Justin interviewed Steve Johanson and David Barron from Starboard Solutions. They discussed methods to redesign a supply chain. 

Listen to the full episode below and subscribe to the podcast on Apple.

 

Highlights

• Making a supply chain decision – 1:30
• How to help clients – 5:24
• What are the chest pieces – 7:40
• Being a supply chain leader – 10:16
• Supply chain teams know a lot – 11:06
• Get your company moving – 14:42
• Making changes to supply chain – 15:52
• Using market rates data – 19:37
• The supply chain world – 24:47
• Seeing explosive growth – 27:50

 

Episode Resources

• Connect with Steve Johanson and David Barron
• https://www.linkedin.com/in/stephenjohanson/  
• https://www.linkedin.com/in/daviddbarron/ 
• Steve Johanson, steve@starboardcorp.com 
• David Barron, david@starboardcorp.com 
• Connect with Justin Smith
• https://smithcre.com/ 
• https://www.lee-associates.com/ 
• jbsmith@leeirvine.com 
• https://www.linkedin.com/in/justinbsmith  

 

Justin Smith 

Hello, David.

 

David Barron

Hey Justin, how are you?

 

Justin Smith 

I’m doing okay, how about yourself?

 

David Barron  

I’m doing well.

 

Justin Smith 

Maybe you can start with Steve and how he came to be here it looks like you came through the arm your engineer, the armed services, and consulting on your own. You’ve had a pretty cool career with a lot of different experience. Which of those play most into what you’re doing today?

 

Steve Johanson

Well, they all lead up to it. My background is in engineering used to drive ships and with the Navy got to see a lot of logistics firsthand on the on the ocean. But pretty much dove deep into management consulting in supply chain and really got into what I consider rolling up your sleeves, real time decision making.   where people have to make good decisions now, not perfect decisions next year. Really made a mark in that area. Obviously, network design played heavily into that which is how do you feel your materials through there and really found a balance there, which is network design can be very complex and time consuming. In these net supply chain leaders, they’re looking to make decisions now in almost anything as a supply chain level decision, your new warehouse, which is kind of a tie back to your work, anytime someone’s up for release, considering a new warehouse, that’s a supply chain decision, it’s an option. So, my background or a lot of the core work I’ve done is just helping people through taking these what might be a little minor pieces but putting them together and making that supply chain decision. That led me to work at LLamasoft for a couple years and realizing we can take this technology and kind of in the same way the camera phone allows a user to take a really sophisticated picture and many of them, that same software and capability in this day and age can be put into things like supply chain design that led me to Starboard.

 

Justin Smith 

That’s powerful. When you think of like how its technologies democratizing a lot of these processes.

 

Steve Johanson

Yeah, we do have decades of experience doing network design. And there’s no reason we can’t take those lessons learned, put them into software and do the grunt work for that supply chain leader.

 

Justin Smith 

And you decided to start your own firm, right? It’s as if you left the safety net of the safe, solid, consistent paycheck. What caused you to do that? Or how did that come together?

 

Steve Johanson

Well, I like to think every good entrepreneur that I modeled myself after seeing a need that bothered them so much that they wanted to trade that safety net just to fix something. And so, in my case, the thing I saw fixed was that we weren’t applying modern technology and common sense to network design. So, I thought we could make that a new tool, that new capability and I took the leap, then did the market research.

 

Justin Smith 

That’s awesome. I feel like that was a good leap. You now have a team. I was going through a little bit of your team, and maybe you can help expand upon that. It’s more robust than sales and marketing. When you start looking into people’s backgrounds and where they come from and what they work on. Can you help me understand part of the people that work with you to help make this all possible?

