Border States’ $20M Supply Chain Transformation with GAINS: An AI-Driven Journey

Sarah(00:02):

Hello everyone. Welcome back. My name is Sarah Barnes-Humphrey of Let’s Talk Supply Chain, and I’m here at the GAINS Summit with Kory. Kory, welcome. How are you?

Kory (00:13):

Good, thank you.

Sarah(00:14):

How is the Summit going for you so far?

Kory (00:16):

I think it’s been very good. It’s been very thought provoking, really enjoyed Art’s session this morning.

Sarah(00:22):

Good, good. Well, I have read up a little bit on you about for this interview, and you are on a transformative journey. You are putting in AI opportunities wherever you can. You’ve got a bold vision for the future of supply chain management. You’re really taking that by the reins for what you’re doing at Border States. So can you tell everybody who you are, what you do, maybe a little bit about Border States and we’ll get into the other stuff later?

Kory (00:48):

Absolutely, absolutely. So my name’s Kory Jacobson. I’m the regional procurement director of Border States. Border States is a wholesale distributor, so we are the electrical industry and we service electrical customers such as residential, commercial contractors, and we also service natural gas and electric utilities.

Sarah(01:08):

That’s very important. So nobody wants to be sitting in the dark ever.

Kory (01:12):

Exactly.

 

Sarah:

..without heat.

 

Kory:

And that does happen. So that happens sometimes blizzards and storms, hurricanes down south, they often take out power and it’s our job to enact it, a storm response and get materials to the electric companies as efficiently and quickly as possible to restore that power.

Sarah(01:32):

That’s a big job. And I’m sure you get calls from your friends and family that are like, what are you doing?

Kory (01:38):

Yes.

 

Sarah:

Sitting in the dark.

 

Kory:

Being in this industry, the electrical industry is fantastic. Being in this industry just gives you a new appreciation of really the backbone of how commerce is within the United States and the backbone of the economy. And it all starts with the electricity and our ability to fuel people’s needs for electricity.

Sarah(02:01):

So it’s a big job. And I heard that, or I read that Border States achieved a $20 million reduction in inventory and improved material availability. How did you do that? How do you maintain it? Talk to us about that.

Kory (02:19):

Yeah, it’s been a little bit of a long journey. So through some of the supply chain situations that have happened through the years, we ended up getting bloated with inventory, which is a very common thing across the entire supply chain. But essentially we decided to change the way we were making decisions. We implemented a data-driven approach to decision making of where and how we can invest in inventory.

 

Sarah:
Ok

 

Kory:

We centralized the group who could make those decisions, and then we kind of pushed them down into the organization a little bit. So we became a little bit more agile in how we were making decisions, and we formulated a template, so to speak, of what does a data-driven decision look like and how do you make one? So that’s really helped us lead to implementing inventory or investing in inventory in a much smarter way. And it’s led to a lot more planning for inventory investments. So we understand what our customer’s needs are, what their potential usage is, and we really understand the risk to us as a company. And then at the same time, we’ve been working with GAINS to deploy a machine learning solution for lead time prediction.

 

Sarah:
Ok

Kory (03:28):

And so we started implementing that as well. And we’ve seen significant increases in the accuracies of our lead time calculations, which does drive improved planning, and it does drive approved precision of where we invest in inventory.

Sarah(03:43):

So talk to us about that continuous drive for transformation within your supply chain operations. What does that look like? How are you continuing to do that once you as a company and as a business unit has decided how you make those decisions, now it’s about taking that and driving that forward in different ways.

Kory (04:07):

Yeah it kind of comes down to two different things. One is culture and really a culture shift. Trying to move away from a little bit of a decentralized culture that we were to a little bit more centralized, but keeping some autonomy and making decisions at the customer level, at the level where it’s needed the most. But to do that, we had to do a lot of training, a lot of communication. Training on what does inventory cost, what does it cost the company to carry inventory, and why is that important? What does a good decision look like? What does a data-driven decision look like? And a lot of that created an understanding of how everyone within the organization impacts the supply chain and conversely impacts the company. So I mean, I believe that understanding breeds trust, and when you create the trust that comes with that, then you have people making those small decisions across the company that lead to improved results. So that’s one of the main ways we did that. And then the other way was technology and analytics. And we’ve created a lot of different, I would guess I would say dashboards. We kind of had this wealth of data coming our way.

Kory (05:24):

And we had to kind of parse through that figure out, well, what do we really need to make a good decision? And so we’re kind of on this journey now to remove some of that data, remove some of those analytics, pinpoint the areas where we just need to look at this area over here to help us make a decision because everything else is just noise.

