Mark Gordon 0:00:10.7: 

My name is Mark Gordon, I run our supply chain business here in the Americas, that's kind of looking across all of our customers, all of our industries, and really, amongst other things, I think the main part of my job is to listen to what you guys are saying, asking for the challenges that you see and here, to bring that back to Anaplan so we can do more and more for you. So that's part of it. The other part generally that I'm doing is going out into the marketplace listening and kind of thinking through what are other analysts saying, what's happening more broadly, what are current events like, and how do we embed that and keep putting that back into our software to help our clients go on? Some of you may think you know what I'm going to talk about, but you don't because this is all new. Hopefully, as the title would have suggested, we're going to talk about financializing your supply chain. If you've seen my sessions before, you know I have to start with a story in some way, shape or form.  

 

Mark Gordon 0:01:23.4: 

I'll go first, this is interactive, I will go first, I love Legos, I do. So that's my son's room, the space shuttle, 2354 pieces. That's actually my dining room, the sideboard, 2083, that's the Concord, and that's my living room, Tower Bridge. I've got Hogwarts, I've got the Millennium Falcon. We've got a lot of stuff going on. Who else here likes Legos? Everyone should raise their hand. Thank you, good, even in the back. We've got it, good. Okay, I love Legos for a lot of reasons. One of the other things, and you may have seen it making its way around LinkedIn and the social sphere, was Lego as a company that people don't talk about. So let's rewind a little bit. We all love Legos, Legos is doing phenomenally well, I'll get to that at the very end. Where was Lego in 2003? Okay, so late '90s, it was doing phenomenally well. By 2003, it was doing horrendously bad. You can see some of the stats here, so margin went from 18, 19 per cent to 2.4, sales were cratering. They had no new product innovation. They were flooding the market with tons of stuff that didn't make sense to their strategy. They had lots of competition.  

 

Mark Gordon 0:02:56.0: 

So think again, 2003, whatever was going on then, Gameboys, PlayStations, digital games, etc., so that's fighting for time and attention, big, huge problem. I care a lot about those problems, but I care about their supply chain problem, and we're going to talk a little bit about financializing supply chain as it relates to Lego. So they brought in a guy, I know I've got some consultants in the room, I can't make consulting jokes as to whether or not they're good or not good or helpful or not. They are, they're wonderful people, I love our consulting partners and friends. Jorgen was a McKinsey consultant that they hired. They brought him in from outside the company, and he's looking at what he just inherited and he's like, oh my God, what am I going to do? We just saw the metrics on the prior slide, right, like margins eroding, my product portfolio is kind of a disaster, a mess, so on and so forth. So he had a couple of things that he was thinking about and was trying to deal with and wrap his head around. What do we do here at this company to make it viable? I'll talk a little bit about that, but one of the things that he said was there's no single answer to anything anymore.  

 

Mark Gordon 0:04:17.7: 

So I got to thinking, I'm like, I'm out talking to clients all the time. Half of you are clients, half of you are partners. We're out all the time talking about not being on the same page, different data sets, different metrics, these sorts of things, and I'm like Jorgen kind of lived that. It's one of the things he saw. The other thing that he saw was this ability to see things from multiple views. His point was we, as a company, are too regimented, we're too structured, we're too focused on our day jobs, our one single thing that we're doing, and we're not able to maybe zoom out and see things from multiple perspectives on how that's going to influence the decisions we make. I got to thinking about that and I was like that makes, to me, total sense in the supply chain perspective. I often talk to some of you internally and externally and I'm like, am I crazy that I'm thinking about stuff this way? Some of you say, yes, you are. Some of you say no, there's actually something to it, and I'll get into it in a little bit.  

 

Mark Gordon 0:05:35.7: 

I want you to think about two things as we go through today. One is there's no single answer to anything anymore. The second is seeing things from multiple angles. With me so far? Okay. Supply chain people, I have some of you in the room, what do we see? That's rhetorical, you don't have to answer, I will make you answer questions later. You see metrics like this, we deal with this all the time, forecast accuracy, attainment, fill rates, OTIF, all of these acronyms that we all love in the supply chain space. That's what we see, that's what we deal with, that's what we're asked for. When we deliver projects, we're asked from a process perspective like, hey, Anaplan, what are you going to do for me? You're going to improve my forecast accuracy by how many points? Have we all had that conversation? Yes, and our clients are fixated on forecast accuracy improvements, totally, and I'm all for it, I am, up until a point because then the question, well, I'll get to the next question in a second.  

