Streamlining Operations: How Bayer and DHL are Reducing Complexity

[Music] Welcome to All Business No Boundaries, a collection of supply chain stories by DHL Supply Chain, the North American leader in contract logistics. I'm your host, Will Haywood. This is a place for in-depth discussions on the supply chain challenges keeping you up at night. We're breaking beyond the boundaries that are limiting your supply chain. Today's episode is Streamlining Operations, how Bayer and DHL are reducing complexity. Our guests are Michael Sullivan, Senior Vice President, Product Supply Chain, North America, Bayer, and James Hoskins, Vice President Operations, Life Science, and Healthcare DHL Supply Chain. Let's dive in. Welcome both of you. I'm really happy to have you here today. I appreciate you taking the time to come onto the podcast. We'll start like we always do. I'll ask you both to introduce yourself. So if Michael, you could go first, tell us your name, who you work for, and what your role is there, and maybe how long you've been at that company. Sure. So Michael Sullivan, I'm Senior Vice President of Product Supply at Bayer Consumer Health, based in New Jersey. I've been here for about six years of my 30 plus year career, and I've had a really good time here with the Bayer Corporation. Okay, terrific. James, you're not a stranger to the podcast, but please, if you can introduce yourself to the audience again? Yeah, no problem. James Hoskins, I'm the VP of Operations for Life Science, Healthcare, and the Executive Sponsor for the Bayer account. I've been with DHL for about 28 years, and my background is majority in operations, packaging, warehouse management systems, and quality. Michael, you said Bayer Consumer Health. Tell us, I think a lot of our audience knows the brand name, but tell us more about the organization. What is it? I think there's a broader Bayer company. So if you could just sort of walk us through who Bayer is, who Bayer Consumer Health is, and where we may run into it as consumers. So Bayer is a big multinational conglomerate. We're operating in most countries around the world, and we really have three divisions. We have a consumer health division, of which I'm part. So I think consumer health being products you can buy over the counter. It's your pharmacy, it's your local store online, to meet your various self-health needs. Now we can talk more about the brands later. We then have a division, which is our pharmaceutical division, which produces, of course, prescription medications. Large focus on ecology, biologics, women's health, and a lot of core needs for people and individuals. And then we have our division, which is what we call crop science. And so they're making growing seeds for farmers to plant, herbicides, treatments, and very much for the agricultural space. We have three divisions, but we're all helping consumers. We're here to help every day life in different ways. Health for all hunger for none is a mantra, and our three divisions are there working together to achieve that. Just a general scale, what's the overall annual revenues of the company? North of $50 billion dollars, and so we're operating in most countries. The consumer health division is the smaller of the three divisions, but it's got a fantastic role-life footprint. Okay. And you share something in common with us, which I think you're a German multinational, like DHL is, so we've got that in common. We are. Heritage, we started as the Bayer brand, with the Bayer Aspirin in Europe to call it buyer. German founded company. We've been in business for more than 150 years. Each one of our divisions has a headquarters somewhere in either Europe or the US. And we run the consumer health division for North America out of New Jersey. Okay. Terrific. So James, catch us up here on the relationship that DHL has had with Bayer. What's the history? Yeah. So we go back about 25 plus years, global account. We in 2019, we started up a 1 million square foot build a suit, a CRT facility with coal chain for Bayer. That's in our Manchester, Pennsylvania area. Bayer is operating in about 800,000 square feet of this, which includes about 150,000 in secondary packaging. And then Bayer being the anchor client, we support to consume our farm up packaging at a little bit of plant support. This was by design to have flexibility and scalability. So for Bayer's needs to kind of grow or shrink into that space as they needed, we currently house about 5,000 pounds of raw material that supports that inbound of any manufacturing in Liars Town. And then on the packaging side, we do cardinization, blister, packaging, crap, and display. So this building is kind of also with a facility that we have in Las Vegas and then McDonough, Georgia as well. Okay. So it's a network that you're running? 