[00:00:00.240] It is the end of the week, Tommy.

[00:00:01.860] Oh, it doesn’t feel like the end of the week.

[00:00:03.600] No, it does not, but welcome. So this is your first appearance on the end of the week podcast, correct?

[00:00:08.890] Correct. I’m very excited to be here and hopefully I’m able to be a recurring guest potentially would be lovely.

[00:00:15.460] Would you want to introduce yourself and let all of our lovely audience know who you are?

[00:00:19.410] Yeah, for sure. So my name’s Tommy Colangelo, I’m a manager with Lit. I actually joined three years ago at, I want to say the height of the pandemic or maybe as it was toning down prior to that. I was at Good Food Market also being impacted by the pandemic. And in that enterprise I was essentially deploying large infrastructure projects which is kind of related to what LYT does. And actually we did get to interact with LYD a little bit.

[00:00:48.970] That’s where we met.

[00:00:49.720] That is where we met. And then prior to that I was working with UPS and special projects, deploying optimization software and actually as I’m learning about AI, actually deploying some AI predictive models that way back when. I did not know that what it was so interesting.

[00:01:07.250] It’s coming back around.

[00:01:08.130] It is coming back around.

[00:01:09.410] So we have you on the POD today to talk about maybe a topic that you’ve been thinking about quite a bit over the last call it year or so. So what is it that is on your mind?

[00:01:19.210] Yeah, for sure. So personally, amongst all the things that we get to do at lid, one of the things that really tickles me, if that’s the right word I can use, is network studies because you’re able to really get a, you know. Well, what is a network study? Maybe it’s a.

[00:01:36.450] You want to start with that?

[00:01:37.610] Maybe we can define that before we get into it.

[00:01:39.350] Yeah.

[00:01:40.050] So the way I see a network study is a review of all the infrastructure that supports the supply chain of an organization. Would you add anything to that, Jen?

[00:01:50.910] So, well, what does it mean, all the infrastructure? Just elaborate a little bit.

[00:01:54.180] Yeah, for sure. So it could be, it could be warehouses, it could be the transportation network. I would probably bundle that into infrastructure as well. You can think of retailers as well as VCs. And then I would also consider the inputs and outputs really. So you know, who are you getting your stuff from and then who are you shipping it to? You don’t necessarily have control on that from an infrastructure perspective, but you do get to decide, at least from the.

[00:02:23.370] Proximity to your inbound or your proximity to your customers. And then of course, that technology that’s going to tie this all together is always one of the underlying themes when we’re talking about transforming folks network. So as we get into network studies, what are some of the reasons? Like why should I care? Why should I do a network study?

[00:02:43.690] Great question. I believe that as an organization, you set up and then you operate for a while with your current setup and maybe you’re not aware of it, but you’ll essentially start having growing pains from your existing infrastructure and reviewing it to see what kind of optimizations you can do to reduce cost, potentially best serve your customers, I believe is good practice to do at a certain interval or if it’s not through, let’s call it organic growth when there’s a big disruption in your organization. Do we have any examples of disruptions in an organization that we can throw out?

[00:03:23.580] Well, I think one of the primary ones, and I think I’ve touched on this with Charles, is when we get into mergers and acquisitions and so oftentimes when we’ve got two organizations that all of a sudden are going to come together as one, that could be a trigger that folks would want to come in and start looking at, okay, how do I integrate two of these networks together? Do I keep everything? Do I consolidate? Do I keep them distinct or together? So that could be one of the triggers. Also in you’re talking about sales channels. So you brought up Covid. Apparently we’re still talking about it. But during that 2020-2022, having folk pivot towards E commerce and integrate E commerce in was another, you know, disruptor in how they were perhaps thinking about their regular networks. They now had this pressure to have more rapid delivery to customers and positioning their inventory close to customers as well. So that could be one of the reasons why folks, it’s time to take a look and see if you’re in the right position to service your customers at the right cost and the right time frame.

