885: Procurement Should Be a Safe Pair of Hands in a Complex World W/ Frank Mckay

0:05Hi there, my name is Philip Ideson. I want to welcome you to the Art of Procurement podcast, the podcast that helps you, a forward-thinking procurement professional, position yourself and your team to proactively take advantage of the revolution that's taking place in procurement today. By interviewing industry trailblazers and sharing insights from our own experiences, my team and I pull back the curtain and shine a light on the strategies, tactics, and tools that procurement teams are using to elevate their impact. And today on the show, I'm delighted to welcome back Frank McCabe. Frank is the Chief Supply Chain and Procurement Officer for Jabil, a global contract manufacturer, and also the parent company of Procurability.

0:46We've featured on the show a number of times over the past few years. First of all, Frank, welcome back to the show. We were joined by you a couple of years ago. And I'm sure while some things have stayed the same, a lot of things have changed in the last couple of years. So appreciate you coming back to talk to us about it. Yeah, no, thanks. Really appreciate you having me, Philip. Always great to chat through some of the things that are going on in the world of procurement and supply chain. So thanks for the opportunity. Yeah, now when we last talked in 2024, I think one of the themes was around earning and using that seat at the exec table.

1:19while I don't necessarily like the phrase seat at the table because we overuse it so much, the concept behind influence, really. And I recall at the time he talked about the importance of being data-driven, giving customers confidence that Jabil really takes risk and resilience seriously. That was a big part of it. And also really focusing on using the language of the business when you're talking to folks across the business. A couple of years later, since we last spoke, has your view changed at all? or is the new kind of ingredients that are being thrown into the mix with everything that's going on around us?

1:56Yeah, no, the view and the approach certainly hasn't changed other than we've probably hardened our philosophy and our approach and the way that we manage the supply chain and the procurement landscape and ecosystem. And if you just think of what's happened geopolitically in the last couple of years. That would tell you that I think we were thinking about it the right way and some of the things that we've continued to put in place and maybe even doubled down on have served not only the company well, but obviously the 450 or so customers that we have from a manufacturing relationship standpoint.

2:41And I would even follow that to say that it's probably benefited the supplier ecosystem as well, because, you know, we have, I think, been responsible and been a good partner. And, you know, I'll say it this way, there's probably a more articulate way to say it, but I think we're a safe bet when suppliers are making investments in their customers and, you know, looking at who's a risk here, who's going to be around for a while, who's got the rack together, who's thinking about things, maybe not just for today, but for tomorrow. And I think we've served the upstream and downstream ecosystem that we work in fairly well as a result of those thought processes and strategies.

3:26I want to talk a little bit more about risk and resilience later, because I think that's becoming even more important to the remit of procurement and supply chain than it ever has before. Before I do that, I want to talk, you're in a relatively unusual position of being the supply chain and procurement officer, like having both functions and organizations report to you. And that's not usual, I think, in many. You have kind of a chief supply chain and a chief procurement officer relationship that has to be nurtured and managed. you've suggested that that relationship can be a real force multiplier for organizations and I wonder if you could just talk a little bit about that and what makes that relationship work in practice yeah so in the lines for Jabil anyway you know yeah and if you if you just maybe spend 30 seconds just giving the audience a little kind of overview of Jabil you know we are a manufacturing solutions provider.

4:30We've got roughly about$35 billion in revenue, but we have about$30 billion in annual spend. So if we get it wrong, nothing else kind of matters for a second. We've got about 100 plus different facilities around the globe, and we're in about 30 different countries. And it's kind of split somewhat evenly from a geographical standpoint in terms of the number of facilities across Asia, Americas and Europe. So truly global in nature and you know the 450 or so customers that we have serve about 10 or 11 of the in markets from defence and aerospace, cloud computing, data centre, automotive, industrial automation and kind of everything else in between.

