Transcript of a BriefingsDirect podcast on how companies can get a better handle on supply-chain risk using big data and community involvement.

1. Big Data Meets the Supply Chain — How SAP’s Supplier
InfoNet and Ariba Network Enable Companies to Predict,
and Proactively Manage Supplier Risk
Transcript of a BriefingsDirect podcast on how companies can get a better handle on supply-
chain risk using big data and community involvement.
Listen to the podcast. Find it on iTunes. Sponsor: Ariba, an SAP company
Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you
from the 2014 Ariba LIVE Conference in Las Vegas. We’re here the week of March 17 to
explore the latest in collaborative commerce and to learn how innovative
companies are tapping into the networked economy.
We’ll see how these companies are improving their real-time business
productivity and sales, along with building far-reaching relationships with new
business partners and customers.
I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host
throughout this series of Ariba-sponsored BriefingsDirect discussions.
Our next interview focuses on how improved visibility analytics and predictive responses are
improving supply-chain management. We’ll now learn how SAP’s Supplier InfoNet, coupled
with the Ariba Network, allows for transparency in predictive analytics to reduce risk and
supplier relationships.
To learn more about how the intelligent supply chain is evolving please join me now in
welcoming our guests. We are here with David Charpie, Vice President of Supplier InfoNet at
SAP. Welcome, David.
David Charpie: Thank you, Dana.
Gardner: We’re also here with Sundar Kamakshisundaram, Senior Director of Solutions
Marketing at Ariba, an SAP Company. Welcome, Sundar.
Sundar Kamakshisundaram: Thank you, Dana.
Gardner: Sundar, let me start with you. From a general perspective, what sort of trends or
competitive pressures are making companies seek better ways to identify, acquire, or manage
information and data to have a better handle on their supply chains?
Kamakshisundaram: The pressures are multifaceted. To start with, many organizations are
faced with globalization pressure. Finding the right suppliers who can actually supply both the
Gardner

2. product and service at the right time is a second challenge. And the third challenge many
companies grapple with right now is the ability to balance savings and cost
reductions with risk mitigation.
These two opposing variables have to be in check in order to drive sustainable
savings from the bottom line. These challenges, coupled with the supply-chain
disruptions, are making it difficult not only to find suppliers, but also to get the
right product at the right time.
Gardner: When we talk about risk in a supply-chain environment what are
we really talking about? Risk can be a number of things in a number of
different directions.
Many variables
Kamakshisundaram: Risk, at a very high level, is composed of many different variables.
Many of us understand that risk is a function of, number one, the supply. If you don’t have the
right supplier, if you don’t have the right product at the right time, you
have risk.
And, there is the complexity involved in finding the suppliers to
address needs in different parts of the world. You may have a supplier
in North America, but if you really want to expand your market share
in the far East, especially in China, you need to have the right supply
chain to do that.
Companies traditionally have looked at historical information to predict risk. And this is no
longer enough because more and more, supply chains are becoming complex. Supply chains are
affected by the number of globalized variables including the ability to have suppliers in different
parts of the world, and also other challenges which will make risk more difficult to predict in the
long run.
Gardner: David Charpie, where do you see the pressures to change or improve how supply-
chain issues are dealt with and how do you also define the risks that are something to avoid in
supply-chain management?
Charpie: Sure, Dana. When we think about risk we’re really thinking about it from two
dimensions. One of them is environmental risk. That is, what are all the factors outside of the
company that are impacting performance?
That can be as varied as wars, on one hand, right down to natural disasters and other political
types of events that can also cause them to be disrupted in terms of managing their supply base
and keeping the kind of cost structure they are looking for.
Kamakshisundaram