 

Mark Gordon 0:06:53.2: 

Same picture, finance professional. So go back to Jorgen, see things from different angles. Same exact picture, right? What do you think the finance professional sees? Forecast accuracy, fill rates, they see stuff like that. So, again, and I am a former, just kind of by way of secondary introduction, I've been in technology for a long time, I'm a former practitioner, New Balance is here, I used to work at New Balance, I ran their demand planning for a couple of years, and it was great, I loved it. I've been in the seat and the shoes, no pun intended, of practitioners who do this day in and day out. How much is forecast accuracy worth? How much is on time and in full worth? Does anyone know? Do you at your companies know? Do you have that answer right then and there? My guess is no, and I know that because I didn't, and I know that because, doing this for a long time, I sit in front of clients all the time that ask me about forecast accuracy, and I ask them what's their total cost to serve, and they're like, I have no idea. What's your total landed cost? I have no idea. What's your margin on that product? I have no idea.  

 

Mark Gordon 0:08:26.2: 

So going back to Lego and to Jorgen, and I'm not at all suggesting that supply chain turned that company around. It was a large part of it, and I'm going to get into that a little bit later too. The part of supply chain that allowed him to turn it around was being able to understand some of these things, both from an operational standpoint but also from a financial standpoint. He realized, the company realized, and again I kind of say him, but he led that turnaround. He did a couple of things. One, supply chain should be not a cost center, it should be a strategic partner. Two, I need to understand the financial implications of how I've set up my supply chain and how I'm servicing my product and my customer. I don't understand that today, back to what I just said a few minutes ago, we're talking forecast accuracies and other things, we're not talking about financial metrics. He realized, for example, that he had no clue how to do demand planning. He, the company, had no clue how to do demand planning. Why? Because they were servicing mom and pop toy shops all the way up to the big box stores, and they were spending equal time on all these different channels, and he realized that the demand signal was so muddy and unclear at the lower end, at the mom and pop, like neighborhood toy shops, why am I focusing time on there? That's not giving me a true picture of demand, because, by the way, all the stuff is being run through the big box stores. So he focused on that to get a clearer picture of demand. That's awesome.  

 

Mark Gordon 0:10:16.8: 

On the supply side, what did he say? He was like, why do we have suppliers all over the world supplying different materials, sometimes the same, from these different places? When something happens, I don't know where to go, what to do, I don't know how much it's costing everything else. So he rationalized the entire supply base, and he cut suppliers down and located them in the right place, the ones that could deliver and the ones that could meet financial targets. He had a much better ability to negotiate but be better served by his supply base because it was out of control. Again, two examples in the Lego turnaround story for how they used supply chain strategically to improve their business and turn it around. I would argue a large portion of that turnaround was less about the operational side, more about this marriage of financial understanding as it relates to the operational side.  

 

Mark Gordon 0:11:20.2: 

The third thing I would argue is that they had to do something, they literally had to do something. They were privately held by the founder's family. So it's great if we could all work for companies that some rich relative was bankrolling and we could do whatever we want, and if things weren't going well, someone's just going to cut us another check and put more money in. They literally had to do something. So that part was super interesting around this huge imperative to make things happen. So, thinking through that, not every company is in that same boat, not every company is in this live or die moment. I'll get to some other pieces later, but I think we all agree lots of different ways we're going to use the T word in a little bit in a couple of slides, I know that we all talk about that, but it's just another example of more volatility, more disruption, more risk in the supply chain, so on and so forth. The word that we're focusing on here is resilience. I actually had this slide built before Friday when we were talking to an analyst firm, and it would have been super interesting if before Friday you would have asked me to define resilience because I probably, I was an engineer, I was not an English major, I can barely speak English, so it probably wouldn't have gone that well.  