5:19So you know we've got a really pretty wide diverse view which is which is goodness so but the lines for me for procurement supply chain continue to become a little bit blurred and but one of the or a couple of the changes i have made since we last spoke philip is i've actually installed um a chief procurement officer who reports directly into myself and i have a vp of a supply chain who is on the customer facing side so if you If you think about those 450 brands across that diverse set of end markets that we serve, each one of those customers is looking for kind of a unique tailored supply chain solution, depending on the industries they serve, you know, the market share they have, the product they're building, the complexity of the manufacturing, the tariffs that they have to deal with, and all the complexities that come with some of our customers.

6:16So someone who is dedicated to waking up every day and serving the customer and their unique needs. And then we have that procurement side who's delving into our suppliers to make sure that we can have the right set of suppliers to meet those unique needs of the customers. And it becomes more and more blurred. But those two folks report directly to me. And I guess I'm the guy who makes sure that it all comes together and that we've got a strategy that makes sense that can be articulated externally as well when we're talking to any of our investors or shareholders or analysts, as well as our board of directors as well.

6:59So it's probably a little easier because both of those roll up to you. But if that wasn't the case, you know, what advice do you have for, I think, for procurement leaders firstly, but we have procurement and supply chain listeners to the show to really strengthen and build that relationship between the two and ensure that they are actually working together rather than these two distinct silos? Yeah. And, you know, I may have, at the risk of repeating myself, I think, I'm just really, really fortunate that the two individuals on the procurement side and the supply chain side have been fortunate enough to be working with them for decades.

7:35So we already have this deep tenured understanding of each other's strengths and each other's weaknesses and the things that we need to work on. And there's just an inherent trust built up over that time. So really fortunate. But if the organizations are separated, um you know there's a way that i think we came together initially as well and it was through technology it was there was so much investment was needed uh in technology and there was such a crossover there and such a you know a pulling bond if you like um because we couldn't do it separately so we kind of created this centralized or center of excellence and that by the way i I don't really have a great way of describing this, but you know, one place and one source of the truth and one investment portfolio that we were trying to cross across, you know, both procurement supply chain, that's where we kind of came together and realized, you know what, we are actually better as one.

8:37So if I was given any advice to Andy, who still has it separate, that's the best place to come together to figure out what your overall, you know, your enterprise strategy should be. And I think you'll find natural ways to just come together over time. And that's what serve does really well, was using technologies, that bridge to pull us together. When you talk about that technology, is it from a perspective of kind of specific collaboration technology that ensures that both parties are talking to each other? Or is it a little bit broader in terms of, we're looking at our tech stack holistically to make sure that all the data is a single source of truth that then drives the same platforms that you might build onto that, which one might be helping procurement professionals specifically, one might be helping inventory, one might be helping warehousing, one might be helping, you name it, the different kind of areas and supply chain.

9:30Which was the, was it like either or, or was it kind of both of those things? It was absolutely both. But you've nailed it in your description of both of those kind of coming together. and there was a there was a realization and you know i'll maybe be jumping ahead here so i apologize you can pull me back but it was all around do we have a supply chain um that we are building that is going to allow us to navigate and be agile enough no matter what the world it continues to throw at us because we came through you know the kind of and by the way when we came together it was right at the start of COVID.

10:09So we were very lucky that we got to kind of experience this as kind of one team and not be separate. So we navigated our way through that. But we realized from a tech stack standpoint, that we had gaps, if we were going to be able to do this and build resiliency for the next COVID or the next war, the next geopolitical issue, the next shortage, supply demand, whatever comes our way, that we've got a tech stack that is knitted together, well thought out, that could deal with anything across, whether that is in the downstream ecosystem of suppliers or the upstream for customers, or just even the logistics that stitch it all together as well.