[00:04:29.120] Yeah. So I guess we touched about organic growth, major disruption of current network, additional services, and I guess stay competitive really is as the objective of all this.

[00:04:44.240] And what I know when we often talk about network studies, cost is going to be the first thing that we discuss. Right. There’s the cost to operate your network on the daily. Typically when we’re kind of kicking around cost to operate on the daily, we’re thinking about your transportation costs, your warehousing costs, and then your inventory carrying is where we put that as well. Beyond costs, what factors come into a network study evaluation?

[00:05:17.360] I think the Two that are more qualitative really are going to be anything related to service level. And then when we’re talking about service level, it’s going to be also tied to lead time and your proximity to customers. Maybe this is a good point to define what a service level is actually. So for me, or not for me necessarily, but service levels in general is an ability to meet customer demand in a predefined amount of time at a certain percentage as well. So for example, a service level, service level agreement could be 95% delivery rate over let’s say a one week lead time. So obviously, and we actually are about to release a, an article relating to that subject where there is a benefit of offering additional service levels or a better service level to your customer where they can rely on you to fulfill a certain demand. Obviously from a network perspective, however, it will become more expensive. One of the reasons why, or maybe Jen can say one of the reasons why as we try to give our providers a better service level to a customer, we can potentially see a rise in costs.

[00:06:30.680] Yeah, and I guess that gets driven first and foremost by the prox. Well, it can be two things. So either the proximity towards the customer, so you’re going to position that inventory closer to the customer. That means more sites and that means more inventory. So with those two, you’re going to increase two of our parameters which are warehousing and inventory carrying costs. You could not do that. And you could go the other route, which is I’m going to keep my one or two locations and it said I’m going to express ship. Then you’re going to increase your transportation costs. But regardless of which format you choose to do, the likelihood is service level increases, you’re going to have shorter lead times to your customers at a higher performance, it’s going to cost you. So how much does that, how much does that really benefit you as an organization? And when I’m having these conversations with my customers in the network study evaluation, that becomes quite a difficult concept to quantify. I know many years ago we were working with a retailer and that was a fundamental question within the entire network study was well, should I be servicing my stores within three days or should I be servicing my stores within five days?

[00:07:52.000] Having sales. Understanding exactly what that cost impact or that sales impact is going to be is a difficult question to ask. And so in the example of this retailer, when we were quantifying the impact of such a change on the network, we made it as an order of magnitude number. So, so we said, listen, in your Current, current setup in your network, you’re delivering your, your stores within five days. This is costing you X if we are to go ahead and improve this to a three day so get that that inventory on the shelf available to sale to sell more, more quickly, it’s going to cost you Y. And giving us that, that difference between the two scenarios gave sales some something to run with so at least they could start thinking about, well, what assumptions would have to be right or wrong and what in what order of magnitude in order to prove or disprove that it warranted increasing that service level. And I know you’ve ran into service level as well in some network studies. How have you seen folks evaluating service level?

[00:08:58.690] So one example that I saw and I believe we all worked on it a little bit towards the end of the pandemic was the deployment of dark stores or being very close to customers. We mainly saw it in the online grocery industry and that was mainly sparked by the fact that people were at home. There was a, at least a perceived desire of having a rapid delivery to your customers. So a bunch of grocers went and deployed that model and we actually saw that it was at least as the pandemic faded away, it was not necessarily something that was warranted. And obviously when we’re talking about food, the supply chain for food is a lot tighter. So it made some amount of sense to be able to deliver fast to your customers. However, there is again a point of diminishing return where you don’t necessarily need the infrastructure to meet service level that is that aggressive, if we can define it that way.