3. The other kind are more inherent operational types of risks. These are the things like on-time
performance risk, as Sundar was referring to. What do we have in terms of
quality? What do we have in terms of product and deliverables, and do they
meet the needs of the customer?
As we look at these two kinds of risks, we’ve seen increasing amounts of
disruption, because we’re in a time where the supply chains are getting much
longer, leaner, and more complex to manage. As a result of that, you’re seeing
that over 40 percent of interruptions right now are caused by interruptions in
the supply chain downstream, tiers two, tier three, all the way to tier N.
So now we need a different way of managing suppliers than we had in the past. Just working
with them and talking to them about how they do things and what they do isn’t enough. We need
to understand how they’re actually managing their suppliers and so on down the line.
Gardner: So, it’s a world where there's more complexity, much more of a time crunch, real time,
and very little margin for error?
Charpie: Very little.
Predicting risk
Gardner: We’ve brought two things together here, SAP’s Supplier InfoNet and Ariba
Network. What is it about these two things coming together that gives us the ability to analyze or
predict, and therefore reduce, risk?
Charpie: To be able to predict and understand risk, you have to have two major components
together. One of them is actually understanding this multi-tiered supply chain. Who is doing
business with whom, all the way down the line, from the customer to the raw material in a
manufacturing sense? To do that you need to be able to bring together a very large graph, if you
will, of how all these companies are inter-linked.
And that is ultimately what the Ariba Network brings to bear. With over 1.5 million companies
that are inter-linked and transacting with each other, we can really see what those supply chains
look like.
The second piece of it is to bring together, as Sundar talked about, lots of information of all kinds
to be able to understand what’s happening at any point within that map. The kinds of information
you need to understand are sometimes as simple as who is the company, what do they make,
where are they located, what kind of political, geopolitical issues are they dealing with?
The more complex issues are things around precisely what exact product are they making with
what kind of requirements, in terms of performance, and how they’re actually doing that on a
customer-by-customer basis. What we find is that suppliers don’t behave the same for everybody.
Charpie

4. So InfoNet and the network have come together to bring those two perspectives, all the data
about how companies perform and what they are about with this interconnectedness of how
companies work with each other. That really brings us to the full breadth of being able to address
this issue about risk.
Dana Garden: Sundar, we’ve got a depth of transactional history. We have data, we have
relationships, and now we’re applying that to how supply chains actually behave and operate.
How does this translate into actual information? How does the data go from your systems to
someone who is trying to manage their business process?
Kamakshisundaram: A very good question, Dana. If you take a step back and understand the
different data points you need to analyze to predict risk, they fall into two different buckets. The
first bucket is around the financial metrics that you typically get from any of the big content
providers you have in place. We can understand how the supplier is performing, based on current
data, and exactly what they’re doing financially, if they’re a public company.
The second aspect, through the help of Ariba Network or Supplier InfoNet, is the ability to
understand the operational and the transactional relationship a supplier has in place to predict
how the supplier is going to behave six-to-eight months from now.
For example, you may be a large retailer or a consumer packaged goods (CPG) organization,
maybe working with a very large trucking company. This particular trucking company may be
doing really well and they may have great historical financial information, which basically puts
them in a very good shape.
Financial viability
But if only one-third of the business is from retail and consumer packaged goods (CPG) and
the remaining two-thirds comes from some of the challenging industries, all of a sudden,
operational and financial viability of the transportation supply chain may not look good. Though
the carrier's historical financials may be in good shape, you can’t really predict how the supplier
is going to have working capital management in terms of cash available for them to run the
business and maintain the operation in a sustainable manner.
How does Ariba, Ariba Network, and InfoNet help? By taking all the information across this
multitude of variables, not only in a financial metrics, but also the operational metrics, and
modeling the supply chain.
You don’t limit yourself with the first tier or second tier, but go all the way to the multi-tier
supply chain and also the interactions that some of these suppliers may have with their
customers. It will help you understand whether this particular supplier will be able to supply the
right product and get you the right product to your docks at the right time.