 

Steve Johanson

Well talk through part of it, and then I’ll let David introduce himself. We are still a small team. I have one primary partner, Matthew Sharp here, our Chief technology officer. I worked with him at LLamasoft in some other projects, and he and I are really the collaborators behind the technology. Where we really laid out the Greenfield problem, we had to solve and said, okay, if we were to do this with modern technology, and he was the person to do it, he was he didn’t have a background in supply chain, which was an advantage. But he had tons of background in bringing new apps, new capabilities, new technologies to market. He’s been with me for years on this one. We really kicked off our product, our v2 of the product, our real marketable product about two years ago. We’re growing and we’re able to bring in some help. So it used to be me doing accounting, janitorial, marketing and sales. We brought in an expert that can work with our customers and really get deep into solving their problems. We’ve got salesforce and some contract developers. And I think David’s a great example of who we want and who we’re trying to hire. Maybe David, you can kind of talk a little bit about your journey to Starboard.

 

 

 

David Barron

Yes. I graduated from Purdue with a Sales Degree and then went out into the world and got my first job at LLamasoft. Steve and I crossed paths and saw really the power and the impact of supply chain design and modeling but saw that took a long time to come to fruition. So, from there I went to work at Blue Yonder and then linked up with Steve here that helps companies do rapid response supply chain modeling and making decisions.

 

Justin Smith 

As a broker, as I delve further into supply chain issues, I found LLamasoft and tried to figure out how can I as a broker utilize this. How can I learn about it? How can I help clients with it? And then nothing like opening up this box and then being hit with the day lose where I realized how complicated it is and how difficult it is to pick up as an outsider so to speak. Even though I felt like I was very experienced, I have a lot of knowledge and I have a lot of experience, I had a surprising amount of difficulty trying to figure out how I can help clients with it better. So, I feel like what I’ve seen from what you guys have put out there feel so much more accessible, and it’s a breath of fresh air.

 

Steve Johanson

Thanks. One of the surprises when we started our company was, who was chasing us down when they found out what we’re doing, and commercial real estate was one of them. Where initially sort of the brokers and the companies were chasing us and I had asked, what are you doing, but then I got to understand how much of a consultative sale industrial real estate is. That all the good brokers get that you’re not just trading leases or dollars per square foot and trying to put people in warehouses that, for the most part, the industry gets that when someone is looking at a new warehouse, they need to feel confident that it fits into their supply chain, strategy, their design, and then it’s a step forward that their future proofing their supply chain.

 

Justin Smith 

Yes, and tell me e-commerce, that’s what’s rocked our whole world and changed the name of the game. What’s been your relationship with the e-commerce wave and as you’ve been riding it and you’ve been factoring it into Starboard, how has that changed it on your side of the table?

 

Steve Johanson

Well, I hope it’s a wave we’re pushing, and it’s not pushing us. But either way, we are closely linked to e-commerce because that is a major driver, but behind Starboard are supply chain redesign and also the frequency at which people are doing design. It’s not just an every two-to-five-year thing anymore, where people make major changes. People can set up seasonal warehouses, they can stock stores and put fulfillment capability in there. So, the bits and pieces I think of in the chess pieces are getting smaller and more fluid in the e-commerce world. Then people do want to sit down and say, I need to know the cost and the service time for these because I need to balance that against my business. I can’t go and say that, hey, every store is now going to do e-commerce fulfillment, I’m going to have a bunch of same day and next day air from every store or every partner. But if I’ve got a platform, I can sit down and rationally go through saying, okay, if I set up these stores in this way, I will meet my service levels, I will be able to do it economically and there’s always a balance. If I didn’t care about money, the answer would be you put a warehouse in every postal code and you would ship by drone. If all you cared about was money, the answer would be I’m going to ship everything by container from China. So, you don’t need us if either those two cases are you. I can tell you the network.

 

Justin Smith 

Yes, I love it. And I love how as I was going through the model of this 92nd demo that you had available and going through it. I love this whole solver feature. That’s anybody who’s like an Excel wonk and has like, use that on the daily knows about solver. But I feel like that’s an interesting that you can set up your current network, then you can manually play out your ideas for where you think you should go. And then you can let the program then go try and give you what the real like optimization is. So, I found that that was pretty exciting to see into run through.