 

Mark Gordon 0:13:01.8: 

Their definition for resilience was speed and flexibility. Those two things have equal resilience. To my math brain, that made total sense, and so we're going to focus a little bit on resilience, but, again, resilience as it relates to what do we have to do in the supply chain space. So then I thought this was interesting too, again you guys will get the Anaplan commercial if you want it, I'm going to show some stuff later, but this is my goal in trying to present to you what I'm seeing, what I'm hearing, and how I'm thinking about it, and how others are thinking about it. I've got partners that have plenty of studies, so this one was from McKinsey. It was interesting to me that only 13 per cent, when you ask a company how do you feel about your ability to deal, only 13 per cent felt like they were well-prepared to deal in the operational dimension. That's not good. I don't know how you guys all think about 13 per cent, but it's not good. I'm not a baseball guy, like Scott was doing baseball pictures and stuff, I know really bad batting averages are 190, 200, that's still better than that, which means that that's not good.  

 

Mark Gordon 0:14:30.2: 

I look at things like this and say, okay, what's going on and how do we improve that? These next two slides, I actually was shaking my head, I'm one of the few people, I don't know about you guys, I loved COVID. I'm going to say it, not as much as I love Legos, but I love COVID. Does anyone know why? Not because I got to stay at home and not do anything, which was great for me. I love COVID because all of a sudden, and I've told this story before, my wife, who's a psychologist, has no idea what I do for a living, she just hears like supply chain when I'm in my home office, and when toilet paper is being hoarded and it's out of stock in a store, or baby formula, do we all remember the baby formula thing? It was kind of pre my time, but it was in your time. The baby formula thing, all of a sudden baby formula is not there, so all these new mothers are freaking out because they can't get baby formula. Yes, it's a problem, you think? All people would hear about is supply chains are broken. My wife finally put it together, she's like, is that what you do? I'm like, that is what I do, the other side of it, not running out of it, but making more.  

 

Mark Gordon 0:15:53.6: 

The reason why I loved COVID was because CEOs finally understood that supply chain was a strategic function. Those that did well in COVID were the ones, and you could see the bump, CEOs are like, hey, we get it, we get that this is important, we get this is the biggest disruption of our time, we get, in order for us to be competitive, we have to pour more money into supply chain, or we have to pour more resources there, or we have to think about things a different way. We have to elevate that and not think of it as a cost center, but really think of it as what it is, a strategic enabler to our business. That was awesome. The rest of COVID, not so much. That part was awesome. Here's the problem, that's the problem, right? The problem is look at the yellow line, it's fallen back to what it was before, but there's hope, because if we get this out in front of more people, and this one came from Gartner and they're big about the overperforming or underperforming, look at the green line. So the people that hold supply chain in, and, again, I'm biased, I get that, but the people that hold supply chain in with the respect that it deserves in order to move the business forward are outperforming.  

 

Mark Gordon 0:17:25.1: 

That's kind of an important thing to take away. It's not just me up here or you guys living day in and day out running around saying supply chain is important, like okay. This is actually saying not only is it important, not only is it a strategic imperative, but it actually drives our business forward. Again, I will argue back to Lego and this sort of thing, it's not the operational side of supply chain that has enabled things moving forward, it's the combination of understanding and making better financial decisions in concert with your operational decisions. I'll say it a different way, all operational decisions are financial decisions in my view. Does anybody disagree with that? I'm happy, people disagree with me all the time, that's my life because I'm wrong more than I'm right, so I'm totally happy for anyone to disagree with that. As I got to thinking about it, as I got to thinking about Lego, as I'm out visiting customers, as I'm out asking them what's your total landed cost, as they're rationalizing their SKU portfolio, and I'm like, okay, you want to cut the tail end of your SKUs? That's cool, I agree with that. What is that costing you? Well, I don't know.  