3DC network with packaging. Okay. And so Michael, I think it's safe to assume that fits within your scope of responsibility. What else are you overseeing in your role as Senior Vice President? Yeah. So I have responsibility for manufacturing both internally at our own facility and then externally with our CMO or our country manufacturing partners in North America. I have responsibility for all the supply chain functions, project management, the distribution team, which James works with in the US. And then as well as a customer logistics team. So I have part of my team is actually embedded with the sales organization, calling and customers. And then I've got a financial services team, which also collects revenue from all of our customers, both for the consumer business and also for the farmer division. You know, one of the things that we talk about in this podcast is careers in supply chain and how broad they really are, which you just outlined there certainly supports that contention. You said that you've had a pretty long supply chain career prior to coming to bear what were you up to? Yeah. You know, before bear, I spent 27 years of proctering gamble. Started manufacturing management, which is what I wanted to do coming out of school. So got right into operations, spent a lot of my years in operations. But I've had the good fortune of working in most disciplines in the operations slash supply chain space. So, uh, contraining, facturing, internal manufacturing, project management, supply chain, some procurement work along the way. Had a chance to work several years in Asia about half my half my career has been doing work internationally. I've changed companies a couple of times and then came to bear in 2019. So I think I've had the good fortune of working in almost every discipline. You can imagine up and down the supply chain and really enjoy operations. It really inspires me to be able to make a product, see it go out the door and see again to the hands of a consumer who's been attending it from the end. So you're at bear and I understand you have a new global CEO and there's a program underway that you're taking part in or leading part of, I suppose. Tell us what that is and kind of how it breaks down and what kinds of things you're working on. You know, when I first came to bear in 2019, very traditionally run company, you know, run a lot from the corporate offices, a lot run a lot from the global headquarters, things deployed to be done, things monitored, very traditional management approach. And you know, we wanted to do better and the idea was much like we've been trying to do a manufacturing for a long time, how do you get to run a business more locally? How do you get to run a business more from a bottom up? How do you get teams to be more autonomous? How do you get more local decision making? How do you respond faster and better to products and development? How do you respond faster to customer needs and consumer needs? How do you take out bureaucracy and create agility? How do you make teams more effective together? How do you get teams to be inspired to drive as much efficiency at the, you know, unit level as possible? And how do you get people who are doing that work every day to create the insights and ideas and the creativity for improvement? And so I like this idea of dynamic shared ownership. You know, what do we, what do we, what do we change? Well, we've taken on a lot of bureaucracy. We've taken on a lot of kind of central organizations. We've taken on a lot of excessive governance. We've created more autonomous teams. We've created product teams we didn't have before. And we're driving efficiency this way too. So it's a journey in like any other large culture organization transformation that takes some time. We're about, you're two into this now. We're getting deeper and deeper into it. We're starting to see some benefits from it, but it takes time. And I think, well, that's one of the key things about culture organization transformation. It's not a quick, you know, you just don't set out the letter and get it done. You have to bring the organization along. You have to train. You have to bring a lot of people along with you. You have people willing to listen to the issues and some of the change creates. And making sure that you're going at a rapid pace, but bringing the organizational long for success. What I feel really good about in the transformation we've made the last year, year and a half is, while we've made this large transformation, we've actually been improving results at the same time. And I think that just proves that that's, it's hard, but we get it. We've gotten that done. And I would fully agree with you, Michael. We've seen the speed to implementation improve our direct contacts at the plan, these teams have had direct ownership. And when it comes to our innovation, that speed to implementation is very important, right? We're seeing a lot of that and we're still new in this journey, but I have seen some great improvement in this area, so good things to come. - Yes, so James, go a little deeper here with some of the innovations. What kinds of things have you been working on with the bear team? - So we just did a customer for life. So we are kind of focusing on all the areas. I know we've got some areas where we're doing a lot of data analytics on some of our OS and D and find through the end-to-end process. We've got some kind of the new gloves to help us pick faster. We're doing kind of like a visual voice pick as well. So we have electric yard trucks, those sort of things. So all the normal stuff that you would see