 

Steve Johanson

Yeah, thanks. I won’t take credit for solver technology that goes back into the 80s and 90s, but I hope what we are doing is like you said, let me create my own model and my own ideas. Let me compare that to the black box solution but then also let me like I would in a computer game, let me move that black box solution because the important thing in supply chain is also equivalence. That black box solution might put a supplier or use a port that I just don’t want to use for some reason. Let me change it and let me find an equivalent solution. It may not be the perfect black box perfectly optimum answer but it’s equivalent and oh, if I use the band instead of Baltimore, I’m going to pay 150,000 more a year but since I’m a supply chain leader in my head, I know all these tradeoffs, all these options, it just opens up that that’s an okay price for me to pay. So, I don’t need to go with the optimum. I just took your question and sort of went on to one of my soap boxes, which is yes, sort of the solvers will give you one perfect answer and that’s not always the best answer for the supply chain leader.

 

Justin Smith 

This is your soapbox, Steve. I love it. It’s helpful because that’s preference. That’s experience when you say, okay, I get that’s an us solution and that may be one of the optimized ones, but experience tells me we’re best served by being X, Y, and Z and then you can add that in. That’s probably where the most magic happens or the most benefit.

 

Steve Johanson

Exactly. Supply chain teams know a lot. If you can provide and put on the table, here’s what this option costs. Here is it’s service to your customer. Here’s some other metrics. But you all make a decision, because you couldn’t put everything in a data. If you wanted to spend a year making a model, you could make a perfectly tailored digital twin, and it’s possible. But if you’re wanting to make a decision today, this week, this month, and you want to keep making decisions each week and month, you don’t need to put everything in data, there is a there’s a lot of stuff in people’s heads. In fact, one of my favorite meetings was Starboard was 2% of this discussion but in the room, we had a 3PL, its shipper, a commercial real estate broker, a finance guy and we just went through a bunch of options. They talked through the various pieces and each one of those was like, yes, we could have run out and spent a month to put data into the model and got it. But we came closed in on an answer because we had the knowledgeable people in in the room closing in this case, it was should we be a to warehouse, one warehouse solution or two warehouses? Should we keep the one in Chicago and merge with the other one B? That was simply the answer and we closed in on it, because we had all the numbers in people’s fingertips. We move the pieces around, told them here’s the cost, here’s a service level, but then let them make the executive decisions.

 

Justin Smith 

How long do these studies take before you think of like a traditional network study, and how much people generally would have spent? And when it’s not something, you have everybody in the room and the program on your conference room TV and you’re doing it real time with everybody’s input, like you would do in like a boardroom setting.

 

Steve Johanson

Again, it’s a wide world out there, very broad, but using traditional methods. A team can easily spend a couple months, three months setting up and getting that first baseline model. Whether they’re doing internally again, the price tag has a huge range to have $100,000 to $2 million doing these studies, so I wouldn’t put my finger on one. But the gathering of data, the arranging and normalizing of data is a huge task. Starboard has its ways around it and using reference data to combine this, but also making the modeling itself very visual and fast and putting best practices into the software. So, I can’t promise where something would have been six months or six hours in Starboard, but someone can have a good model running in a couple of days. Where they can look at it and start the process of what I consider triage, hey, here’s some bad ideas, we’re going to quit talking about them, no matter what we put into the data, there are going to be bad ideas. Sometimes that’s enough for a company to feel good about analysis, because there’s always those bad ideas. Here’s some great ideas, we’re going to do them no matter what and here’s some other things we need to start putting more into the model. We need to get more rigor into the inbound costs. We need to go get some better facility costs. So this process of triage, and I didn’t come up with it, I found it by observing great VPS of supply chain directors of supply chain. The ones I really admire, were the ones that could triage and get a decision out the door and get their get their company moving this week. And it doesn’t mean that they’re going to go deeper and deeper. They’re not going to go deeper and deeper into analysis. It just means that there’s some bad ideas, they’re going to stop doing those right now. There’s some good ideas, they’re going to execute on them and there’s some ideas, you just need to dig deeper and do deeper analysis into. I want to be in the business of helping that type of decision maker. The one wants to move. Yeah, his company moving forward.

 

Justin Smith 

And the pace of play is only increasing, right, just faster decision-making loops. The market right now for property, it’s insane the speed in which things are moving and that’s one small component. So, it’s increasingly complex.

