses are willing to have other people come in. And and it comes sort of at there's sort of two elements to it. One is anyone who has sort of gone through this type of digital transformation in their operations knows how difficult it was to do that. So just because I come in and see what you did doesn't mean I can go and do the exact same thing myself.

But it doesn't mean I can't be inspired by what you've done and and learn from the lessons. And this this notion of sort of the rising tide floats all ships, which is very fitting given what's in the background here, I think is is really central to this entire network and what we're trying to do. I mean, it's also what was a lighthouse last year is not a lighthouse this year. And so we need to have this continuous idea of of what is the best of what's possible right now.

I think if we think about something like, artificial intelligence in in the early cohorts, I would say only about ten percent of the applications we received had a artificial intelligence based use case as part of their submission. Now it's at sixty percent.

Oh, wow.

In in the the latest cohort of of twenty one new lighthouses that we just announced in December, every single one of them had a generative AI pilot already running in in their lighthouse facility. So it wasn't one of their core use cases, but they're already working on this. And so I think it's it's that sort of not resting on what I've done, but also thinking about what's coming Mhmm. Is really also central to the community.

Interesting. What were some of the lighthouses that were announced, in Davos that stood out to you and why?

Well, I I mean, there's there's twenty one of them, and I think they they all stood out. We had a, a fantastic meeting to sort of hand out the awards for the latest lighthouses and to sort of talk about what's needed. And the thing that stood out to me the most was actually going back to a comment that that we were discussing earlier, which was on the need to sort of not keep this just within those who are high performing. I think there was clear recognition that look.

If you're a a small or medium sized company, and and maybe you're a supplier to one of these large arch players, and you see that these large multinational conglomerates, whether it's it's, Schneider Electric or Unilever or Johnson and Johnson, and and there's there's many others Of course. Have a lighthouse, sometimes the the the thought can be, well, yeah. Of course, they they can do that. I don't have the same resources.

I don't have thousands of workers across multiple continents.

And so there's I think there's the danger of us through of sort of losing losing that attention saying, well, I have to go back to sort of what I'm doing. And there was a recognition, but that doesn't mean these learnings aren't aren't applicable, that we can't cross pollinate here across different communities. We have small and medium sized companies who are lighthouses in the community already. And so the the big conversation from that group being, how do we ensure that we don't sort of create an industrial digital divide that keeps growing, where the lighthouses continue to excel up here and everybody else sort of gets left behind.

And so I was really excited and inspired to sort of hear from the group of saying, k. It's great that we're here. We're talking with each other, but we need to make sure this message reads everybody. And not just that we're explaining the message, but that we're actively and proactively helping people to go on this journey with us.

And so to me, out of all the lighthouses that there's I mean, we we talked about sort of the AI applications. I think there's amazing things. This renewed focus on sustainability, another sort of major piece. But this idea of genuinely the recognition of needing to to share beyond and continue to not think about my four walls only.

It was really exciting for me.

I love that, and thanks for sharing that. Now many companies, you know, dialing in today might be like, hey. How do I get a lighthouse? Or at least, you know, what is the process?

Yeah. So it it begins with we do two waves each year of sort of applications. So there's a an online application if someone types in World Economic Forum lighthouses that you can find the the website, and and and there's an application page there. Phase one of the application is is an online, submission of you have to submit five use cases of what you're doing, how you're actually looking at some integrated applications of new technologies.

The focus is really that it's it's it's quantitative impact, though. Though. So if I build a brand new facility and it it goes live tomorrow, I can't submit tomorrow to be a lighthouse. I have to have nine to twelve months of demonstrable quantifiable impact of of what is actually happening in that that space before I can be considered as a lighthouse.

So I think the other exciting thing is sort of we also have so we have greenfield sites, but we have facilities that are lighthouses that are more than a century old that have been refitted with new technologies. A lot of the amazing things that that o nine produces, you'll you'll find in these locations. And so I think that's a really exciting element. So we have that initial sort of virtual submission.

Those get evaluated by a team. And then for those that sort of make it to phase two based on that initial submission, we go visit them. Anyone who's sort of been involved in in digital transformation factories, and sometimes you have to see it. Let me let me go see what what it looks what's actually happening on the ground to talk to the people who who were involved with that.

And then following the the actual visits, we have a final we have an expert panel, that is, external to the World Economic Forum that we bring together twice a year who looks at all of the submissions and considers it's a mix of industry leaders and academics, about seventy percent from industry and and thirty from from academia, who look at these and say, okay. Is this really the most cutting edge that's possible right now? And taking into account the industry that they're in and and all these different elements. And then from that final review panel, we find out who the, the the lighthouses are, and it's always really exciting to then go on the journey with them of integrating them into the community and being able to sort of share all the things that they've done.

I really love that initiative, and I think it's a great way to share learnings, best practices, knowledge with everyone that's part of the community. So, you know, really cool. Last question. A lot of those lighthouses are sort of next gen manufacturing. But you also mentioned there are what you call end to end lighthouses.

What is an end to end lighthouse? And again, what are some that, excited you?

I mean, it goes back to that idea of what we're talking about of of true sort of ecosystem design where we have some end to end lighthouses from Johnson and Johnson and others who are really saying, okay. What have you done to use technology to interconnect the different pieces on it to drive a specific outcome? And so some of those have have demonstrated that, you know, before they had the the the ability to digitally connect across their supply chain and just an element of their value chain, They knew that they had that certain metrics of operational efficiency, certain losses along the way, and then blind spots. And by building this this end to end digital connection, they were able to remove those. They were able to operationally identify areas where they didn't even know that they were losing money, or or losing time or causing negative sustainability impacts. And through that, they would highlight all that and then address it is the the sort of big piece on that.

Mhmm.

So, again, it visibility was is really sort of critical to that. But then it's what do you do with the information? I mean, we're in an age of we're inundated with data and information. And if you if it's not actionable, it's not useful.

And so I think those are the the the big things that the end to end lighthouses really try to to focus on of how do we connect these pieces to accomplish whether it's a sustainability goal, resilience goal, a business performance goal, or all of the above. And so, those are really critical. And I think we've talked to some of the leaders in in the the supply chains, and it was amazing to see the the transition and the the lessons really were learned in in the last four years. It's easy to say we learned a lot during the pandemic or or during, our response to the supply chain disruptions with the the war in Ukraine.

But to actually see people sort of have concrete use cases. I mean, the the recent, disruptions we've seen in the in the Red Sea, talking with some of the leaders, they said, well, actually, it cost us money. We've had to change the the direction of sort of where we've we've gone, but we were able to pivot so much faster than we were when the same sort of disruption started to happen with us in ports in in during the pandemic.

And so it's not that disruptions aren't gonna happen, but it's how quickly can you adapt to them. And I think that's where technology plays an enormous role and where these sort of end to end lighthouses can really hopefully provide a sort of a source of inspiration for for others.

Totally. No. Awesome. And thanks, Ian, for sharing your wisdom and knowledge today.

Wisdom might be a big grand, but happy to share some some of the things I've seen others do.

Awesome. Thanks for being here with us today at M10X, and, looking forward to our next interaction.

My pleasure. Thank you.

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