in those implementations, but really getting into this new vision of what bear wants to be and how we're gonna end up within two years, especially since I think the biggest thing for bear is you're objective to reduce inventory, 25% across your network by 2027. So using all of our data and our analytics and our AI support to look at what that's gonna be and how we can meet there to make sure that we are funding innovation responsibly. We can't put in a lot of these big robotics and those sort of things until we know where we're gonna be. So we're seeing a lot of stuff around data analytics, AI and those sort of things in reporting. Michael, what are your thoughts on some of those topics? - Look, I think one space we've made a lot of progress in the last couple of years is really about serving our customers. And first of all, our service levels are nearing all time highs, which is great to see and that's a joint effort between our manufacturing sites and our splicing team and you as our distribution partner. So I really feel good about the progress with me on servicing our customers, but then how we service the customers. And what we're trying to do is take empty miles off the road. How do we get more efficient in a way that it's better for the customer from a receiving standpoint? How can we make the whole experience better? How do we help eliminate overshorts and damages and avoid fines and things to come along with those topics? So these are collaborative activities. And one thing we've seen from the DSO effort is even within our own organization, getting the customer team, collaborating with the distribution team, collaborating with the financial services team has really helped us think more end to end on servicing the customer. And I think in the end, it's better for all the parties involved. Michael, when you say customer, are you thinking about consumers or are you thinking about other entities? Our customers are the retailers. We're not a direct selling organization at all. So everything we get to a consumer is getting to a consumer through a retailer. Those retailers may be brick and mortar. They may be online, most are now a hybrid. And but in one format or another, we're selling to a retailer who is getting to a consumer. Right, and I'm not sure everybody unders, a lot of our listeners understand some of the dynamics there. So when you talk about service, you also mentioned fines that can come into play. What are those dynamics and how do you manage the relationship with your retailer partners to kind of get them the service that they need? How do they try to either support or guide your actions to deliver service levels? - You know, the partnership with the retailers is absolutely essential. Let's look at it from the retailer lens. You're a consumer, you go into a store, you have a shopping list, you have a product you wanna get. You want it there. You know, you want it on the store shelf. And that store shelf is, the retailer's real estate and they wanna have it stocked. And so our job is to partner on how to make that happen. And obviously they have a very important piece to play. They receive products. They have their own networks to distribute from large distribution facilities down to their stores and from their stores, maybe to a backroom and maybe from a backroom then to a shelf. So they have a series of steps in this process as well. But we have to help them. And so we have to get things to their warehouse, their distribution point, when they need it, we need to get it to them in a way that's easy for them to understand what they're getting. So when they unload it, they unload it, record for it properly. And they have other complexities. You know, they may only have so many trucks lots available per day at their warehouse. So when it gets there becomes very important. We know the things that get go into a drop lot. Maybe you don't get a motor for a couple of days. Well, that's lost time. Maybe you didn't get to the store on time. So we wanna work with the retailer to make the flow of goods as seamless as possible. We wanted to be on time. 'Cause we wanna be on that store shelf for any consumer goes to that retailer, our product is available for them to make that purchase selection. - It seems a bit like a paradox that you're trying to take a lot of inventory out of your network. So help us kind of hold those two thoughts together where you're taking supply down basically about wanting to improve service levels or fulfillment levels. - Yeah, that's the art of supply chain management, right? - Yeah. - So, you know, what we want to do is overtime gradually reduce our inventory levels and optimize. Why for a variety of reasons? Maybe over time we were more efficient at our factory or maybe we have a product that's made in a different location. We're able to make it closer. But, you know, whatever we can do to make the flow of goods more efficient, we ought to be able to then have some offset in the inventory reduction. It could be through our production cycles, for our production plan, product placement. In other words, what warehouses we have it at and where and why, how we replenish those warehouses. You basically have to look at every