 

Steve Johanson

I mean, just as a benchmark for me, my first network design project was probably 15-18 years ago, maybe longer. It was okay, that was six months long, with three months of sort of post processing and analysis and might take a year, because this particular client wanted to have everything assembled, and we’re going to make one big change to the supply chain. Things are constant now. It’s not even just a period, it’s as stuff pops up, we’re doing a back to school promotion, where do we deploy the inventory? Which facilities do we use? Which suppliers do we use? What warehouses coming up for lease? I don’t even want to just consider where that warehouse is, let me do a quick roadmap and look five years down the line and keep these pieces moving because I need to evolve the supply chain. I don’t have the luxury of being able to say, let’s wipe the map clean. Place all my warehouses, plants, and suppliers and then in 10 years, I’m going to go wipe that the mat clean again, I don’t have that luxury things are things are changing. When you fix a plant, fix a warehouse, it does commit you for a while. But you always need to be one step ahead on this decision making ready to make the next decision and not just on that one warehouse, it needs to be a roadmap that I’m constantly changing and modifying. I didn’t even mention that demand is constantly changing, as well as supplier base is constantly changing.

 

Justin Smith 

Yeah, and I imagine you help with that, when you hear with network studies of this garbage in garbage out, maybe some of the garbage in is still client garbage. But maybe you can help with some of the other like assumptions. And when you think of all of the data in this reference data that’s going into the model.

 

Steve Johanson

That’s a good point because again, I applaud how advanced solver technology has gotten. It can solve huge problems with enormous amounts of data but you also have to recognize that all data is faulted, sometimes to a great degree. So you can make a very precisely wrong decision but feel great about it because the data all pointed that way. One thing that Starboard does is, we look at specifically transportation data. So if I back up a bit and say, if you put a lens on logistics decisions, think of it this way, for every dollar you spend in lease, you’re spending two in labor, four in inventory holding and 10 in freight. So, freight is your largest, most sensitive cost. But if you’re doing a traditional network design study, you’re asking someone to go out and get hundreds of 1000s or 10s of 1000s of rows of data. And you’re using your historical rates that you paid for sometimes in January, sometimes in December, you’re using bids and quotes from 3PLs, filling in the gaps with regression data and it really becomes a statistical soup. So, when we talk about traditional Mex methods, taking three to six months to get to a model. A good chunk of that is because the statistical soup, and even once it’s normalized, it may not be a reflection of what you’re going to pay next year or going forward. All freight really regresses to market rate. There’s a market out there and the fact that if you’re trying to find in your company’s data, the fact that a truck from Phoenix to LA is 42.5% the cost of LA to Phoenix. You may not get there with your with the statistical significance is my other soapbox, by the way. That’s a long haul for you to take a company specific data to get there. So, being able to use market rate data and move your rates, calibrate your rates to a market rate for truckload LTL even parcel. Not only does that move faster, but it’s also more correct if I’d collected screen shots of all the time someone had made a network and it had turned into a big spider diagram and they’re trying to figure out, oh, the model came back and said, I should be shipping from Phoenix to Maine. That’s wrong, your model is wrong. No, if you look at the data, you’re going to find that in the accounting world. There’s a truck that when one truck that went from Phoenix to Maine, and accounting cost $0 and at the end of the quarter, they had some correction they figured it in, but that correction didn’t make it into the model. So, the model thought you could have a free truck from Phoenix domain.

 

Justin Smith 

And we need more of those free trucks.

 

Steve Johanson

Yes. Again, an extreme example, I always say solvers are great but they’re also like passive aggressive children. If they can give you the right answer that you don’t want back, they will do it, they will find that little hole that little twist in the data to give you that answer.

 

Justin Smith 

That’s a great way to illustrate that point. What’s the raw data and the information that clients come to you with? Or that’s the minimum amount that they need in order to get started?

