The Future of Supply Chain: Building Sustainable and Transparent Businesses
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Hello, hello. Welcome to Smart Talks with IBM, a podcast from Pushkin Industries, iHeartRadio, and IBM. I'm Malcolm Gladwell. This season, we're talking to new creators, the developers, data scientists, CTOs, and other visionaries who are creatively applying technology in business to drive change. Channeling their knowledge and expertise, they're developing more creative and effective solutions, no matter the industry. Our guest today is Sherry Heinisch.

At IBM, she's the global leader for sustainability services and offering leader for sustainable supply chain and circularity. But to her friends, she's better known as the supply chain queen. Sherry's job is to help businesses design and build supply chains that are environmentally sustainable and socially equitable. She's helped guide strategy for Fortune 500 companies and has won numerous top awards in her industry.

Sherry has worked with companies like Salesforce and UPS to shape thought leadership around supply chain, and she's also a major advocate for greater inclusion and diversity in her field. On today's show, why sustainability in supply chains is good for the planet and for profits, how technology can ethically reshape the way consumers source their goods, and what the supply chain crisis has revealed about the interdependence of our societies.

Sherry spoke with Tim Harford, host of the Pushkin podcast Cautionary Tales and longtime columnist at the Financial Times, where he writes The Undercover Economist. In addition to publishing several books on economics, he's also a BBC broadcaster with his show More or Less. Okay, let's get to the interview. ♪

Sherry, thanks so much for joining me. And I've been looking at your job titles. I've got the official job title, IBM's Global Sustainability Services Leader and Offering Leader for Sustainable Supply Chain. And I've got the unofficial job title, which is Supply Chain Queen, which I have to say I like a lot better. So what do you actually do?

Well, the title that I'm most proud of is Mother. Let me just start there. And, you know, I am very fortunate to wake up every morning and do what I love, which is answering a fundamental question. What responsibility do you have to others and what impact are you making in the world that we share? So in my current role, I lead sustainability services and alliances globally for IBM Consulting.

Just make the connection for me between sustainability, which I think I understand. It's like, you know...

doing the right thing, looking after the planet, looking after people and supply chains, which I also think I understand. That's the thing that goes wrong when I don't get my kettlebells, when that ship gets stuck in the Suez Canal and everyone's complaining about them at the moment. But how are the two connected? So sustainability and supply chains are interconnected in that you have a lot of

Companies making commitments right now around decarbonization. Maybe you've heard of net zero journeys or science-based target commitments. And when you double click that, supply chains are actually the conduit to realizing a lot of the scope three emission reduction initiatives that companies are after right now.

Sorry, just explain scope three for me. So scope three emissions are emissions that happen outside of your immediate control. So think about upstream in sourcing and procurement. Think about when a consumer actually uses your product. So for example, a lot of consumer goods, the impacts associated, especially the carbon impacts,

and the water impacts often live after they leave the retail establishment or your front doorstep. If I buy a car and I fill it with gas, then

and I drive it around, then even if the car is made incredibly responsibly and the gasoline was refined in the most efficient possible way, I'm still burning gas, right? Absolutely. And I think that this is the real human emergency that's tucked under a lot of the climate change conversation is, how are you transforming the lives of people, helping them make better decisions? A lot of that happens in a supply chain.

I think supply chains have gotten a lot of attention, maybe for the wrong reasons lately, because you don't have your favorite snack or your favorite thing at your fingertips on the shelves. And certainly with the pandemic, how we buy and procure goods has changed quite a bit.

But supply chains, that's where it really gets real. That's where we see things around responsible sourcing and a lot of the social inequities that can be addressed using a supply chain, fair living wage, making sure that you have a diverse workforce. So the cognitive diversity, something that I evangelize at IBM. How are we really shifting the type of people who are in the room building solutions to fundamentally rethink the world?

right now. And this is going to sound like an ignoble question because you've just expressed these noble sentiments, but are sustainable supply chains good for business? Of course they are. So there's always this business case for change. And I think there's a pragmatic lens. So having come from industry and supply chain for over 15 years, there's always the lean optimization. And what that means is things like

operational efficiency, looking at materials differently. Is there more value left? Is there more value on the table? So looking at lean and green projects and initiatives, a lot of those things have been historically tucked under.

