 Welcome to the GATT, the podcast for enterprise leaders delivering timely insights for today's global economy and tomorrow's competitive advantage. I'm your host, Chris Kane, president of the Center for Global Enterprise. And today we sit down with two global business leaders to discuss factors that are transforming global economics, business models and supply chain operations. Mike Beskarin, chief operating officer for digital technology at DP World, a world leader in global logistics, and Marco Kovacic, the managing director of Digital Supply Chain Institute, a New York-based non-profit applied research organization. Mike and Marco, welcome, and thank you for being with us today to discuss why CEOs need to fundamentally adjust their supply chains now. For the past 30 years, business leaders have been able to execute their supply chains, mostly unencumbered by geopolitical constraints. Geo-economics was highly integrated and strong support for multilateral trade agreements created operating efficiencies for companies and gave management substantial freedom of action. This unencumbered environment no longer exists. The world is at an inflection point over growing concerns and in some cases, resistance to globalization and economic interdependence. We're seeing three factors that are having a defining impact. The rise in de-globalization, the rise in protectionism, and a commitment to mitigating climate change through operational adjustments. In addition, concepts of supply chain sovereignty are rising and threaten a company's ability to retain operating flexibility and competitive advantage. Companies may choose to stay the course with globally interdependent models, but they are well-served to find alternative choices to mitigate these new operating and financial risks. One such alternative model that has arisen recently is called constellations of value. It is being embraced by leading supply chain owners and operators and provides a choice for CEOs to consider. Mike, perhaps we can start with you. DP world is on the front lines of supply chains, helping companies and countries move trade every day. What changes have you seen in the last two years affecting supply chain owners? And if companies are adjusting to these changes, how are they doing? Chris, thank you for having me. Yes, I think over the last two years with all of these black swan events as well as which happened in a generation now happens so frequently, is exposed a lot of disruptions in supply chain. There would be the Swiss Canal incidents or COVID-19, of course, then geopolitical issues that we're noticing. There's clearly some lot of unforeseen challenges across. So there is a compelling need now, more than ever to digitize, getting to know how do we create access to data, especially from the supplier to a buyer to a vendor connection is extremely important to create alternative routes, especially the key digitization areas for customers to go understand business growth, to identify like working capital, whether it is through e-bill of leading and connecting to certain financial institutions or operational efficiencies using technology, a better ERP, better solutions in terms of running for forwarding, or even like corporate social responsibility, understanding carbon offsets associated with a lot of transportation that you do. All of these things have become extremely important in this process. So at the center of all of these supply chain activities, digitization is the key element to weave together all these discreet manufacturers and suppliers and buyers across the entire ecosystem. And now with that, digitization also becomes, reading and routing becomes a very critical issue. Can we find alternative routes for previously congested solutions today? Can we find alternative suppliers? So there is for a lot of the supply chain heads today and CEOs have become imperative to go find alternatives across the network and using digitization as becoming a key element to go ahead and accomplish that objective. So one of the things that is seemingly at a deficit today's world is trust, trust in governments, trust in institutions, trust in suppliers, et cetera. And supply chains have been attacked by these kind of forces, like you were referencing pandemics and black swan events, which has had an impact on people's confidence that they can trust either a process or a supplier. Mike, turning back to the point you made about digitalization, digitalization and trust. Can you talk a little bit about what you're seeing with your customers and in the marketplace about how digitalization can increase trust and therefore bring more confidence among the stakeholders to a process that allows them to move efficiently and at the same time with increased confidence? I think yeah, there's several examples that I can actually talk about, Chris, thank you. I think if you take a look at some of the platforms, I mean, today there is a, you know, we have CDH.com as we've developed for a lot of our customers, predominantly to focus of like best rate solution. So we saw like during these events, there were a lot of rollover finding space and location and like large shipping liners or finding air capacity or finding like road capacity was always challenging. So but what digitalization brings to the forefront is the ability to go back and see transparency in some of these slots and pricing and what we can actually go back and provide with the greatest amount of confidence for a customer that we can actually lift a container. And also like, how do we do that? We also did this with building alliances with a lot of like freight forwarders. Collaboration is the key when you have a fragmented supply chain and fragmented markets. So we've able to go back and identify freight forwarder for instance in China and we're connecting the freight forwarder in Brazil and they're able to communicate in a platform where, you know, you have payment guarantees insurance guarantees and then you have the ability to seamlessly transfer data from point A to point B. So it covers the physical supply chain, financial supply chain, as well as the digital supply chain as well across the board to ensure that it's like more trust and problems in this process of looking at data. So it's very imperative to go back and identify the list of players who have like