 

Steve Johanson

The very most important piece is the demand, where is the product going, in what volumes, shipment sizes, and this is usually easy to get an easy to get in a normalized manner. It’s often massive but that’s the piece to get right. The second piece is your what are you spending now? What are some good lane rates that we can use as a benchmark to calibrate? So we don’t want that Phoenix domain which free but throw in a couple 100 trucks that you’re spending because we’ll use those to calibrate to the market and then the rest is where’s it coming from? But if you can get that first piece right, we’re off to the races with a good model.

 

Justin Smith 

It’s all about meeting the customers where they are.

 

Steve Johanson

We’ll put one twist in, it doesn’t have to be last year’s shipments or next year’s forecast. If you’re an e-commerce company, we helped out an early-stage famous mattress company now, which was primarily shipping in the Dallas area and West Coast. That’s not the demand for the future. So instead of using their forecast and their demand, we said, well if you’re marketing for next year, we should be using US population as your demand profile. So, it’s important to think ahead, what are you modeling for? E- commerce is often the one that’s very extreme at the point where which they break out of their key markets, their starting markets. They’re in a whole new world, they’re going from regional to national, and they need to show a demand pattern that reflects that national poll.

 

Justin Smith 

Yes and so population migration would lead me to think about this last year, and shocks in people’s supply chains. How did you guys experience the last year? And what kind of conversations were you having with customers as they were dealing with that? Or is that too fast and abrupt of a change to have that be something? I got to imagine that it flowed through you and you had all sorts of interesting conversations with people as they dealt with their challenges and trying to find ways to adapt.

 

Steve Johanson

WI’ll break it into two parts. The first part was people were obviously reacting to COVID, lack of supply changes of demand. Again, if I go to the people I really like working with, they’re the ones they’re like, okay, we’re dealing with this now but any change is opportunity. You have to change the supply chain, so the ones that we’re looking at, okay, we’re a little offended now. So let’s still go ahead and make the five year roadmap. Where do I want to be in five years and how do I take from where I am now to get there? That’s really what I think the best use of actually any network design technology is for right now because reacting changing your supply, you can do that on the phone. If you really need to get a new semiconductor supplier, you’re probably only going to find one that can do it and you’re going to make that arrangement right now. But again, if you’re thinking long term, let me move these pieces around, let me look at that roadmap, let me plan out my future and future proof my supply chain. The fact that things got up ended a little bit actually helps that visionary supply chain leader.

 

Justin Smith 

If you have to make a change that allows you and the opportunity to make a change not only for now but for the future, correct? As you think through your roadmap in the future and technology, what’s next? So, we now have AI and machine learning that’s helping with computation power and playing out scenarios. It’s now more accessible for people to be able to work with teams like yours and on these types of projects. Where do we go from here?

 

Steve Johanson

Well, I think you hit on it. I’ll go back to my previous comment about older technologies always return one perfect answer. The supply chain world, we really want to be able to get better at equivalence. One answer might be, hey, you use this supplier this this and you distribute out of Atlanta and Fresno. We want to be able to tell people that by the way, there’s an equivalent answer where you distribute out of Allentown and Las Vegas, and it’s only this much different. So, when we talk about AI machine learning, we want to take it to not getting that one answer better. I want to give the supply chain leader these areas of equivalence, because that’s where they can start looking at being faster in the triage process. And again, I’ll bring out your other comment about data errors. If your data is plus or minus 10%. That precise, precise, single answer is in question anyway. So why not say, hey, here’s three possible networks that are all very, very close in cost and service time. And let the executive use his knowledge and vision for the company to pick which is the best or most future proof for him or her.

 

Justin Smith 

If you asked them, would they like to have equivalent options? I got imagine everybody jumps up and says the more the merrier and that makes me feel better and I feel like I have more confidence in my decision making or more redundancy. I could see that be something that I get helps them sleep better at night.