supply chain but when you say sustainable supply chain to me it feels very different it's different because a lot of the optimization and efficiency gains specifically in environmental stewardship have been consequential they have not been intentional yeah the fact that people are thinking about supply chains now i think for the wrong reasons uh as you mentioned because stuff's gone wrong um

I'm sure that's frustrating as a supply chain professional and indeed a supply chain queen. But I mean, is that an opportunity? Because suddenly people notice that this is important. People notice that the society relies on supply chains. The economy relies on supply chains. Do you think that over the next few years, the supply chain sector will look back at this moment and say, actually, that did us some good? Absolutely. I mean, there's...

The reality that we will never return to where we were before and that supply chains really power the world. They connect communities. They connect, you know, this super global, hyper local frame of mind in that it shows the relationship that businesses can't succeed in societies that are failing.

I think there's a sense of renewed resiliency as well when you have business operations or business as usual, but you actually can't stop looking toward the future. And that for me, at least when I will look back on this in 10 years, I know that supply chains are right at the forefront of creating the type of adaptability to rethink a new world

To use sustainability and purpose as really an anchor to connect every person across the global network that each of us participates in. To the pre-COVID consumer, supply chains were truly out of sight and out of mind. It wasn't until baby formula started disappearing from the shelves and we had to sign up for a six-month waiting list just to buy a car that we realized how much we had taken for granted.

Sherry mentioned earlier much of the environmental and efficiency gains in supply chain have been consequential, not intentional. But now that disrupted supply chains are more visible than ever, we're forced to ask ourselves, how can we improve them? How does technology govern the modern supply chain? What can businesses and consumers do to make supply chains more sustainable and operationally efficient than before?

Let's listen. I'd also like to talk about computers because I feel computers have got to be involved. This is an IBM conversation. You work for IBM. What have computers, what has data, what has digitization got to do with supply chains? It's so important because digital and supply chain, especially from where I sit, it makes sustainability visible everywhere.

actionable, and operational. So we can just take some of the supply chain obstacles that have emerged in the past two years throughout the pandemic. A lot of executives have had to scramble to frankly rebalance their supply chain operations. So you think about demand volatility, rebalancing workforces, reallocating production lines to other products, especially as PPE was manufactured.

all of the policies and procedures needed to communicate openly with customers. And then also seeking alternative modes of transportation, logistics, and other services.

Data and digital is really at the heart of this. If you don't have the right technology, you're not able to make smarter, more informed decisions. And a lot of this data, frankly, especially in supply chain organizations, it exists outside your four walls. And the pandemic is a perfect example of the sort of collaboration with technology that's essential to not only save lives, but to make better business and operational decisions.

So I'm trying to picture this. So I just imagine I'm a kettlebell. I don't know if this is a good example or not, but imagine I'm a kettlebell. Why a kettlebell? I mean, partly because I've got a couple down here and partly because kettlebells seem to be the quintessential thing

that everyone was trying to get hold of in the spring of 2020 and no one could. So, okay, so there's a kettlebell. I'm a kettlebell. I've just been made in a foundry just out, you know, 100 miles out of Shenzhen. And I'm going to have to be driven on a truck into the port of Shenzhen, stuck on a boat across the Pacific, arrive at Port Los Angeles,

and then be put on a truck and I'm going to go to, let's say, Las Vegas, because there's somebody in Las Vegas who wants this kettlebell. And, you know, there's a problem because supply chains are all messed up and we're trying to make this whole thing more sustainable and we're trying to use digital technology. So just talk me through how this process could work better, how it could be more efficient, how it could...

protect the planet more, how it could reduce volatility. What's going on that might make this kind of thing work better? So the first question you ask is

Why are you producing something across the ocean that's landing in Las Vegas? And I think that part of the beauty of exponential technology right now in modernization is that we have more information to inform decisions and make better decisions. And what that means is in your kettlebell instance, you think about the footprint of that kettlebell. It's a very long supply chain.

