The Resilient Supply Chain and Emergence of Digital Manufacturing

Welcome to Advanced Automation, a podcast by Calvary Robotics, where you'll find industry leaders and experts sharing their thoughts on the world of automation. Hi. My name is Joe Gemma, and you you are watching another episode of CalTV by Calvary Robotics, your source for expert insights in automation and robotics across a wide range of industries. I had the pleasure of speaking with my good friend, Christophe Schell, recently. He's the chief commercial officer of HP. We had such a fantastic conversation that we had to break it up into two parts. In part one of our conversation, we will dive into how the pandemic is permanently reshaping the business environment and supply chain philosophy. Today's topic, very topical today, probably more than any other time, talking about the changing business environment due to the pandemic. And we have a my friend and special guest today joining us to discuss this important topic, Christophe Schell. Christophe is the chief commercial officer and a member of the executive leadership team of HB Inc. In this role, Christophe is accountable for all aspects of sales, go to market, and revenue, certainly margin generation, and on a global scale. The commercial organization is divided across ten markets, category teams across print, personal systems, and services, as well as centers of excellence covering the global accounts, Omnichannel pricing, channel strategy, and sales operations are also his responsibility. Krzysztof has been with HP over twenty one years and have held several senior management roles across the globe. More recently, just prior to his current position, he was president of the three d printing and digital manufacturing for HP globally. Previously, Christophe was executive vice president of growth markets at Philips, where he led the lighting business across Asia Pacific, Africa, Russia, India, Central Asia, and the Middle East. Christophe started his career in his family's distribution and industrial solutions company, and he also worked in brand management at Procter and Gamble. During his career, Christophe has had, and many would say, the fortunate opportunity to work in global markets and move nine times internationally. Christophe holds a bachelor's degree from ESB Rutlingen in Germany and in France. He is fluent in German, English, and French. And today, Christophe lives in sunny California and Palo Alto. Christophe, welcome, and thank you for being with us today. Thank you, Joe. That was a great introduction. Really appreciate being here. It it it nice seeing you as my friend. I'm glad we can share some of this your insights. And it's an important topic as I mentioned at the top of the, introduction here, changing the changing business environment due to the pandemic. And in fact, you've noted that markets are changing and companies are looking for, I'll say, more adaptability, more flexibility, particularly around supply chain and social selling, two important topics. So let's start with the supply chain topic today. There has been much discussion about shifting current models. So how do you think we can work within the current framework yet adapt to avoid the situation of choke hold as it is today that was created in this unprecedented environment? Yeah. I think look. I I do believe that this year was, an eye opener, for all of us that are involved in supply chain, maybe owning supply chains. And I I I I summarize this a couple of months ago to my team as a big moment for myself. You know? For all these years, we've been trying to optimize supply chain for cost. There was always speed as well, but it was really centering around cost, and then how can you optimize for speed. Very rarely did we think about having to optimize supply chains for resiliency. And this is what happened this year. We saw in our business, in the business of our our customers and partners, major impacts, on supply chains. It's obviously started in in China. That was the first country was impacted by the pandemic. And all of a sudden, factories, couldn't manufacture anymore. It wasn't just the factories. It It was also that their components suppliers couldn't manufacture anymore. Interestingly enough, China was the first one in, in the problem, but it also was the first one out of the problem. But then it happened throughout, the the globe from a factory point of view, from a component point of view. That was the first observation. So second observation was all around logistics. Planes were not available. Ocean freightliner were available, but couldn't, help us sometimes. We have products. You know? This year for us is an interesting story. We have products that are obviously experiencing headwinds. If you think about our office business, desktop computers or office printers, this was a tough year. But on the other hand side, we also identify that we have products that, that really are in high demand, sometimes essential. Okay? People working from home, kids learning from home. So putting, a Chromebook, putting a notebook for six weeks on an ocean freight from China to the US, was not the right thing to do, because our customers expect the demand. So we started, flying a lot more. Again, impact. We had crazy situations where where planes got, repurposed, okay, for more essential products, medication, for example. Very interesting. So that's overall on the on the supply chain side. Then, obviously, I think what we're probably gonna talk a little bit about today is digital manufacturing, digital supply chains. And I do believe that is a positive coming out of this pandemic year that we all have understood what digital manufacturing really means, what the benefits are, how agile you can be if you have a digital manufacturing setup. And I'm let's talk about that, in in your in your next questions, I guess. But overall, very interesting year from a supply chain disruption point of view and as a as a manager, from a focus shift going from cost to resiliency. You know, I'm I'm sure our listeners, you you probably gave them some education, never thought about the fact that the business environment changed in terms of your customer day database, because of people, you know, not be able to go into