5. Without having this inter correlation of network data well laid out in a multi-tier supply chain, it
would have been almost impossible to predict what is going to happen in this particular supply-
chain example.
Gardner: So, David, it sounds to me as algorithmic or as if a score card is there. Is that the right
way to look at this or is it just making the data available for other people to reach conclusions
that then allows them to reduce their risk?
Charpie: There absolutely is an algorithmic component to this. In fact, what we do in Supplier
InfoNet and with the network is to run machine-learning models. These are models that behave
more like the human brain than like some of the statistical math we learned when we were back
in high school and college.
What it looks for is patterns of behavior, and as Sundar said, we’re looking at how a company
has performed in the past with all of their customers. How is that changing? What other variables
are changing at the same time or what kinds of events are going on that may be influencing
them?
We talked about environmental risk a bit ago. We capture information from about 160,000
newswire sources on a daily basis and, on an automated basis, are able to extract what that article
is about, who it’s about, and what the impact on supply chain could be.
By integrating that with the transactional history of the Ariba Network and by integrating that
with all the linkage on who does business with whom, we can start to see a pattern of behavior.
That pattern of behavior can then help us understand what’s likely to happen moving forward.
To make it a little more concrete, let’s take Sundar’s example of a company having financial
trouble. If I take a company, for example, under $100 million, what we have found is that if we
see a company that begins to deliver late, within three months of that begins to have quality
problems, and within two months or less begins to have cash-flow problems and can’t pay their
bills on time, we may be seeing the beginning of a company that’s about to have financial
disaster.
Interestingly, what we find is for the pattern that really means something, after those three events.
If they begin paying their bills on time all of a sudden, that’s the worst indicator there possibly
could be. It’s very counterintuitive, but the models tell us that when that happens, we’re on the
verge of someone who will go bankrupt within 2-3 months of that time frame.
Delivery model
Gardner: Now I can see why this wasn’t something readily available until fairly recently. We
needed to have a cloud infrastructure delivery model. We needed to have the data available and
accessible. And then we needed to have a big data capability to drive real-time analysis across
multiple tiers on a global scale.

6. So here we are, Ariba LIVE 2014, March. What are we going to hear when can people start to
actually use this? Where are we on the timeline for delivery in this really compelling value?
Kamakshisundaram: Both Supplier InfoNet and Ariba Network are available today for
customers, so that they can continue to leverage these solutions. With the help of SAP’s
innovation team, we’re planning to bring in additional solutions that not only help customers
look at real-time risk modeling, but also more of predicted analytical capability show.
Gardner: Very good. David, what are some key features, and perhaps some business benefits
that the audiences will hear this weekend that you’ll be taking out to a wider audience over the
next several months?
Charpie: In terms of the business benefits in what we are offering, the features that really bring
to life this notion of integrating the Ariba Network with InfoNet are, first and foremost, an ability
to push alerts to our customers on a proactive basis to let them know when something is
happening within their supply chain and could be impacting them in any way whatsoever.
That is, they can set their own levels. They can set what interests them. They can identify the
suppliers they want to track to as many as the entire supply base. We will track those on an
automated basis and give them updates to keep them abreast of what’s happening.
Second, we’re also going to give them the ability to monitor the entire supply base, from a heat-
map perspective, to strategically see the hot pockets -- by industry, by spend, or by geography --
that they need to pay particular attention to.
Third, we’re also going to bring to them this automated capability to look at these 160,000
newswire sources and tell them the newswires that they need to pay attention to, so they can
determine what kind of actions can they take from those, based on the activity that they see.
We’re also going to bring those predictions to them. We have the ability now to look at and
predict performance and disruption and deliver those also as alerts, as well as deeper analytics.
By leveraging the power of HANA, we’re able to bring real-time analysis to the customer.
They have those tools today, and so it’d be creating a totally personalized experience, where they
can look at big data, look at it the way they want to, look at it the way that they believe risk
should be measured and monitored, and be able to use that information right there and then for
themselves.
Sharing environment
Last, they also have the ability to do this in an environment where they can share with each
other, with their suppliers, and with others in the network, if they choose. What I mean by that is
the model that we have used within Supplier InfoNet is very much like you see in Facebook.

7. When you have a supplier and you would like to see more of their supply base you request that
you can see that, much like friending someone on Facebook. They will open up that portion --
some, little, none -- of their supply base that they would like you to be able to have access to.
Once you have that, you can get alerts on them, you can manage them, and you can get input on
them as well.
So there’s an ability for the community to work together, and that’s really the key piece that we
see in the future, and it’s going to continue to expand and grow as we take InfoNet and the
Network out to the market.
Gardner: So certainly for many companies this is a make-or-break type of capability. The cost
that could be incurred if issues crop up in your supply chain before you have that some advance
notice can be devastating. But, of course, not having the information yourself prevents you from
getting it. So it seems to me there has to be something you do to a third-party that has access to
the data across the supply chain.
Do you have any examples, Sundar, of organizations that demonstrate one, the very high stakes
involved with doing this properly, and two, the fact that you really couldn’t do this as a single
organization looking into a supply chain -- how it has to be a cooperative effort.
Kamakshisundaram: Dana, if you take a step back you can see why companies haven’t been
able to do something like this in the past. There were analytical models available. There were
tools and technologies available, but in order to build a model that will help customers identify a
multi-tier supply chain risk, you need a community of suppliers who are able to participate and
provide information which will continue to help understand where the risk points are.
As David mentioned, where is your heat map? What does it say? And also, point to how you not
only collect the information, but what kind of mitigating processes you have to put in place to
mitigate those risks.
In certain industries, we see certain trends, whether it’s automotive or aerospace. A lot of the
suppliers that are critical in these industries are cross-industry. Focusing on a certain industry and
having the suppliers only in that particular industry will give you only a portion of that
information to understand and predict risk.
And this is where a community where participants actively share information and insights for the
greater good helps. And this is exactly what we’re trying to do with the Ariba Network and
Supplier InfoNet.
Gardner: I’m trying to help our listeners solidify their thinking of how this would work in a
practical sense in the real world. David, do you have any use-case scenarios that come to mind
that would demonstrate the impact and the importance and reinforce this notion that you can’t do
this without the community involvement?