10:53And that's what kind of drove us together and made us think maybe a little bit more holistically than we were. And I'll just say pre-COVID. yeah i may come back to some questions around kind of the role of procurement supply chain but let's kind of talk a little bit of a bit more about the technology given we're kind of talking about it um here and um i think when we last spoke uh we talked about ai and automation and we talked about uh i think at the time you were heavily using rpa you were just starting to experiment with generative ai the world has changed a lot in the last couple of years so But kind of where are you in terms of thinking about, you know, the adoption of AI in all of its different forms a couple of years on?

11:38Yeah. And I'll just I'll jump into that, Philip. But the first thing I would say, though, is one of the things we've been very, very careful of from a messaging standpoint internally, both into the procurement supply chain organization. organization and we're you know we've got the 3 400 folks inside the organization very careful with the messaging that the investments we're making here was about enriching the current roles that they have this isn't about going lights out purchasing or taking people out it is about doing more with the same so I would you know with message that I think appropriately but also externally as well making sure that we are not positioning yourself as hey we're moving towards ai and ai is going to do everything and we're going to take the human out of the loop we've not messaged that way because that's never been the intent nor the strategy but we are absolutely taking advantage of what ai brings um enriching the roles uh i think taking data entry out of as much as we possibly can or whether that's a buyer whether that's a planner or whether that's a customer facing person who looks after a supply chain or the sourcing individual or the category manager we've made i think really really significant steps in allowing their jobs to be more enriched um and if you look at it the the one thing i think we've been pretty maniacal around is can we actually have these roles performed to the job spec and the job description that we put out there um and and that's been kind of the goal is let's make the jobs be the jobs we said they would be and not data entry and we've made some strides there think about things like autonomous sourcing would be one example that we've introduced um even from a quoting standpoint we've made significant inroads in making sure that our quoting has as much ai capability built in there so that we are not continually testing the supply base to the the ways we were uh historically that we've got access to pricing that we can now generate use uh use ai to help make sure that we're pricing appropriately going forward without going back into the the supply chain and you know testing the same uh you know requesting the same price for the same part from the same supplier that we did you know two three months ago as well have you had any wow moments along the way where you've seen something and and it was just like wow you know that's you can kind of see the game changing or the the after the possible you know as you see things that you never thought were possible yes and i can give you a very recent example where uh i was absolutely i was embarrassed by being blown away because i felt i was the only guy in the room who didn't know we'd made the inroads and the progress of um and this it sounds pretty simple but um it was a wow moment of we can now predict uh where our shortages are going to be and we're making steps to eliminate what would have been a shortage which would have built risk in which could have potentially put a factory uh down uh you know waiting for that you if we used to talk about proactive risk mitigation basically exactly and now we have an automated way uh utilizing the ai and a capability that prevents that and it does it for us and it and it mitigates the risk massively and we did it in like a six week period from concept to go live and i got to see the pre-go live version that only started six weeks ago that i had no idea was even being developed so that was uh oh wow this is the pace and the speed um that the world is moving at these days so yeah that was just one example of it kind of blew me away just the capability that we'd introduced in such a very very short space of time oh and by the way the other thing i would point to is for very very little investment as well um which i think back five years ago uh it wouldn't even have been a capability but i can tell you if we even started that it would taken as a year and that would have cost me you know way more than it did you know today it's kind of incredible how you can just have an idea and you have a working prototype in sometimes an hour that you can start to tinker with um yeah obviously you're a completely different scale and working is a completely different scale than a lot of businesses but uh it just allows you to start thinking about what you may be able to do and testing it with use cases almost immediately rather than just trying to prioritize, decide I'm going to invest in that one.

16:28It's going to take me six to nine months to come to fruition and then decide, I'm not really sure about that one. I'm moving on to the next one. No, exactly. And I think, you know, one thing I would maybe also guide the audience on as well, Philip, is we've made an investment in a dedicated supply chain and procurement technology stack innovation. and i have one person who runs out who reports directly to me who works uh right across the organization and serves the needs wants and desires of whether it's logistics whether it's procurement whether it's supply chain whether it's our services organization that we that rolls up inside my organization as well um and i think that's really important it's not shadow it and i would advocate that you do not you know have a shadow it that you work in collaboration and in full transparency with your enterprise IT department.