And there's a lot that can happen. So shorter supply chains are typically happier. They have less risk. They have a lower carbon footprint. They also have more autonomy and agility, meaning there's a shorter distance and there's less disruption that's probable in that shorter supply chain. So, you know, you look at how are you sourcing? What's that sourcing decision? Is it lowest price? Yeah, probably. Yeah.

But what's the total price? What's the total price of that? And that includes a lot of the regulatory pressures around lowered carbon emissions and carbon taxation, cross-border adjustment tax, so on and so forth. Also look at the supply network. Like, are you creating a shortage of materials or goods or inventory in other parts of your network as a result of fulfilling that kettlebell order?

from China to Las Vegas? Is there a better alternative? Is there a decision that's smarter, that's a local or domestic decision where you can maybe with an incremental cost have a shorter distance to market, to delivery, a lower footprint,

and you have more control over what happens and a lot of those drivers of disruption like demand, supply, logistics, workforce, sustainability, you eliminate that risk by design all the way upstream in that very first decision point. Where do we source? Where is it going? And what's the total cost of ownership for that kettlebell? And if we want these decisions to be made more responsibly...

Who ultimately is making them and what are the challenges that we face? What are the obstacles to a more sustainable strategy? Is it cost? Is it ignorance? Just inertia? That's such a good question. What's getting in the way? It's such a big question and it's a great question because I, now I know this is a little provocative, but I think that consumers...

have more power than they know. They are the demand signal in a supply chain. It all starts with what you buy and why you buy it. And what I often find gets in the way, and you'll have a lot of folks who give you big, fancy, long answers, pontificating. It ultimately comes down to choice. It comes down to, and again, this is a bit of a first world answer, but you have the ability to choose with your pocket.

what type of world and what type of brand you support. The thing that I find most telling, Tim, is if you knew and if there was a way that a company could convey that level of transparency, not everything, not every single data point, but just enough to give you context around your purchase, would you make a different decision?

And that is what sustainability and supply chain is, in my opinion. That level of right level of transparency to help people make better, more informed, responsible decisions. And that's also where the divide lies. There's so much data. I think there's no lack of data, frankly. A lot of it is living in disparate silos.

And part of the work that I support, how can you be a great connector across all the different touch points to not only connect this data, aggregate it just for that first step of visibility, but then the sharing that's needed. Great use cases, the QR code enabled product label. So giving the consumer the ability to scan a code and see in-app

relevant sustainability metrics that would enable, in theory, a better, different decision where you could show not necessarily what a carbon footprint is or metric tons of carbon. Most consumers don't understand that. But in this example, hey, if you buy this product, you're saving 40 trees from being cut down. You're contributing toward this brand

responsibly sourcing a product, and also evangelizing the information in a way where you can be part of that journey. There are tons of examples where customers want to be a part

of something much bigger than themselves, employees as well. So I think, you know, we've talked a lot about consumers being the demand signal and that's really where it starts. But then I think that this is the power and the momentum, the paradigm shift that we're seeing where sustainability and supply chain absolutely matter.

I love this idea that as a consumer, I can just pull out my phone and scan the QR code and I can get as much or as little data as I want. I can get the quick summary or if I'm a real nerd about something, and some people are very passionate, they really want the details. I've got a friend, every time we go to a restaurant, he's always asking about the supply of the fish. He's super interested in sustainable fishing. It's just what he does. We've all got our interests. So I love this idea that

that these codes could just empower us. It's clear that that's a possibility now. The risk of digging a little deeper into more technical details, you mentioned this problem of data silos. Talk me through exactly how that problem manifests itself and what solutions are being explored. So historically, I think when you talk about competitive advantage, people have...

been able to operate in a black box, especially with supply chain data. A lot of the data around sourcing, logistics providers, manufacturers, all of these things were leveraged together for competitive advantage. So they didn't want to share this data, this strategy across their ecosystem. From what we've seen throughout the pandemic, you are

probably more profitable, more agile and successful in understanding where you absolutely have to share this data. This is equally true for sustainability data. So I think the paradigm shift is now in order to decarbonize our world, create the type of meaningful change, biodiversity restoration, ocean health,

making sure that our forests are healthy. All of this requires cooperation now at scale. So when you talk about technology, I mentioned before that, especially with digital and modernization and supply chain, it makes it visible. So everyone can see a source of the truth. So specifically at IBM, we talk a lot about something called an intelligent workflow.