 

Mark Gordon 0:17:25.1: 

So you want to do it, but you don't know how much it costs. Well, yes, because we think it's the right thing to do. I'm like, again, I'm not trying to be argumentative, but based on what is that the right decision? So the more you ask these questions, the more you realize we live in these two different worlds. We live in this world where we're running supply chain optimizations and everything else that's optimizing based on fill rates or the goal of forecast accuracy, again which I love and let's get after it. I'm not at all suggesting we're throwing that away. What I am suggesting is if you're so myopically focused on that, where you don't realize what the benefit is or how much that is benefiting you, then you're chasing a metric for a non-business reason and a non-financial reason, and you are perpetuating the problem of living and breathing supply chain into a cost center, not into a strategic partner of the organization. I don't know about you guys, when I'm talking to C-level executives, I'm not sure those guys care about forecast accuracy. I'm pretty sure they care about money, dollar, cents, margins, profits, etc.  

 

Mark Gordon 0:20:12.2: 

I'm not sure how, as a supply chain professional, I'm going to sit on one side of the table, talk to them about the metrics that I want to, back to those pictures, and have them ask me what is it worth, how do I know I want to do that, and me not be able to figure that out. So that's all I got to say, but there's going to be a little more because I got to fill up some time. So we've been thinking about this, we're talking about this. I think those of you that that know me, I was at Oracle for a while, for a long time I ran their business, I really remember there was always this thing like, hey, I want to plan in units and dollars and everything else. Yes, we could do that, hit the menu, flip it over, there's dollars, there's units. You know what dollars was, and this is not a slight at all to work because it's pretty much every company that I've worked with except for this one, you guys know what the dollar forecast was? No. Dollar forecast was units times average selling price, that was my total revenue.  

 

Mark Gordon 0:21:23.5: 

Does anybody, again I'm more than happy for people to disagree with me, does anybody think that total revenue was at all realistic? I'm getting some head shakes, no, I'm not seeing any nods. Again, you could totally disagree with me, that's fine. That was the best you could do. I'm not saying that was bad, or maybe I am, but not intentionally. That was literally the best you could do because you couldn't get, and we sat through Adam's presentation today and Joe's and you've heard some stuff that Anaplan does and petabytes and all this stuff, that was the best you could do. That was the best we could do at Oracle at the time. Give me an average selling price, multiply it by my volume, that's my total revenue, and then let me try to figure it out from there. We were so rudimentary in am I ahead or am I behind? I could never get to total cost, I could never get to margin, I could never get to contribution, I couldn't get to any of that. Now, in retrospect, 15 years later, whatever it is I'm looking at, I'm like, oh my God, we can do so much better, and we should do so much better, and we should be asking more of our supply chain systems.  

 

Mark Gordon 0:22:43.3: 

It should not be the same as it was 20 years ago, because if it was, then I'm not really sure what we're all doing here in that sense. So financialization, that we're calling it financialization, a supply chain, is not just average selling price times units, it's really more acting like a general manager, it's really more getting in some of that detailed information, essentially running a PNL, and every decision you're making on the operational side and the supply chain side has an accurate dollar, whether it's profit, whether it's total revenue, whatever, it has it right there with you, you can see. You're not going to let me wait till the month rolls over and get some new data and bring it in and run a report and then I can decide whether that was a good decision or not. You're not doing that. You're doing that the minute you're sitting down in front of that machine, that web browser, you've got enough power, you can look at it and you can say, that's a decision I'm making because that's ultimately what it's worth to the company, and that's what we're trying to get across to folks.  

 

Mark Gordon 0:23:54.8: 

Interestingly enough, and I'm having trouble reconciling, quite honestly, the couple of slides from Gartner with the yellow line and the green and the red, I'm having trouble reconciling that with this next one here, and I'm not suggesting I know the answer, but in that box where the path to CEO is increasingly through COO, which more often than not owns supply chains. I'm having trouble reconciling, quite honestly, and if I had a room full of CEOs, I would ask them this question, how did you come through that path, valuing supply chain, and then get into the top spot and then all of a sudden, it's like a cost center and not a strategic thing? I'm not sure why that's happening, but what I do know is if we in supply chain start to talk financial language either first or most definitely side by side with the operational decisions that we're making or proposing, I do know that'll resonate, that much I'm confident in. So those are just some things to think about.  