the office, but in fact, shifted to a completely different area that has many and right now, I'm also working from home. Many have worked from home, and so you had to adapt the product to to the market. And and you mentioned some other things. So I I wonder, so what then, if anything, has HB done to address this situation of a a more adaptable supply chain that can be sustainable going forward? As a I I think, you know, start let's start with the consumer or the customer. This year has seen we've we've talked for years in in the IT industry about the consumerization of IT, how aspects that are important for, you know, how you consume entertainments in your consumer life, how these aspects actually have an impact on how you consume technology in your, in your professional life. And this year gave that whole movement the biggest boost, the biggest acceleration. So, the way I like to think about this is it's actually the birth of a completely new customer segment. It's a segment that I will call prosumer. And the interesting thing about this is there's two definitions, on the word prosumer. One is it's a professional that is also a consumer, and we saw that playing out. We saw that first definition playing out. So you and I, we're working from home. Our companies want us to be productive. They want us to have the right security, and they want us to be compliant. At the beginning of the pandemic, you won't you won't believe how many customers called us up and had they had to move call center people into working from home. And then they had to, make a workflow happen where call centers could process credit card information in a home environment. Okay? That never happened before. But it was a major concern for CIOs, for security, cybersecurity specialist as well. How do you make that work? So all of a sudden, you have that professional enterprise type of, feature entering in your consumer environment. The other thing is true too. Once you do that, once you become a supplier of a professional working from home, you actually have a foot in the door of the family's entertainment needs. And you should absolutely take advantage of that because you're still communicating with that employee, but now in a home setting. And so what we've seen in HP, number one, it helps us that we have a foot in both segments, in a consumer segment and in a professional segment. But how do you bring it together? And so what this year has done, it moved the the way we think about road maps, the way we think about manufacturing, more into a holistic approach, in an approach where we don't differentiate anymore between a consumer customer and a commercial customer, but we look at them as one, prosumer. The second definition of prosumer is Interesting. Some go ahead. No. I said interesting. That's an interesting perspective. Thanks. So the the the second the second one is a definition of you have a consumer at home, and the consumer has entertainment needs, but the consumer designs and manufactures at home. That's the second definition of prosumer. And I think this is particularly interesting because I can apply that logic from an HP point of view in our three d printing and digital manufacturing business. And what I saw playing out this year is that we don't sell three d printing, products for, for home printing, if you want. Okay? But we sell three d printing applications that can lend themselves to consumer applications. So the interesting piece what we saw happening this year, the first one was a lot of our customers all of a sudden had impact on their demands. Okay? The reason why they bought an HP Multichat Fusion printer in the first place, that application was maybe not as hip for them because of the pandemic. Particularly, a lot of small and medium businesses, a lot of the, the prototyping businesses, they didn't see the same amount of demand in the crisis than prior to the crisis. But there was a very quick learning here about the difference of having, equipment that is digital versus an equipment that is, more analog. Okay? Call it, CNCing or injection molding, for example. They pivoted with the digital equipment to use the install base that they have and move away from the core applications to print applications that were hip, that were high in demand. So I'll give you a couple of examples. We started to share designs on note swaps and mouth swaps, and this got printed across the install base that we have in three d printing globally. We started to, print elbow openers, for for doors. That was done, holistically across the install base. We started to print, with our partners and customers face shields very early on When the analog supply chain was still thinking about how to get it from a to b, we had the design go from a to b digitally, load onto the machine, and print where and when, the demand was, was re required it to be printed. And I think that for somebody who has, like you, grown up in a in a in a manufacturing environment and has seen how difficult it is this year to adjust, this must be a very powerful eye opener. And and I do believe, you know, I'm not, naive enough to think that a digital manufacturing, will all will will be able to to replace an analog manufacturing a hundred percent. But I think that the coexisting of the two is where we are heading. And I think that, the digital manufacturing really accelerated this year because the the entire value chain understood what is possible, how flexible it is, how agile it is, and how you can overcome hurdles, like, for example, logistics. Well, you stimulated some some more questions I'd like to ask you about that. So, certainly, you know, you you had a new opportunity channel to the market that maybe you didn't have before as you say right to the consumer, so to speak, or at least in an education perspective, the consumer. And and also this agility concept you talked about. And it's really important that HP had the ability to be that agile, to adapt very quickly, be able to help, not only the market, but also a a new market opportunity for you that maybe didn't exist before. But, you know, that's you as a large company, you have that maybe ability to be to to move and and make changes like that, to stay competitive. What about, you know, smaller