And this is where you can use technology like blockchain, like AI, like twinning, like quantum to bring all of these stakeholders upstream and sourcing and procurement all the way downstream to the consumer even. So take that QR code that you scanned at the shelf. Consumer can look at their phone and see the journey of that product. They can credibly see where it was sourced.

There's even the functionality to thank their farmer. So maybe you're scanning a bag of coffee beans where you can thank your farmer and identify the source community. When have we ever been able in a source to pay intelligent workflow, connect the first kilometer of

of a supply chain with the last mile all the way to the retail shelf. So I think that these are the types of possibilities and opportunities that are enabled with technology, creativity, cognitive diversity, and fundamentally rethinking the way that we've done things. Right now, 9% of materials in the world actually are circular.

which means 91% of the goods that we use, that we consume, end up in a landfill or are wasted in some way, shape, or form. And that is absolutely unsustainable. We are on a path when we look at our landfills and we look at just the management of waste and oceans and waterways, we cannot continue to take, make,

and waste or throw away goods that we produce as a species. We're becoming more and more aware of the societal ripple effects that result from our consumption. Much of Sherry's job is to think about how we will live and consume in the future and how we can affect change today. There's a human element to her work.

Tim asked Sherry how she collaborates with the many humans who are embedded in our supply chains to get them on board with changing the status quo and what part creativity plays in her work. This whole season of the Smart Talks podcast is focused on creativity in business. Are you a creative person? Of course I am. You know what's interesting about my career path? I actually...

I started as an entertainer, as a singer. A lot of people don't know that. So I was a musician, songwriter for many years. But yeah, there's something about creativity. It's like the human soul on fire. And when we think about everything that we're living through right now,

We need people who can be creative and think from different perspectives to redesign this world and to redesign business and really steer us into a new future. Now, now, now, now, you might not agree with me, but supply chain and music are absolutely connected and they're very similar. And I'll show you why.

In supply chain, you always start with customer centricity or voice of the customer. How are you meeting their needs, their wants? How are you fulfilling the demand? It's no different than being on stage and singing or writing a song. Think about listening, tempo, rhythm.

cadence and pulse emoting tone all of those things that orchestration it's just like music it's just like supply chain i love it so i mean you you've conveyed this idea of of the creativity and of the the listening and of the tempo can you give me a specific example of

of a time that you've helped a client who's come to you and said, "Look, got to make the supply chain more sustainable." Or maybe the client didn't realize that they had to make the supply chain more sustainable and you convinced them of it. But just talk me through a particular client project or client relationship. So yeah, looking at a transparent supply chain in this example, this organization is a bit immature in the space.

So looking at how you encourage healthy snacking and they wanted to use data differently. A lot of the data that they had was very much disconnected from the way work gets done. But then they also wanted to bring the customer along with them, which was a scary proposition because I think one thing that came out of that engagement is

They weren't as mature as some of their competitors. And they said, if we voluntarily disclose some of the risks that we know we want to address, but we have to start somewhere, taking that first honest step, will it harm our brand? And it was a really interesting way of looking at it because as a consumer who actually buys their products online,

I thought, wow, they're starting from a place of wanting to be honest and wanting to lean in. And we have to acknowledge that a lot of brands are on this journey and we are going to see things that we cannot unsee. Yeah. It sounds like it felt really vulnerable. Very much so. The other thing was not knowing...

how to get started. And in order to give people that level of transparency in this customer example, they needed the nitty gritty and the nitty gritty was very dirty. And it was a lot of assumptions cobbled together. And I actually had to convince them that it was a great starting point and almost take them from feeling very vulnerable to feeling very confident. And again,

I saw services in technology and it was a great learning moment, frankly, because technology doesn't necessarily solve that. It's very much connecting that human experience. And that is where specifically in this example, the client had a vision for a transparent supply chain, but didn't know how to piece together a lot of great ideas where they could actually fund

their transformation over a five-year period. It was a billion-dollar business case, a lot of really cool ideas tucked under it, but it was, what's the sequence of steps and why? How do we prioritize resources, funding?

transforming work. So a lot of the work was automated, you know, thinking about the future of work and automation. How do you repurpose this analyst time, for example, to more value add time? So all of that to say, it was a great learning experience for me and also for the brand that I serve and that we both got to learn together and do something that really changed everything for them. It sounds like this work really matters to you.