[00:09:59.050] Yeah. And even. And when you’re getting onto that online grocery topic as well, we thought about that for many years and we had an influence as well from our experience in Korea about how they treat online grocery. They have a credibly, at least in Seoul, where a lot of our experience was coming from incredibly high population density that warranted certain setups. And then as those came over to Canada and the U.S. it was very difficult to replicate that population density. Manhattan was really only the other place that had something that was comparative. And so a lot of these models that people thought a lot about have kind of softened over the years. It’s no longer quite as hyped as it used to be. Of course we know network strategies. We are talking about the plan for the next five, eight, ten years. They are typically revolving around either long term infrastructure investments, you’re either going to sign a lease, you’re going to build a building, it might be long term Contracts, you’re going to go with a 3 PL for whatever extended period of time. So I know internally we often discuss about them as a North Star, how does somebody go about this strategy to getting to that point and what are the intermediary steps they might do along the way?

[00:11:19.740] Well, assuming that you’ve defined the optimal network that you want to be start, you want to start building to, I think the only approach that you can take really is a phased approach where you’re going and attacking your bang for your buck decisions. You know, dd some of the outcomes are pretty obvious and we’re able to quantify, you know, what makes the most sense to roll out that quicker and at least give a direction to, to our customers or our own clients.

[00:11:48.680] Right. We could say that we think about it in priorities, priority one, priority two and so on and so forth.

[00:11:53.780] Right. One of the deliverables that we produce out of our network studies will be a roadmap of how to phase out the deployment of the solutions that we’re providing. Weighing them in the balance is also an exercise that we do and it’s some of the value that we add.

[00:12:12.860] Well, I mean that of course gets me thinking about. There’s so again we’ve talked about strategic decision making long term. Then you get into the tactical which is it’s not quite your operational day to day, but it is that hey, within the year I’ve got my infrastructure, I’m not about to change that. But there are things that I can do, I can move my inventory around, I could potentially change a supplier within one or two years. And then there’s these movements that go around and I think oftentimes like now we’re hearing a lot about either Digital Twins that came up that was talked about a lot last year, perhaps now we’re talking more about control towers. Just for my, my distinction between the two and there’s a lot of opinions on it, but Digital Twins is going to take it to a level of granularity that is lower where you are truly going to understand your production equipment performance versus control towers are an amalgamation of the data from Your, from your ERPs, from your transportation systems, from your warehouse management systems and bringing that all into one. Once you’re given this tool in the control tower, it allows companies to make these what if scenarios about all right, I know my fixed infrastructure, I know what it is.

[00:13:32.800] How can I go about, how can I go about optimizing within what I’ve got under certain constraints And I know it’s quite dramatic to talk about but we have a customer who lost a facility from a tornado and the ability to have these very, very quickly. If that was to happen, how would I redeploy to support my customers? Becomes incredibly valuable when we go from strategic down to more of a tactical level.

[00:14:02.010] Yeah, 100%. I want to throw a curveball question. You know, we’ve been talking about AI a lot. Do you, do you see a place for AI in a world where you have digital, digital twin, the control towers.

[00:14:16.430] 100%. There’s the amalgamation of historical data. Right. We know inherently that anytime you’re dealing with data, there’s going to be some noise and some cleanup to do it. So AI even used from the perspective of cleaning up your historical data that you have and so you can make better decisions, but then also layering on AI’s ability to bring in predictive data on whether that be climate related events, whether that be regional influences as well. So I think that no doubt that that’s going to be incredibly powerful and enable folk even further with, with what they can do.

[00:14:53.250] Yeah, no, very interesting. So maybe if we can recap the, the, the network studies that we do really get work with the strategic vision of our customers. We help define the path and the recovery changes that need to happen to execute on the. When we look at a more granular short term planner, medium term execution, really the rise of digital twins control towers and let’s call them smaller levers that you can pull can help you gain the marginal or gain on the marginal opportunities that are there until you execute and create the major change that needs to happen.

[00:15:33.190] Absolutely. Wow. So thanks Tommy. Will you be joining us again?

[00:15:37.920] Well, most definitely.

[00:15:39.060] Oh, great. All right, thanks everybody. We’ll see you soon.