high governance, high reliability in the process and we've leveraged technology to get like a list of freight forwarders in the platform. And this is something that we're providing and then the customers are really adopting to that. So that's one way of doing this. And the other thing is also equally important is like, I mean, we've also noticed in situations during the pandemic is many countries where the vaccines would reach but the syringes would take significant amount of time because the department of customs is like has to pay the department of health vice versa. There is financial transaction that needs to happen. And then while the syringes reaches. So what happens in a situation like that, you bought up about the trust is extremely important. So can we go ahead and then highlight the data? What is so important? So we created something called the World Logistics Passport in about 27 countries plus we have the ability to go back and then provide our customers a green channel and then highlight this product is extremely important. And especially companies, which have blue chip companies that have great governance. The documentation is really good as it relates to the house bill of lading, master bill of lading. It's easy for them to transact and then get through, have an accelerated green channel through customs. And then this includes like countries like Brazil, Columbia, Thailand who participate in this process. So now we've created an ecosystem where traders from all these countries can communicate. And then at the center of the solution is the digital technology, whether it be blockchain or it could be, I mean the people of lading that we are building with right now or even like reading and writing new solutions trust becomes a very key element because high fidelity in data and ensuring that we are showing the right information all the time becomes very critical. So again, to your question, the whole encapsulating data into the physical process and highlighting this and then making sure it's got very high fidelity becomes extremely important. And then that's what we've been working towards to go help our customers. So Marco, it seems that as an operating premium trust is almost sacrosanct and this concept of constellation of value is an interesting model. And it seems to me that based on what I read, constellation of value provides a selective opportunity for the players to increase trust among themselves on an operational basis. Could you talk a little bit about the constellation of value to talk about what it is for our listeners and talk about why you think it's got a benefit for those players who are involved and what it might bring to a CEO who is looking at this environment that we've just described and trying to figure out what pathway forward makes the most sense for them to pursue? Yes, Chris, definitely. We in Difficult Supply Chain Institute look into things and new trends from the applied research manner. So that means everything what we explore and research, we put in direct context of real time business with our members. So in last 12 months, we came towards the concept of constellation of value and how does it resonate and how does it look like is that we defined it as a selective network of entities which is basically chosen to advance the efficiency, security and security of supply chain owner, right? It's then very important what it is, let's say comprised of. So usually it's comprised of suppliers, manufacturers, service partners, logistic service providers and other supply chains, they're holders. And then everybody is focused on several things which means for everyone, right? So there is a shared common interest and it contributes to visibility, predictability, security of the company's customer delivery requirements. So it basically answers the questions of continuity, resilience, security and efficiency of a supply chain. So with this, we see that we are living in the time and Mike as well, underlined that of not competition but co-opetition, right? Where we really collaborate and as you said, foundational pillar is trust but how we connect these three dimensional nodes, right? We connect them with data exchange because it's a trusted entity of the companies who are serving the value chain together and they serve it for the same interest of fulfilling the need of the final customer. Now what we have seen and what was one of the things which companies asked us when we started experimenting with the model was like, okay, that's a cool idea, it looks nice but how do we overcome the functional boundaries, right? Which is a very, very relevant question. Of course, we didn't have the answer right away. We needed to test and drive. So we test in a trying, we realized that that's a less of a barrier. And here is why, right? Because there is an increased collaboration and data sharing through the group. So the constellation, as it consists of the nodes of the entities, for instance, such as warehousing, TPL fulfillment or component manufacturers, they're all connected to critical pieces of data between the members. So this is how you integrate a red thread across and basically accelerate everybody's interest. And this way of collaboration also provides an increased cyber and operational security, which I mentioned at the very beginning as a very, let's say, big challenge going forward because it's something with the connected world, the risk in that sense grows. So with this way, an enterprise can be proactive rather than reactive with everybody who is part of the constellation because immediately the parameters for cyber and operational security are set and aligned within the group before you start sharing data and before you start moving the constellation forward. So overall, that becomes a trusted entity for transformation, for innovation, efficiency improvement, cyber security improvement. And at the end of the day, it serves the needs of the new customer in the right way. It seems like it's an interesting model and a timely one given the division part is taking place around the world fused by various geopolitical events and by being more intentional about who you're gonna work with and how you're gonna work with them to Mike's point earlier about creating a shared reliance and understanding where data becomes the red thread, the constellations