or medium sized companies, how do they manage the impact of this supply chain or agility to stay competitive? What kind of advice would you give them? I think it's a it's a very good question. I would actually I would actually think that small companies or medium sized companies sometimes have an ability to move even faster, because, you know, what it's it sounds very good when I talk about all, the change that this year saw HP embrace and drive. I talked about some of the headwinds as well. Another headwind is that, you know, we have a very large employee base, and, they are sometimes experts in in something they're really experts in what they do. And if the demand in sales, for example, in office printing is not there, how do you pivot and take a resource that you hired for office printing and bring them into okay. Now you work, on an Amazon Marketplace opportunity, and you, you know, the engagements are completely different. You go from understanding account management quite well to maybe into data management. And there are, obviously, there are limits of how much change you can drive, but we tried. We tried to repurpose our our resources. We tried to pull them into where the heat was away from where it was a bit colder, I guess, from a demand point of view. I think, overall, that that worked, different by culture, to be honest as well. You know, I I have a global team, so, some markets embrace this more than others. But I think a very interesting learning. I mean, that's that's number one. Number two, I think for us, at the very beginning of the pandemic, two things were very important. Number one, employee safety first. So empty employee safety became the number one priority. And we also told our teams that we understand that this pandemic is driving completely new dynamics in their family lives. You know? Looking after kids that that can't go to school, looking after parents, that are that are you know, can't be exposed to to this virus, required many of us, to relocate time. And we told them from the get go, guys, that's number one priority. If you miss a call, if you miss a meeting, that's fine. Please catch up when you have the time. And, actually, that had a very positive dynamic, within HP, within our workforce. The second, key imperative was we are a company that does eighty eight percent of its revenue through partners. And we knew that some of these partners are gonna face a lot of headwinds. Okay? The demand dropped for some of them. For others, they had a lot of demand, but they didn't have the product. Payment terms. Okay? A lot of, a lot of our partners have and had in the past, difficulty collecting money. So we tried to help very flexibly. We changed, how we we changed in some, instances our payment terms. We increased we moved from rebate programs to upfront programs in order to improve their cash flow. We, we try to understand each and every situation. We talk to other ecosystem partners, in particular, on the financing side. And so coming back to your question, I do believe that in these times of crisis, the ecosystem partners that you operate with, the suppliers that you have, and the the value added partners that you work with in order to bring a solution to market is super important. And I I think that for for smaller and and medium sized companies, this is this picking the right picking the right, relationships, picking the right ecosystem partners has been absolutely crucial, and I and I hope that there will be a learning. I really hope that at at the end of this pandemic, when we all have a vaccine, let's let's think back. Let's rate our relationships that we have, across the globe, with with different partners, and then let's make purposeful decisions about where we will invest time and resources going forward and where we maybe will pull back. And I'm talking here about relationships. That's number one. Number two, go where the heat is in the market. I mean, you and I, we're both in sales. Okay? So sometimes it's very difficult to to invent demand. You have to pivot. You have to be able to pivot. And I do believe that when you are in manufacturing, that's difficult. Okay? Because you you your entire line, your entire operating model, your expertise is very much vertical at times. It's even more than just an industrial vertical. It might be an application vertical. It might be a part, that you're really, good at, and you don't know so much around that that part. Having flexibility in in your business model, in how you think about opportunities, how you evaluate opportunities, but also having flexibility in the assets that you use to bring value propositions to life is super important. And I've learned and you know me, Joe. I'm not coming from the analog manufacturing side, but I've learned that digital manufacturing is a great tool. And it's not just three d printing. I think it goes it really starts with an entire digital twin concept. You know? The amount of discussions I had this this year with designers and engineers that are operating from home and that are simulating manufacturing processes, robotic processes, and doing that in the digital twin concept has increased significantly. And I do believe that is something that will stick. Okay? It's not gonna stick a hundred percent, so engineers will go back into factories. Designers will go back into offices. But I think the utilization of digital wind concepts and digital manufacturing concepts, that will stay. And that's why I believe that this year was a a major boost, for for that for that shift from analog to digital in manufacturing. Yeah. Yeah. First of all, I I'd like to say we're all in sales, but you you're right. Certainly, you and I are are commercial interface to the markets. But HP has been a a beacon, maybe an example that way, as I talked about the small and medium sized companies and how can they adjust. In fact, many of your partners are medium and small sized companies and understanding how to work with that supply chain and building that from that strength of relationship, give them a a a good opportunity to continue to be competitive and agile on the market. So that's good advice. And, again, glad HP can be a a beacon, as I say, for an example for the rest. And for those of the that