 

Mark Gordon 0:25:09.6: 

Again, I like to put up third-party stuff because you could take my word for it, but it's one guy's opinion. I like when there's stuff up there that I can point to, there's a lot of frameworks in the marketplace. We've all heard of the score model. Yes, thumbs up, nods. So I know it, to be honest with you, I don't know it know it, maybe there's other folks in here that if you know it super in and out, please come up and take the clicker, but I was looking through it and I found it was super interesting in the sense that - so the score model, it is what it is, and it's also got a whole long list of metrics that are attached to each of the phases of the score model. So we're not guessing at what should we do, we're looking at what all is in there. So the two that I highlighted in red, one was agility and the other is cost. The reason why I like the agility, we had the resilience conversation today a little bit before. So speed and flexibility is resilience, flexibility largely agility, I'm going to say it's the same thing. Those of you that speak better English than me, you can agree or disagree, but to me they were kind of the same thing.  

 

Mark Gordon 0:26:32.7: 

I love the cost side of it because, again, the more that I've gone around to talk to folks to see what they're doing, the less I see the cost side in their day-to-day work. So it's not just me saying this stuff should be in there, it's Apex, those guys, they're pretty good at what they do, they've been doing it for a long time. So now what do I think? I said before, this was really hard 15, 20 years ago, ten years ago, whatever. So anybody that's on older stuff, it's really hard. You're probably not doing it, and you're not doing it because you didn't want to, you're not doing it because you probably couldn't. Integrations were too hard, real-time data was not available, the ability to pull it all together wasn't there. Supply chain systems were generally built for supply chain metrics. Shocker. So this was all an afterthought, it didn't really exist. So when I got to Anaplan a year and a half ago, two years ago, my first headache was why am I walking around different events, different places, having friends call me from the industry and them asking me, why are you at Anaplan, because that is a finance company, that's not a supply chain company? 

 

Mark Gordon 0:28:09.5: 

That was my first six months here, I was 20 pounds lighter, and I had more hair. Then I got to thinking about it and I was like they don't understand what we do. I get the legacy of the company was financially oriented, but they don't understand what we do in the supply chain space. It's way different than what they all thought. Then I got to really thinking about it and I'm like, those guys are jealous, they're jealous, they cannot do what we do, they can't, because of their supply chain systems. So I turn it back on them, every time I would get a call, I'm like, dude, how long does it take you to show total cost to serve of a customer or profit by channel or whatever? They're like, we don't even do that. I'm like, I know you don't because you can't, but you should be able to, and shame on you for not telling your customers that they should be looking forward in that way. So if we're going to marry finance and supply chain, which I want to do, that's what Jorgen did, and anything he says goes in my book because he's the Lego dude that turned it around, we've now built a foundation.  

 

Mark Gordon 0:29:39.7: 

So I've got a few things to show you here, a couple of screenshots, because, again, I like real stuff, I don't like the make-believe stuff, I don't think Legos are make believe, so I think it all ties together because they're actually real in front of me that I can play with. I've got a couple screenshots, just so you get a sense for what we're thinking about, what I'm thinking about, what we want to embed in these systems, what we want you to use, again, whether it's Anaplan or not, doesn't matter, I want you to make sure you go ask how do I get that into my system today? So things like scenario modelling, we've talked about that a bunch over time, Anaplan people have, because we're really proud of that, we're really good at that, that's cool, we all know that. I care less about our ability to run scenarios, and I care more about where the arrow is pointing in the bottom right, your ability to decompose those scenarios into financial metrics when you're sitting in front of a supply chain screen. That's what I care about. I care but I don't care.  

 

Mark Gordon 0:29:39.7: 

I care that, hey, if we run this scenario, this third shift or extra capacity, we'll be able to meet the demand that came. That's cool, what does it cost you? Is it worth it and is the cost right and is the revenue, right? Not some of this hand-waving average selling price with volume stuff. I want real right; I don't want fake right. So that's part of what I'm interested in on screens like this. I'm super interested in screens like this where we're actually talking about carrying costs. It's the bottom one, kind of second to bottom one in that red circle. So carrying costs, pretty simple. I think someone said it from the back when I had the other views up of the picture like what do finance people care about, inventory carrying costs. It needs to be on there, you need to see it, you need to understand it, and you need to make decisions off of it. Not that like my service level is going to be 98 per cent, that's awesome, I'm super glad your service level is going to be 98 per cent. How much is it going to cost you? How much is it going to cost the company? What else can you do with that money if you don't do that? There's the T word, we all knew it was coming.  