17:28And that served us really well, having that. Again, call it centralized, call it center of excellence, whatever you want to call it. It's just one throat to choke for me. It's an investment stack that I can understand exactly where it emanates from. It's bought into by the organization. It's in collaboration with the enterprise, with our CIO as well, who's completely supportive of all of the efforts that we have and i just think that will save you duplication yeah going against your your your council getting out of compliance um misusing licenses and all the other things that comes that you maybe not think about when you're thinking you're doing the right thing in a little bit of a closed box or a little bit of a vacuum i i just advocate that you be as transparent as you possibly can how um and my last question on this but i think it's a it kind of follows that we talked about um from a team perspective it's about enrichment and enriching enriching their roles you talked in examples it's around doing things you were never really able to do before so it's not necessarily yes there's there's the efficiency part which is important because it frees up resource to do these other things yeah How do you think about, given the size and scale of the team that supports procurement and supply chain at Jable, how do you think about readying your team to be able to take advantage of that time that becomes available to them to do some of these more strategic things that they maybe never had the opportunity to do before?

18:59I think, honestly, for us, it was really simple. As I mentioned earlier, we went back to the job description and said, this is what we expect of you. this is where you should be spending your time and if you think you've got any gaps from a skill set standpoint we've offered out a whole suite of of training um for them to meet the needs of those gaps we've done that from an internal standpoint and we've invested from an external standpoint bringing that capability in-house as well so i feel really good that we've provided the folks inside the organization, the capability to get up to speed if they weren't already.

19:41So that's kind of one of the ways that we've kind of looked at it. But we have been adamant that, and we've encouraged everybody to come to us and say, if you feel that you are having tasks that could be taken over by, you know, some type of technology, AI or otherwise, please bring that to bear for us and let us go address it because we know we now have the capability we wouldn't have had yesterday and we've made that investment so and we have had uh people um more than happy to point out areas where we think uh you know that they think we can enrich their life that they could be better served doing other tasks that would yield more value than you know and i i'm just saying data entry it's a little bit more complex than that you know but um you know people have been really uh really vocal about it now that they know hey this is a safe space to come and have these conversations and there will be somebody there who does try to to help and take those ideas and try and turn them into something that is of value using the tech i i know i'm going off topic a little bit here but um i i'm really interested to think about or to understand how you think about the the governance around the use of of ai and what i mean by that is more within your team so there is that you can let everybody kind of experiment on their own and there's definitely a case to be made that that's how you learn is by you have your own individual use cases you have the access to some tools where you can create and use ai yourself so you can make your life easier on the other hand you have you said three three and a half thousand folks um you don't want three three and a half thousand people all creating their own use cases and going and using ai on their own because there's no connectivity between it all um so you know how did you kind of think about i i need to encourage my team to take risks or not take risks to experiment um but also i need control and kind of balance those two things together yeah yeah so um we have a process uh and i and and i'm very clear on saying it's a process It's not a policy.

21:51We have a process that we introduced that we educated everybody on that they can go follow. Hey, here's the guidelines if you have an idea. And by the way, we have a sandbox environment that people can go off and do their own little experiments that is off-cycle, offline, that isn't inside the live environment, the production environment, if you like. They can go test out their theories. And then if they get to play in that little sandbox and whatever idea they have they think then merits further discussion that's when they bring it into the the technology stack folks and then they flush that through and then there's a council in there that would allow them to go potentially go invest in this and go make it happen so it's a pretty straightforward um process not a policy um for folks to be able to get take it from an idea allowing them to play around with it and then take it forward if they think there is and then it's done in a when I say a controlled environment I just mean it goes into one organization so we don't have 17 different organizations where this is happening and it's all inside procurement and supply chain and as I say that reports directly into me because I have to make sure that we don't end up doing anything that we think is the right thing but ends up getting us in trouble from a licensing standpoint or just getting Is it a whack from a compliance standpoint or a SOC standpoint or SEC or anything or anything that would potentially rub the wrong way with customers as well?