needs to be a model that hopefully gives you more control over some of the factors that are played. Let's talk a little bit about the rise in de-globalization, the rise in protectionism and the commitment to climate change. Mike, of these three factors, which of the three do you see companies and your customers struggling with the most and are there other structural factors that you would bring to CTO's attention that are maybe beyond these three but these three seem to be forces that are really shaping and reshaping how people are doing business today? Absolutely, Chris. I think for our role as a global trade enabler, we're practically in every continent operating. Our role is to go ahead and then say, whatever our customers decide, if I want to read out, if I want to near shore, we provide a flow, a physical flow of goods to go back and support their strategy. They want to continue doing business as usual but they want working capital needs to go back and solve. Obviously we have products that we've built for them. And then for climate change, as I mentioned earlier, which is a lot of concerns today, when we have conversations with almost every customer, they want to know what impacts do we have. We have partnered with companies like Climate Trade Out of Spain. They have created a fractionalization of carbon credits so we can provide options for our customers to offset. And there is a sense of concern. This is extremely important. I mean, there is a lot of our customers, they want to do. How do we go back and solve that? So whether it's like a reforestation solution or providing like a windmill, they just want to know how they can actually participate. And now when we actually break down and then say from a shipment from LA to Shanghai, like about two tons of carbon, for instance, and then we can go ahead and then say you can buy offsets at $20 to go ahead and then offset that particular. And then we appropriately apply to the specific projects and they have a time limit. And they're also verified by global bodies to ensure that this is something that's covered and it's done on time. So with the right certified authorities, so it makes sense. So that is an area that we're noticing from customers as well as you pointed out a sense of care and the duty of care. We're noticing that across all our customer base but they just want to know, guide us in terms of like how we can propose that. Thank you. In a DP world, Mike is probably among the few entities who has both a presence and an authority with both the private and the public sector. You do a lot of work with governments clearly around the world. And so you are dealing at this intersection between the public and the private sector, maybe almost uniquely, is the public sector behind in its appreciation of these forces that we've been describing relative to the private sector or do you see the public sector attentive and pretty much on par with the challenges that the private sector is dealing with and how to create new approaches to them from the public sector? I think when we work with public sector, they are, I mean, World Logistics Passport is a great example of that. I mean, we have today countries like Brazil, Thailand, Mexico, Colombia all participating. How can they attract a lot of these customers not only from a business perspective, but they've all realized eliminating friction in the flow of trade is very pivotal to go ahead and then create a good business climate. So they all realize that when we go have conversations with Minister of Trade, whether it is in the former CIS of countries or in a lot of like Africa or in Latin America and Asia, there's a common team that is a willingness to go back and conduct business and do what it takes to go ahead and then provide the right facilities for change is really there. And then we see it, whether it is like at our port or we see it as it relates to some of the physical flow of merchandise that I talked to you about like WLP, the program that his highness himself envisioned, and then to go back and create a rapid transit from Asia via Dubai to Latin America and Africa. All of these are like very well received by public sector. Of course, private sector, it's like if we have like a service proposition and the best cost proposition, obviously, they are very interested in that. So I see a good parallel today when we work with the ambassadors of like countries like Rwanda, for instance, I'm very proud of working with his Excellency Ambassador Emmanuel who created new solutions and then suggested that I can give you so many examples like that, high domestic trade out of Uzbekistan, for instance, we need more core chain, how can you help us with that? And then we have a lot of folks actually talking to us about if we have like lovely coffee in Rwanda, which is actually used to go back and increase premium copy, can you help us with like packaging? So we can appropriately present our product. So I see both public sector, especially like governmental authorities as well as private sector, looking at what are all the possibilities? You know, in terms of looking at the constellation of value, there are very key element of that. That's really great to hear. It's very encouraging. I'm glad that people are both at the same level of appreciation in with a spirit of cooperation. Marco, you have a diverse membership in your institute, large, small, shippers, trade-folders, manufacturers, et cetera. These three factors that we were talking about de-globalization, protectionism and the commitment to climate change, how are the companies dealing with that and which ones are they struggling with more or so? Do you think? So in general, from all the three, I would say that, you know, for de-globalization and protectionism, people are already left seeing certain plans or if they're smaller companies, they follow the plans of their big customers, right? And they're trying to overcome them through joint collaboration. So in that sense, some of them are more successful or some of them are less, but there is an idea in which direction they are going. So where we see more challenges is the commitment towards the climate change. And, you know, it goes into two aspects, right? One aspect is related to the aspect of the large organizations, which mostly now struggle and try to