It does. It does. It's why I get up every morning. I had this moment where it clicked and it was about seven years ago. I have three kids. So my oldest just turned 13. My oldest, Shay, my daughter, Ari, is eight and my youngest is seven. And it was when he was born that I just sat back and thought, you know, with the climate emergency, you know,

It was right around 2014, 2015. What am I doing? Like, what am I doing to change this? And you start to think about, you know, when they're 18 and God knows what the world would look like then, what did you do? What was your response? And being in supply chain and at the time starting to dabble in sustainability, I saw those interconnections and I saw a way marrying supply

supply chain, sustainability and technology to really make a difference and transforms people's lives. And it's good for business and good for the planet. And I think it was all of that coming together and clicking for me where I just said, this is what I'm going to do. And it's just been an incredible feeling and nothing can replicate this. My kids are proud of me.

I love my team. I would choose them even if I wasn't here. I would find them in the universe. I always tell them. So that's really what it's about for me is making a better world for others, for my kids, for their kids. And that's what matters most. Just help me look 20 years into the future. And we know...

The climate isn't going to get any better. We know we've got a real problem there. And for the foreseeable future, that will get worse, even if we're able to put some real solutions in place. But supply chains themselves, in 20 years' time, what would you hope sustainable supply chains might look like? I definitely want community resilience and hyper-localism to be

a driving force for supply chain transformation, meaning that, so a big brand, like do you have community permission to open your doors there? How do you preserve that community? How do you ensure that basic needs are being met? That is so critical and important. I mentioned before that businesses can't succeed in societies that are failing. And I think that that tie between businesses

Profit with purpose and societal impact, it's coming to the forefront now. When I think about a supply chain in 20 years, you think about community resilience. You think about, you know, how am I enabling others who have been marginalized or traditionally left behind to have access to health care, to have access to education and upskilling?

I think all of these things, that's what I would want most. And in terms of like how work actually gets done and how we transform our thinking, it's that we have shorter supply chains and that we think about the impacts holistically.

The total cost of ownership for a brand, for a phone, for a mouse, for a can of sparkling water. What's the total cost of this really? Which isn't necessarily price. There are other things that go into that. And I think that if we really understood the impact that we have

on the world, how we contribute to climate variation and climate change. I want to believe and hope that we would make different decisions. Sherry Heinisch, it's been such a pleasure talking to you. Thank you so much. Thank you, Tim. It's been a pleasure. When we think of supply chains, we typically picture cargo ships or faraway factory belts. Maybe a map of the world with a string of connected dots running from Shenzhen to Las Vegas.

But what Sherry does so well is highlight the impact these often invisible systems have on our daily lives. We all want supply chains that are ethical, environmentally responsible, and integrated with local communities. It's good for business, good for the planet, and good for the consumer.

The pandemic gave us a chance to begin the paradigm shift in supply chain thinking that Sherry talked about. Now there's an opportunity to put these ideas into action in our day-to-day choices, in our businesses, and in our communities. The next time we're at a grocery store and can't find our favorite snack, let's take a moment to remember that.

On the next episode of Smart Talks with IBM, how AI-powered technology can help us combat the human biases that result in discriminatory hiring practices. We talk with Angela Hood, founder and CEO of This Way Global. Smart Talks with IBM is produced by Matt Romano, David Jha, Royston Berserve, and Edith Rusillo with Jacob Goldstein.

We're edited by Sophie Crane. Our engineers are Jason Gambrell, Sarah Bruguere, and Ben Tolliday. Theme song by Gramascope. Special thanks to Carly Migliore, Andy Kelly, Kathy Callahan, and the 8 Bar and IBM teams, as well as the Pushkin Marketing Team. Smart Talks with IBM is a production of Pushkin Industries and iHeartMedia.

To find more Pushkin podcasts, listen on the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts. I'm Malcolm Gladwell. This is a paid advertisement from IBM.