23:24Because if you think of who our major customers are, they're the most innovative brands in the world. So we're always cognizant of we're the guy who build things. Let's not get ahead of ourselves over our skis and anything. So I just need to be careful there as well. how do you think you measure the procurement and the supply chain professional of the future do you think that changes uh i think it already has uh i think you know what i think when i was coming through my career and uh and you you know you know that's better than anybody philip it was cost reduction cost reduction cost reduction and uh i'm not telling you we don't have that as a metric by any manner means because we have to keep our customers competitive and we have a yeah we have a process that we execute every quarter where we um that we go through that makes sure that we understand um are we still competitive do we have a position of cost leadership that will never change well it's just the engine that keeps turning that but that's not um how we're viewed anymore the the um how we get viewed and the metrics that we are now held accountable to or that plus 10 others um some of them being things like um the contribution of the balance sheet yeah um and that there's probably five different metrics inside our uh our performance and assisting with uh balance sheet health uh that would be another way resiliency um you know did we put a factory down did we have a shortage that uh resulted in a missed schedule missed forecast, miscommitment to the customer.

25:00That's now became one of the largest metrics that we have. And then maybe one that's a little bit strange and not traditional is how much money we're making on our services arm as well. So have we been able to monetize and leverage the$30 billion, the relationships we have suppliers or uh or kind of global world view um that we have as a result of managing you know 38 000 suppliers and across 30 billion dollars have we converted that in a uh you know sub state as substantial and sustainable revenue and margin streams that didn't exist uh yesterday and i think i'd mentioned you before you know we have the pnl ownership for that as well so that's another huge metric that didn't exist five years ago.

25:52And that's again unusual for an organization it makes you self-funding as much as you can as well doesn't it because you know you're bringing in margin that it truly in perhaps a different way than sometimes we think about procurement adding to the top line you know you're adding to the top line by having a services business within you because you're leveraging all the expertise that you have to support you you know, non-competitive businesses. Yeah. The knowledge that you have. And it's never, I would never, you know, I would never try and fool the audience that any conversation when you're asking for funding is easier or easy, I should say.

26:28But it's certainly, yeah, from a storyboarding, from a credibility, yeah, from a trust standpoint as well, it's a different conversation when you can say, hey, I've already made X last year. I'm committed to making Y this year, but I need a portion of that for funding for the enterprise because here's the things that we're going to go do. And I'm not sucking dollars out of the corporate fund because it's coming out of the money that procurement supply chain services has generated. It just changes the conversation from a credibility and trust standpoint. it just makes again i'm gonna say easier but uh yeah it's never easy no well you end up running a business within a business aren't you so you're a business you're on p &l that's reported that's generating more than just asking for money uh and that's what you know that the pitch is possibly that's why it allows you from a value proposition perspective to think more broadly as well then you're not going and saying uh measure me on my cost savings because that's only measure you can use to demonstrate for me to demonstrate what my roi is which is what we made the business case on so many procurement investments over the years because you can show that you're delivering value in other ways beyond that that's right and again maybe for the audience as well from uh just giving a little bit of uh under the covers you know it started off organically and then yeah we moved inorganically and we sought some funding uh from the the board to to go do some acquisitions.

28:02So we're now, we've got four acquisitions inside the services organization, and we've got a joint venture with a native AI company as well. So we've made some really good progress. But yeah, it allows us to move at maybe a little bit of a more nimble pace than you would if you're just under the traditional guidelines and rules that procurement and or supply chain would be operating under. Well, I just want to come back as we close out more tactically to the idea of risk. We talked about risk at the beginning. I think that, you know, procurement and I think supply chain has always been a, there was a podcast I did this morning that talked about us being guardians of resilience and this idea of that's kind of one of our roles.