Sarah(05:40):

Get clear.

Kory (05:41):

Exactly, yes,

Sarah(05:42):

And also, what are the consequences of maybe some of the bad decisions,

Kory (05:47):

Understanding the risk, yep.

Sarah(05:48):

And there’s no perfect decision out there. It’s going to impact somebody in the organization in some way, but how do you make those decisions where everybody’s understanding the impact and knowing the impact before you can have it.

Kory (06:04):

And that really comes down to communication, getting all the stakeholders involved, clearly articulating the impacts of our decisions and the potential risks and the benefits to the company.

Sarah(06:14):

And so how did real-time data analysis help with all of that?

Kory (06:20):

Yeah, real-time data analysis is really important. As volatility and uncertainty continues to grow, you need to be quicker in the decisions that you’re making. If you’re not, if you’re delayed in your decision making, you actually can inflate your inventory by quite a bit. You can miss the potential opportunities you have by bringing in material way too late way past when a customer’s need is. And we’ve experienced that. We’ve made some of those decisions where we’ve went with maybe some suppliers who we knew maybe couldn’t deliver, but we made the decision and sometimes it bit us. And so it’s really all about making decisions quicker and being more agile.

Sarah(06:59):

And so how are you measuring success? How are you measuring the results of what you’ve been implementing, what you’re driving forward? What are the KPIs? What are the metrics? How are you thinking about these things? What does success look like for you?

Kory (07:16):

That’s a really good question. So we tend to follow the same kind of KPIs everybody does: inventory turnover and material availability. So how do you measure performance of your inventory? How do you measure the service of your inventory? A couple years ago though, we implemented a metric called return on receivables and inventory.

 

Sarah:
Ok.

Kory (07:36):

We implemented this metric because we realized we have to care about the balance sheet of the company just as much as the PL statement and receivables in inventory. So accounts receivables, they really tie up your cashflow.

 

Sarah:

Yeah, you’ve got all that capital and inventory.

 

Kory:
Exactly. So the profit that we’re getting, we’re tying that up in our inventory and our accounts receivables if they’re not performing the way we want them to. So we kind of have this balance of understanding how much is our cash being tied up because cashflow is very necessary for a growing company like ours.

Sarah:
Yeah.

 

Kory:

And so that’s really what success is looking like for us, is this venture called return on receivables and inventory, material availability, lost sales, inventory turnover. They all kind of roll up uniquely into this. And if all of those are working at the right levels or the levels we expect as a company, then we are generating enough cash to continue to grow.

Sarah(08:32):

Yeah well, and I think also for all levels of the organization to understand what inventory means to that bottom line, but also the cash flow that it stops when it’s just sitting, or it’s in movement.

Kory (08:50):

Right. Yes. We call it the cycle of cashflow, right? So if you have inventory sitting in your warehouse or you’re not collecting payments from your customers, that’s your money just sitting there tied up, it’s not getting back to you.

Sarah(09:00):

And a lot of people see the inventory, but they don’t actually tie it back to capital and the movement of cashflow that’s needed for an organization.

Kory (09:09):

Yeah.

Sarah(09:10):

See moving forward on a day-to-day basis.

Kory (09:12):

Yeah and there’s a lot of communication and training, a lot of culture shift that you have to do, and making sure people truly understand what does that underlying metric mean to the organization? What does moving that up or down slightly create on your P&L? What does that change mean to the organization?

Sarah(09:30):

And you’ve been one of the drivers for implementing GAINS automation, AI. Talk to me about those technologies. How have they helped improve efficiency? How have they helped you realize some of this success or the measurements to success?

Kory (09:46):

So I think at Border States, we maybe have a little bit different vision of how we want to implement automation.

Kory (09:54):

Automation does bring us great efficiencies, and that’s great for labor expenses, et cetera, but we really want to automate the mundane tasks that decrease our employee satisfaction, decrease our employee engagement. They’re coming every day and they’re pushing a bunch of buttons, and those aren’t tasks that are really driving value for the organization. So we want to automate those and that allows the same amount of people to then focus on more strategic tasks that create decisions for the company and allow us to generate more cash. On top of that, when I look at implementing AI, my approach to implementing machine learning or AI is really implementing it in areas that will facilitate decision making.

Kory (10:42):

So parsing through all the data, I talked a little bit about all the data that we have. We as a human, we really can’t go through that data and inform us.

 

Sarah:

Could you imagine the spreadsheets?

 

Kory:

Yeah, right, exactly. That’s where we need AI. We need AI to really parse through that and understand the relationships in that data and then feed us exactly what we need to know to make those decisions. So automation to free up our use and our work time so that we can make decisions that focus on the strategic decisions, and then AI to bring to light all the areas that we need to focus on.