don't that don't understand or need to be more collaborative in this approach, if they can't strike that balance, I think they'll find themselves in a very precarious situation of being able to sustain the business because I've as you indicated, you know, it's collaboration. This, working as a single chain of really making it work as partners and in supply chain is the only way to make the survivor be agile. So let me talk about something else along these lines. You've spoken, in certainly both from the b to b and the b to c perspective, how cost optimization, you touched on a little bit earlier too, has been kind of a driving determinant of decisions in the past when considering the structure of supply chain and the need and that needs to broaden beyond the, so it's almost single factor why they make decisions. But yet we have to admit this is a business culture, a reward structure that's been in place for a long time, and as you say, particularly around the analog manufacturing. How do you go about getting people and companies to understand this is now becoming actual limitation of how they do business? I think that's a very good point. You know, I, I I just I can only tell you what we've done this year, in order to address some of this. You know, you you will understand this in our core business, a lot of the demand look at consumer business that was in the past, decided at a brick and mortar level went online. So we had to move our resources online, internally in the company, but also our partners. We were actually teaching a lot of partners how to stand up an online business. We have think about Africa, for example. Storefronts, small and medium partners of ours, did not have an online presence. They now have one. Okay? And we we try to help. We try to educate. That's number one. Number two, sales comp. Very, very you know, in in the US, this this performance based culture that we live in the US, how do you design a sales comp strategy? How do you issue a sales comp letter when you don't know what the demand is going to be in the next three months, when you don't know if you can actually supply the demand in the next three months. So we went back to team quotas. Okay? Believe it or not, we went from individual targets to team targets because we felt it it is easier to manage at an aggregated level and more fair as well. It also helped us to move people then, to where the heat is because we told them, hey. You are gold on the team number. Doesn't matter if there's no demand in office right now. Do something else and help the team. That has helped us. Okay? We are now looking into how to bring this slowly but steadily back to how we looked at sales compensation and resource focus, prior to the pandemic. I don't wanna come across as as as too cheesy on this, but at the end of the day, you need to have values as a as a company. They help you dramatically in in a in a in a force majeure, in a in a crisis like this one. And I think we try to include that that that value system that we have in HP. We try to apply that not only to to ourselves, but to our entire system, to our ecosystem partners, to our channel partners. And that has that has helped us a lot. I've learned a lot. If you ask me, what is the headline, now looking back twelve months for this year, for this calendar year, for me as a manager, it's the year of ethical decision taking, because we had to make a lot of ethical decisions, not just on the customer and partner side, also on the employee side. You know, when you have when you when you have a customer situation on service and support and you really need to, you ideally would have a a service and support agent from HP go to a customer to repair a unit, but you don't wanna do that because of COVID nineteen. How do you decide? I'm the one deciding whether they go or not. How do you make that decision? Okay? So having a clear ethical framework is amazing. I also have to say I'm really super impressed with what what our engineers were able to do. We in we installed remotely very complex setups, not just in three d printing, also in our in our graphics business, in our web press business. These are huge machines. Okay? You've seen some of them, Joe. They they fit into a warehouse, and, they take weeks to be installed. And the way the team did that, together with the customer, together with a partner that was, on on, location, very impressive. So there's there was a lot of ingenuity. I think you can't plan for all of this, but I do believe it comes back to, hey. What talent are you able to attract, and how does this talent react if you give them a certain value system to react within? And that's that's my learning for this year. So ethical decision taking would be my overall headline, and I think important for all of us that we reflect and that we project of how, we wanna drive this going forward. And I I I wanna applaud that. It's interesting because, for me, my first job as a very young engineer, and I, you know, I know I still look really young, but it was many years ago. As a young engineer, my my first boss, he he really tried to instill exactly those those principles, ethical, process of decision making. And and maybe just as important you mentioned is teamwork, taking on the challenge as a team. And and the way we can be successful is utilizing these talents and the skills as a team. It's not an individual thing. We're not islands. We have to work together as a as a group. And, certainly, I've tried to bring that in my career, and it's nice to see that HP and and your philosophy supports that, and that's why you have your success. Now I've heard you speak, and, again, you're one of the thought leaders across this these many industries in the in the world from business to business and business to consumer. I've heard you speak about the supply chain of the future, and you just mentioned again the importance of that human component. And you've touched on some of that, advice that we'd give to leaders to address this important aspect. So I I appreciate you sharing that with us and and really putting in company policy. I agree with another comment you've made, in the past that I've heard you say about this ethically minded consumers, you know, in in terms of us, but also