28:46And that's always been true to supply chain and not as true sometimes to procurement, but I believe it's becoming so. And even cost is just a risk measure. and innovation and hampering innovation is a risk measure as well so everything kind of comes up under this purview but i think there's sometimes um uh there's not necessarily clarity between who owns risk management risk mitigation it's easy for everyone to point fingers at each other when things go wrong um you talked in the first episode a couple years ago you've talked about it here about how important it is that you know you have risk uh and you have resilience built into everything you possibly do for all of your customers you know how do you think about where responsibility lies ultimately for managing risk managing resilience across your supply chain and the role that procurement plays in that uh the buck stops here um and and that's how we kind of think about things and operate and you know we we just don't have time to have a well i only own this part of the bill of material and the customer owns this part and and operations that we just don't have time for any debate so we've just decided as an organization that we own risk we will manage risk we will invest in ensuring that we are diluting as much of that risk as as possible through you know people process and technology the you know three things that everybody day always talks about um and i think we've made significant investments and i may have mentioned this the last time as well philip but it still holds true is i just cannot afford for our customers to ever see jables anything other than relevant and that safe pair of hands who understands how to manage a very complex very global supply chain and um because we are we have some wonderful competitors uh that we go up against every every day and so when all else is equal around pricing just for a second and and the commercials something has got to be that tipping point and and i've got to make it our ability to manage the supply chain and take that that worry of risk away to the best of our ability and that's what we strive for and we are maniacal around it And it's why, and I'm very, very clear on this, when we, in fact, in two weeks' time, we have the fun of our long-term planning session where we go and ask for the next year with a two-year outlook beyond that of funding and justify the organization and seek any, whether that's CapEx or OPEX and all the fun stuff in there.

31:29and I make no secret of the fact that I will stand, I'll be here every year asking for some level of incremental funding to ensure that I can look everybody in the eye and promise that we are doing everything possible to eliminate or reduce or dilute risk to the best of everybody. So the buck stops here and I think it's, you know, we're trying to just make it part of the culture that if you're part of this organisation, you bear the responsibility for taking on that risk and making sure that we're doing everything we possibly can to eliminate it. Well, Frank, I really appreciate your time as ever.

32:09I know that we could have gone in lots of different directions as well today, but really interesting insights. I love kind of how you want to think about risk and it being essentially a team sport. You know, you're selling confidence and peace of mind, you know, as well as all the things that you do every single day, but that's what you want to really instill. is that confidence that we don't need to worry. You know, I think that things are happening. And the best organizations sometimes are the ones that, you know, you're not singing from the hilltops. You're just making sure that what needs to get done gets done with no worries and concerns.

32:45I just have to look our customers in the eye and be truthful and say, hey, I promise you we're doing everything we can using, you know, the tech that's available to us today. and I think I've got some of the best folks in the business and I think we've built up mature processes to make it happen that we can deal with anything that the world shows us. Well, let's wrap up here. What I'm going to do is I'll put a link to actually our last conversation as well in the show notes so anyone who didn't listen to that can come and listen to the chat we had a couple of years ago. We used that as a little bit of context for today.

33:18I'll put a link to your LinkedIn profile as well on our show notes for people to connect. but one last time frank thank you so much for joining me today

33:30if this episode struck a chord with you please do send it to somebody we grow here at art of procurement through word of mouth and that would be really appreciated you can also support us by giving us a thumbs up a star rating or a review wherever you listen to your podcasts since 2015 we've built the world's largest free resource for procurement professionals looking to elevate their impact. Our resources span podcasts like this, videos, blog posts, papers, and events. To join us on the inside and to ensure you never miss an episode, a webinar, an event, or a post, please do subscribe to our weekly newsletter This Week in Procurement.

34:07You can do that at artofprocurement.com slash subscribe. That's artofprocurement.com slash subscribe. Thank you for joining us today and I look forward to seeing you again soon.