Sarah(11:18):

Well and then how are you using that technology or those solutions that have been implemented to help you gain a competitive edge?

Kory (11:28):

That’s a great question. So really when the philosophy of our company, I talked a little bit earlier about serving electric utilities.

Kory (11:37):

And through storms, the philosophy of our company is our customers can’t go it alone. They need somebody like us to help them. And so when we’re implementing these types of technologies, we really are focused on the areas where it’s going to help us facilitate that for our customers, help us be alongside our customers in their times of need and get them the material they need when they need it. And so implementing AI is all in the supply chain aspect for me, for Border States, is all about improved decision making when it comes to inventory policies and forecasting it and demand planning, and how can I make better decisions to both drive the cost part of the business, the cashflow part of the business, and make sure that we are servicing our customers.

Sarah(12:22):

And so you have this partnership with GAINS, and I think it’s been spoken about and there should be a link in the description for them to go and read the full story. But how does that partnership with GAINS help you look into the future and think about your long-term supply chain strategy?

Kory (12:39):

Our partnership with GAINS has been, I think, a little bit more unique than any other one I’ve been a part of. It’s truly vested partnership. We bring each other problems and we’re willing to invest our own resources if we think that problem is good, if we think that’s a good problem to solve,

Kory (12:58):

Not just for us, but the broader GAINS customer base or the broader supply chain. If we think that is a good problem to solve, we will invest our own resources without any contract or without any kind of understanding of what we each get at the end of it. And that’s driven a lot of different solutions. It’s driven solutions around purchase order automation. It’s driven solutions around inventory sharing. So how we rebalance inventory across the company. We’ve created new assemblies with GAINS around planning for multi-vendor planning and multi-vendor purchasing. So basically for our commodities at how we purchase at lowest cost or how we bundle POs together and look at the cost of those Pos off various commodity vendors we have, and then also our implementation of AI and lead time prediction. So that really just started with us coming to GAINS with a problem. We have a problem that we need to figure out how to solve, and they came up with some ideas and we both worked for a very long time without any contracts or any interest to the end result of both of us just trying to solve that problem together.

Sarah(14:11):

And what’s the end result of that? Because I think it’s had a significant shift on your forecasting and planning, right?

Kory (14:17):

Yeah. So the end result so far has been $20 million inventory reduction, like we said in the beginning. Like we said in the beginning, that’s been, I mean, we’ve gone further than that, but that’s really helped facilitate that $20 million inventory reduction because we’re able to have more visibility in the supply chain now. So we understand where variability is within the half a million materials we provide. We understand where visibility is, and we can now facilitate communication and we can collaborate with our vendors and really try to mitigate that volatility and embrace it a little bit and make sure that we are investing in the right areas. And so it’s helped both material availability, so we’ve serviced our customers at a higher rate with a lower amount of inventory.

Sarah(15:02):

Well, and it sounds like you’ve already done a lot of work so far, but this is a journey, not a destination, so there’s always a lot of work to do. So if we think about the future, how are you thinking about the next steps in your supply chain innovation and maybe how does GAINS support you in that?

Kory (15:20):

Yeah, I think GAINS is going to be really important in that journey. I would like to continue down this path we’re on or right around decision engineering and how do we facilitate better decision makings, better data-driven decisions within the company. And we need to go places like further our PO automation. So we need to invest in AI to further our PO automation. We need to invest in automation just in general around forecasting and demand planning and what we’re looking at from a planner perspective. And then we need to figure out how can we take all this data and pinpoint exactly the areas that we need to make decisions on throughout the day. So all about making the little decisions that add up, and it’s all happening within the GAINS environment. We really can’t do this without GAINS.

Sarah(16:10):

Right. Well, and you also don’t know what you don’t know. There’s a lot of things that can happen tomorrow, three months.

Kory (16:17):

It changes all the time. Absolutely. And our ideas change, and we’re meeting with the GAINS folks this week and constantly, and we’re bouncing ideas off of each other. Try to figure out how we can just take that one step further in what we’re doing.

Sarah(16:32):

Yeah. Well, and also look at it from different angles and perspectives, because again, you don’t know what you don’t know, and so maybe there’s some gaps and some things that you’re not even thinking about, right? Maybe you’re not using the technology to the full its potential in one area that you could be doing that. So I really appreciate you sharing your story, sharing your journey. It sounds like you’ve done some incredible work and we appreciate what you’re doing for the supply chain industries. So that’s it for me and Kory at the GAINS Summit.