 

Steve Johanson

But it gets a personality type. The majority, yes, there are some people that it just opens up questions. But yes, I think, again, you’re a supply chain leader and you’re an expert in your business, having a couple choices, not 100. We’re trying to narrow it down from 100 but knowing that there’s two or three equivalent networks I can follow. And even on a roadmap, I want to be somewhere in five or 10 years. And here’s a roadmap, here’s to two or three different ways I can progress towards that. Because I do know what’s what in a lot of people’s minds is that supply chain design will actually lock in 80% of the total supply chain costs. So, once you’ve decided where your facilities are, how you’re connecting them together, that fixes 80%. It’s non sensitive, you can’t change it. So, every time you have to look at your roadmap, any time I can move some pieces around, I can work on the efficiency of that 80% if I’m keeping that 80% then now, I’m having my purchasers all trying to negotiate like hell for that 20%. So, if you’re trying to cut 5% of 20%, you’re at 10th of a percent.

 

Justin Smith 

Then I got imagine there’s landlords and owners and investors of industrial real estate that have drilled down into this. And it’s amazing because they would be chasing other people’s demand but when you think of certain parts of the country that have really seen explosive growth, and you’ve seen a lot of investors flocked to it. I’ve have heard anecdotally of a few that have tried to drill down into other like supply chain studies to try and think through, where is the next place I can deploy capital and develop new product? Is any of that anything that overlaps your world or that you’re aware of? Or is that totally separate and they have their own black box that they’re working with?

 

Steve Johanson

No, it’s not totally separate. I’d like to do more of it. It’s essentially, reverse site selection is when you have a site and you’re figuring out who needs to be there for it, but this is one step past that. I do think that Starboard is at 1000 users, I’d like to get to the point where we’re starting to know from where people are looking and putting things that we’re going to know some great insight into where the movement is, the market movements towards new distribution centers, what ports people are using, what supplier areas they’re using. I’m hoping that we’re going to start to get some insight into that area. But right now, it’s an open opportunity. I think someone should work on it.

 

Justin Smith 

No doubt about it. If you ask them the common industrial broker, they will tell you every market everywhere, has everybody all looking at, that’s just like a sign of this small stretch of time and where we’re at. Super, I mean that for me, and I think that’s super helpful. I don’t know if Grant or David, do you have any more questions or thoughts or ideas?

 

Grant LaBounty

Yes, have one question for someone trying to learn the platform and understand how to create one of these models. What is that process like? Do you guys host trainings for some of these executives?

 

Steve Johanson

David, I took all the questions. Why don’t you feel that one? Sorry?

 

David Barron

Yes, no problem. So, at Starboard we have an introduction video to get people up and going. I’m on the commercial side here and I can build a model and it’s pretty easy to operate. We also host training every Thursday, that anyone’s welcome to attend. And they just want to jump in, get a feel for the tool, ask specific questions, see what’s new, and what features are out there. We’re on a really aggressive dev cycle. So every two weeks, there’s something new being pushed out for typically highlight those new features, and answering any questions or using the tab as well.

 

Justin Smith 

You’re going to see new smiling faces every Thursday, maybe just these two, but I have a feeling you’ll see others that are in our industry that are listening.

 

Steve Johanson

Well, thanks. We love people to join, we call it office hours, even some of the veterans come back to those sessions, just to hear what people are doing, see the new features and ask their own questions. So, it’s always an open forum. It’s even fun sometimes when the University of Rhode Island, Colorado State, we’re in several universities, we often get a slew of college students for a new class pop in, it’s interesting to see what they’re doing.

 

Justin Smith 

I would think it would be a great resource for all the supply chain programs of the country, right, as they’re taking their textbook learning and turning it into real live. Wonderful. Well, I have a great place for people to reach you. If they want to look into it. I will link the website to the show. Is LinkedIn good for you guys or email or how do you prefer people reach out to you?

 

Steve Johanson

Probably email. Okay. We’ve got a good LinkedIn site. That’s always a good place to post stuff. So, I think they can find us on either. We usually are just inviting people to go to the website and create a new account. That’s the that’s the fastest way to hop in and hear from us and get involved.

 

Justin Smith 

Awesome. We’ll make sure because for anybody listening, there’s you, it doesn’t cost anything to get started and to start looking at it and start playing around and just understanding a little bit of what’s available and how it might be helpful for you. Cool. Well, thank you guys. I really appreciate it. That was super helpful.  We’re excited to see you guys on Thursday. Wonderful, we’ll catch you guys later.