flow step in the process from materials through manufacturing to warehousing and storage and getting into our customers. And we know that the best in class, if you look at the Gardner analysis each year where they rank manufacturers, top 25 manufacturers and then they have a small cluster that they refer to as the masters. You know, these companies have worked year on year looking for ways to optimize their flow of goods, materials, processes and bring and free up cash. And the best are, you know, operating at 30, 40, 50 days. Well, our job is to continue to work in that direction. And sometimes the best in the industry from the supply chain standpoint, the inspiration. And we have some work to do to bring the inventory level down, that's for sure. - Well, we are very familiar with the magic quadrant. I was gonna save DHL up in that master class with magic class. And so I think we relate quite well to that. But, you know, to Michael's point, that speed to market is difficult in life sciences, right? There's a lot of complexity and I know we might get into that a little bit, but there's a lot of things that happen that need to be check box in your quality holds. I believe Michael, if I'm not certain, but to your Myers town releases quality holds within 4.5 days, which is incredible. Like that, the bad is first in class. - Thanks for that point. We worked really hard on that. When I took over the factory, our production to release from a quality standpoint was closer to eight, nine days. We've cut that in half. It really helps with the flow of goods. I will tell you that, you know, we have a number of CMO partners where that time clock is more like 25, 30 days sometimes. So that's really helped us tremendously. It's come through a lot of hard work. We've done some things, optimizing processes in our laboratory. We've done some laboratory automation upskilling. It's a number of factors that all come together. But what helps at the most make a quality product the first time every time. And it may be a lot of work. makes all of your quality release cycle time much more effective. While you're transforming the organization, Michael, there's a lot going on in the supply chain industry around innovation with data analytics, which James talked a little bit about earlier. There's interesting automation technologies coming into market. Two questions. How do you sort of weave those into the overall transformational journey? And how do you find the talent to support some of these emerging areas that are new or, well, let's just say new in the supply chain industry? Look, the digitization AI systems, your tech stack, these are all essential now in these industries. And every segment of our supply chain for materials all the way through our customer has a digital aspect to it. Whether it's how we communicate with our raw material suppliers, whether it's our manufacturing execution system, where we've taken paper records and now we're doing everything electronically, whether it's tracking and tracing of our transportation activities, all these things have been digitized. And there's much more to do. I think we are at the very early innings of, you know, getting deeper understanding of AI and how to apply it. And there's going to be more great tools developed for us to consider and access as we continue to evolve our tech stack. But these are these are these are essential tools now for any manufacturer. And from a from a skill standpoint, we really have two challenges. One, you know, we have an existing workforce and technology is changing rapidly. Look, we've just happened with AI in the last 24 months. And so, you know, we have an obligation to train and upskill our organization, help them develop new skills along the way. And we also hire in town, just like DHL does. We bring in a number of college recruits to come with more of a digital native beginning. And so they've been great assets and additions to organizations. So it's a, it's a both. We'll bring in talent, but we also have to upskill. And I think that's the magic for any company right now, as we need to do both. But while it's, it's evolving rapidly, evolving environment and AI is at a complexity in some ways and it's going to make some things easier, but we, we all have a lot more to learn. The biggest obstacle was that your company needs to invest, right? So we invest in those people as well, like you did. And we actually have programs, right? Because, you know, they're still funding at this point, right? So we have our own AI platform that we kind of keep. Together, it's got a lot of, you know, cyber security and things on it. So the outside world can't get in there, but we use all the data from, you know, different customers to kind of look at some things. So it's in its infancy, but we do have a great staff that's working on it in our innovation as well, right? We have an entire staff that comes in and looks at all the different things, you know, they look at hundreds of different, you know, of specs that we could look at that may fit into bear may not. So I think that the biggest thing for us is just that collaboration that we do, especially, you know, you see that in your QBRs on a daily weekly