understand, you know, how they can get the reliable and consistent data for tracking the progress on ESG, especially for the public reporting, right? So this is something which is happening across the board. There are so many studies done about how you can do things, you know, how you can offset or, you know, how you can do a good general strategy, but about the plans and the execution, we see and we think it's all around maybe at 5% now from 100% which can be achieved. And what we are very encouraged about is nobody stands still there, but everybody is trying to exchange and share the notes in a way and then excel on that agenda because that agenda is also implicating the first two things which you mentioned, Chris, you know, the globalization and as well protectionism. And we have, for instance, an example of the United States recent inflation reduction act, for instance, which covers all three, right? And it includes over, I think, $400 billion for green subsidies from which, for instance, EU companies will be excluded unless they relocate to United States or in an aspect of electrical manufacturers, right? For any kind of subsidies, in that sense, for purchase, for instance, in US, you need to assemble it in North America. So these kind of things through a ESG agenda and, you know, a focus where the governments are leading the show implicates the first two topics as well. So that's why we see, you know, two aspects which are playing in both because I would also resonate on what Mike says, no matter of the challenges we see, what we have seen with our membership is that the business and the trade will always do a step forward, sometimes quicker, sometimes slower, but this is the cohesive factor across all the challenges. So I'd like to ask you about management structures and management models within companies and what your experience is with some of the companies you work with. Are the people in a company who are focused on climate and ESG activities and responsibilities and obligations? Are they integrated with supply chain functions and others who are dealing with the daily operational execution of a company? Or are they detached? And if they're detached, what do you see as the trajectory of these two responsibilities? Are they coming together to Mike's point where they're starting to become integrated and therefore seamless? Or is the organizational model, the management model in companies that you are experienced with needing a reorganization as well? It's a very, very important and good question and thank you, Chris, for it. What we have been seeing so far is that there are two approaches, right? In both approaches, the overall ownership sits within the CXO, right? So usually it sits in the CEO office and then it can go into two directions. One direction, it goes to the operations and then the operations are candling it through partnerships with different departments, right? The second one is it sits in the supply chain side and especially with technology. So it would be another CEO or supply chain, for instance. And these two components and these two approaches showed us so far that when it's under just the operations and so many departments, it's moving very slow because there is no same sense of urgency within different departments. When it sits within the supply chain arena and technology, especially for those who have manufacturing, assembling, or moving goods, it has the right house where the urgency is high and where everybody's trying to get the relevant data and the relevant partnerships in order to have one source of truth for the ESG board. I would assume that you would recommend to CEOs who are listening to this and business leaders that they look at their organizational structure and if possible integrate the climate change expertise into the supply chain organization so that they can be executed as quickly and seamlessly as possible. Definitely, Chris. And with the single point of truth, with the ESG supply chain, especially for international organizations where you are touching every single part of the value chain, that's the right place to be. Okay. All right, well, thank you both for sharing your thoughts and your insights today. Before we let you go, we always like to use the last minute or so to give our listeners some strategic insights to think about. And we call it our emerging critical issues moment. And the obligation for you two is to, in one word or one phrase, tell us what emerging issue that you see on the horizon that you believe business leaders need to put on the radar? And Mike, why don't we start with you? You know, I mean, working capital is one of the key things that I could think of, especially in SME segment, we've been talking about it because as the inflation and the price of borrowing is becoming challenging, more and more tier two, tier three, tier four suppliers are having like deep challenges in acquiring, even if you are like a tier three, tier three provider of a corn or, I mean, any kind of commodities to very large businesses. If you're two steps, three steps removed in tier three, it's very difficult for you to go back and then find like, you know, short-term financing. So Chris, I would go for something which is maybe softer in that sense, but highly important. I would say that the CEOs should pay really attention on the shift in generations within new customer and then as well within the new employee. And what I mean by it is we are coming into next five to six years of one of the largest changes in between the generations, where the GMZ will become one of the primary customers both in B2B and B2C. And then as well, the drivers of change and transformation and integration of everything we are planning within our businesses. So this will implicate both, this will implicate, you know, who we serve and with whom we are creating business and it will as well implicate of weeks when we work and create a future. Well, great. We'll come back to these and future shows. Mike, Marco, thank you for your time and insights today. We really appreciate you sharing your experience and your thoughts with the listeners of the GAT. You've been listening to the GAT sponsored by the Center for Global Enterprise celebrating 10 years convening global enterprise leaders around the world and the most important business transformational issues.