 

Mark Gordon 0:32:09.6: 

I like this one for a slightly different reason. Yes, tariffs, yes, scenarios, yes, cost of tariffs, so on and so forth, but in that middle column it's labor cost. So, again, Jorgen telling us see things from different perspectives, pull in different kinds of data, make decisions from a well-rounded point of view. Tariffs are not just a dollars and cents on my ability to fulfil. Instead of Vietnam, I'm going to wherever, I'm going to go down to Mexico or change suppliers in that way because tariffs are going to be different, it's going to cost me different, etc. That's true, but there's more to it. Labor, transportation, warehousing, it should all be in one place. Same thing here, we've talked a little bit about it before, so this decomposition of cost but more importantly all the way on the right-hand side, the red circle around look at my scenarios and be able to dollarize them, again in a reasonable, in a detailed and in a complete way so I can make the right decisions for me. Base it on dollars, base it on money, you'll be much better off. Reports, same thing. So alternate scenarios, let me blend the metrics. So fulfilment rates with net loss or gain, all on the same page, needs to be there.  

 

Mark Gordon 0:34:07.0:  

I think this is the last one. I love this down at the bottom, cogs, margin dollars and margin percent. Who's got a supply chain system with that in there right now, literally right now? Who can pull it up and say, here's my forecast, trace down the PNL and these are my margins. Again, if you don't, totally fine, but I don't know how you're answering the business questions that your management's going to ultimately ask you in the timeframe that you're expected to answer it. That, to me, is kind of the key thing. Can we get to this stuff? Sure. Can we run weekend reports or ad hoc stuff? We can. Why are we not embedding that into our everyday work? That's the question I have struggled with figuring out. Part of it is because we couldn't, part of it is because systems didn't exist to allow us to do that. Now we're saying, we got it. Back to my buddies making fun of me, why are you at a financial planning company? I'm at a financial planning company, A, because it's a planning company, not a financial planning company; B, because supply chain is blowing the doors off the rest of the company; C, I can marry financials and supply chain, and you can't. That's why. That's what my customers are asking for.  

 

Mark Gordon 0:34:07.0: 

So once we do that, we've got it complete, complete-ish. We're dealing with executives, we're dealing with our operational folks, everybody's happy. I added this one in, this was the last one I added to the deck, just one or two more slides. They're doing great, this company is amazing. Again, I want to say supply chain was the entire turnaround, it wasn't. They were brilliant in some of the other things they did and how they focused and so on and so forth, but supply chain, understanding the financial implications, costs, customers, channels, suppliers was a huge benefit to them when things were really tough 20 years ago and now these guys are amazing. So in wrap up here, the couple of things that I've talked about, you guys have nodded and raised hands and gave me some thumbs up, which was super nice of you, embed all the metrics together. It should be in the same place, it should be readily available, you should be able to see it. It shouldn't be this super big effort at the end or coming out of some reporting system, that defeats the purpose. 

 

Mark Gordon 0:37:01.6: 

It's not just about getting that information and being able to talk about it, it's about being able to act on it at that point of action, which is in your planning system. Do that scenarios, embed that stuff, speed up your processes, a lot of the speed up of processes, again, I get all the time we don't have data to support this. I'm not sure that I entirely buy that. I think what people are actually saying to me is I don't have data in my system at the time that I need to use it. That's actually what I think they're saying. So embed all that stuff in. Three, I would say align, but what I really mean in the third part is act like a business owner, act like a general manager, act like someone who cares about the dollars and cents of this whole thing, because then you will get a strategic seat at the table. You will be in that green line, not in the red line. So those are the things I'm thinking about as it relates to just the market, to Anaplan, to products, to the way maybe supply chain practitioners should be thinking as we go. We've got some more stuff coming out, again, stuff that we've written, stuff that is coming out from IDC and some others, so all of that is great. I think I'm just about wrapped.