basis where our two teams are kind of really kind of looking at and say, hey, you have a gap here, we can fill that. And we have a gap, we ask you, right? So it's a, it's just really a good team effort. And I think that the fact that both companies understand that this is a necessary, it's not going away. There's great advantages to it. We both invest on it. So I think that, you know, with that relationship, moving forward, we'll have, you know, more opportunities to come on the innovation side. We, we built a, our own, a large language platform, which has given our internal employees, you know, like a safe, protected environment in which to utilize AI tools, which is, which is really fantastic. It's helping us a lot. And, you know, I think where we still have some interesting challenge ahead is then data. Because not all the data we want is in the right place. You know, for example, sometimes it's hard to marry together if we have a deliverable issue. How do we marry that together with why and where's the data around the, you know, the defects and how do you trace that back to action ability? Or if we have a issue with a delivery and we get some feedback on an over a shorter damage, well, how do we trace that back to the order? So I think we still have some interesting challenges ahead with getting the data. Because not all the data is in, is in any one party in some cases, other cases, it's hard to mesh it together. All the way back to, for example, maybe an original order and then makes it a little more difficult to research. So I think we've got some interesting spaces we can get into as we, as we keep working forward. So both of you have had long, long careers in supply chains and you just went through some really exciting things that are happening in the industry overall. As you look ahead, where do you think things will be in the next five or so years? Or, you know, what kinds of developments are, are you most excited about? Well, I'll tell you, five years is now a long time, Frank. Yeah. Yeah. You know, think about five years in reverse. You know, we went through free COVID, COVID, AI, so much, so much has happened. It's five years now, it become a long window. But I think clearly, acceleration of digitization, acceleration of AI. It's here to stay, you know, earnestly comparison the other day. If you look at how long it took to build out the internet, 15, 20 years, maybe, maybe it, now it's maybe it hits mature peak or peaking. We're just at the early, early innings of AI. And so that's got a lot of legs and that could take us a lot of places to help us going forward. And I hope it helps us to optimize. I hope it helps us find spaces to take cost out. I hope it finally helps us discover new products. So I think the spaces we can get into with AI will be just really exciting. I don't think it's just a buzzword. I think it's been proven that it's not just a buzzword anymore. But at the end of the day, I think what we have to keep in mind is that products, manufacturing, supply chains, they all operate with people. And we have a very important human component to all of this. And so we have to continue to develop people, develop culture, strive to make the best product every single day and realize that the employees are a while we're here, the consumers are why we're here. At the end of the day, if we serve them all well, we'll have long term businesses, not five years, not about 100 years from now. Right. Right. Great answer. Thank you. James, what do you think? I would say we look at bears having a little bit of a renaissance with their DSO strategy and really kind of streamlining. So we want to be the fight of that helps do that. Right. That'll be a long partnership. You know, not every company is expanding and growing as fast. Some are kind of, you know, settling back in and getting ready to move. Right. So so this transition with bears is exciting. You know, we want to see what costs we can take out and how we can improve that customer and customer feeling. Right. So we just want to align and with with bears object is we want to make sure we streamline what they're looking at. Right. We want to look at our cost to serve and drive all those things out that they don't need today and then move forward. Right. So, you know, hopefully we have another 25 year plus relationship after this. Terrific. That's great. Well, thanks. Thanks both of you for joining me today and telling us a lot about where bears headed and how DHL is supporting. And Michael, thanks for the insights into, you know, supply chain career. You certainly have an interesting one. It doesn't sound like it's coming to an end anytime soon. So look forward to catching up with you in the future and seeing how your transformation journey goes, goes in time. Very good. Thank you very much. Yeah. Thanks. Well, thank you, James. Thank you. Michael. Have a great rest of the week and look forward to crossing past soon. If you enjoyed today's episode, be sure to rate us and subscribe to us on Apple podcast, Spotify, or wherever you get your podcasts. You can also relisten to our entire library of episodes on our website, DHL.com forward slash A B N B podcast. See you next time. (upbeat music)