from the consumer side. You know, ethically ethically minded consumers are willing to pay more for a product. And and I think quoting you exactly that comes from a transparent supply chain. So what drives companies not to take this into account when developing their, as you say, sales go to market strategies? And what can we do as a society and as businesses maybe to help to get that message out? Do you have any advice for that? I think it comes back to values. Sometimes, sometimes you need to convince a customer, about a value proposition. And a value proposition has to be more than just price. And sometimes, the value proposition might cost a little bit more, but it might also or not might. It will also then give you other options. And I think that's that's something that we need to embrace. It's something that we need to embrace as as enterprises, as, as business owners, as manufacturing. Having a focus on ethical decision taking, to me, also includes having a focus on sustainability. Right? It's very much part of it. I do believe that, you know, with the with the tools that we have available in the year twenty twenty, we can be much more holistic than we could be ten years ago. I mean, Joe, just for a second, imagine imagine this crisis, the same crisis, COVID nineteen, hitting us fifteen to ten years earlier. You and I would not have been able to work from home. Our kids would not have been able to follow school online. They would have probably had a gap year right now. Okay? But that didn't happen. They were actually able to follow. Yeah. It wasn't always perfect, but there was school. Both my kids are in college right now in the US, and they have every day online classes. So just think about how far we've come, and we sometimes forget about this. Mhmm. That's what we need to that's what we need to embrace. To me, digital manufacturing is one of those next big things that is going to happen. And now let's project ten, fifteen years forward. If a similar crisis, god forbid, happens again ten, fifteen years from now, we need to be better equipped. We need to be more resilient. And the way to be more resilient is think about the products that you want to manufacture and the services that you want to deliver. Think about how you want to do that, where you want to do that, how much flexibility you design into it. And then ultimately, and this is another learning from this crisis, how do you wanna engage with your customers? Do you know what is one of the fastest growing businesses of HP this year? No. But I'm curious. It's a it's a subscription service. It's an auto replenishment service where you, subscribe that we ship you ink to your home. Okay? And it's a product that's called instant ink. Your printer hangs in the cloud. Once the cartridges are down twenty, twenty five percent, an auto replenishment, process starts. And you don't have to leave your home to go shopping for cartridges. We send them to your doorstep. They come in a box. There's a little sachet. You put your old ones in. You post it back. We recycle them. It's a closed loop, valuable position. COVID nineteen has accelerated demand for this. Now going to PC services. Okay? You and I, we're using a laptop right now. We're doing it for this call here that is a virtual call. The CPU usage that we have on both of our laptops, is able to do much more superior tasks than email and Zoom calls and stuff like that. But during the week, that's what we do. During the weekend, Joe, because I can't go traveling, I play FIFA on my laptop. Okay? Now all of a sudden, my CPU usage goes up. Now think about this. In ten to fifteen years from now, I don't think that my son will ever or my daughter as well. They will never spend money on owning a laptop. That's not how they think. No. They will spend money on a subscription to have access to a laptop. But they want this flexibly. When you do emails during the week, they wanna pay two ninety nine a day. But when they do a game on the weekend, they are happy to pay a little bit more. And so designing that from the get go, designing the business model from the get go into how we want, our technology to be consumed is super important. So I've I've talked a long thing here, but it's it's it's really having an end to end idea about how value propositions will be offered to customers going forward. How do you design for that? How do you manufacture that? How do you sell it in? Is it a transactional engagement? Is it a services engagement that actually delivers more of an outcome? These are all questions that not only the IT industry should ask, every one of us should ask because we are all part of the value chain. And when you have an answer to that for your category, for your industry, for your application, for your part, then I actually think that you have a chance of becoming more resilient. And by being more resilient, more equipped for whatever, is gonna be thrown at us in the future. And I think that's, for me, so important that we learn from this situation this year, and project of what it could mean in the future and how in ten, fifteen years, we're not only ready to go to school online or to, work from home, but to manufacture from home. And that's that would be a great objective to have for anyone in the manufacturing business. Yeah. You know, it thank you for sharing that. In fact, I I would say because it's such a dynamic environment, it we will be prepared even before the ten to fifteen year cycle process because same things are changing so rapidly. Even, from, you know, the area the space that we work in is a lot of the manufacturing environments. So digital twin, AI is already playing a very crucial role in this service management model and adaptability and the flexibility and and the agility we talked about. So it's already moving ahead. It's such a dynamic environment. It's really exciting, actually. And as you say, this is gonna be part of the way that next generation will certainly be living their lives. Thanks for tuning in to this episode of CalTV, again, brought to you by Calvary Robotics. And stay tuned for part two of my conversation with Christophe, which will bring you more frontline insights about the changing business environment and the impact to customer interaction.