8. Case study
Charpie: Let’s start with a case study. I’m going to talk about one of our customers that is a
relatively small electronics distributor.
They signed on to use InfoNet and the Ariba Network to better understand what was happening
down the multiple tiers of their supply chain. They wanted to make sure that they could deliver
to their ultimate customers, a set of aerospace and defense contractors. They knew what they
needed, when they needed it, and the quality that was required.
To manage that and find out what was going to happen, they loaded up Supplier InfoNet, began
to get the alerts, and began to react to them. They found very quickly that they were able to find
savings in three different areas that ultimately they could pass on to their customers through
lower prices.
One of them was that they were able to reduce the amount of time their folks would spend just
firefighting the risks that would come up when they didn’t have information ahead of time. That
saved about 20 percent on an annual basis.
Second, they also found that they were able to reduce the amount of inventory obsolescence by
almost 15 percent on an annual basis as a result of that.
And third, they found that they were avoiding shortages that historically cut their revenues by
about 5 percent due to the fact that previously they couldn’t deliver on product that was
demanded often on short notice. With the InfoNet all of these benefits were realized for them and
became practical to achieve.
Their own perspective on this, relative to the second part of your question, was they couldn’t do
this on their own and that no one else could. As they like to say, I certainly wouldn’t share my
supply base with my competitor. The idea is that we can take those in aggregate, anonymize
them, and make sure the information is cleansed in such a way that no one can know who the
contributing folks are.
The fact that they ultimately have control of what people see and what they don’t allows them to
have an environment where they feel like they can trust it and act on it, and ultimately, they can.
As a result, they’re able to take advantage of that in a way that no one could on their own.
We’ve even had a few of the aerospace and defense folks who tried to build this on their own. All
of them ultimately came back because they said they couldn’t get the benchmark data and the
aggregate community data. They needed an independent third party doing it, and SAP and Ariba
are a trusted source for doing that.
Gardner: For those folks here at Ariba LIVE who are familiar with one or other of these
services and programs or maybe not using either one, how do they start? They’re saying, “This is

9. a very compelling value in the supply chain, taking advantage of these big-data capabilities,
recognizing that third party role that we can’t do on our own.” How do they get going on this?
Two paths
Charpie: There are two paths you can take. One of them is that you can certainly call us. We
would be more than happy to sit down and go through this and look at what your opportunities
are by examining your supply base with you.
Second, is to look at this a bit on your own and be reflective. We often take customers through a
process, where sit down and look at supply risk and disruption they’ve have had in the past, and
based on that, categorize those into the types of disruptions they’ve seen. What is based on
quality? What is based on sub-tier issues? What is based on environmental things like natural
disasters? Then, we group them.
Then we say, let’s reflect on if you had known these problems were going to happen, as Sundar
said three, six, eight months ahead, could you have done something that would have impacted
the business, saved money, driven more revenue, whatever the outcome may be?
If the answer to those questions is yes, then we’ll take those particular cases where the impact is
understood and where an early warning system would have made a difference financially. We’ll
analyze what that really looks like and what the data tells us. And if we can find a pattern within
that data, then we know going in that you're going to be successful with the Network and with
InfoNet before you ever start.
Gardner: Very interesting. Sundar, the last question to you. This also strikes me as something
that doesn’t fall necessarily into a traditional bucket, as to who would go after these services and
gain value from them. That is to say, this goes beyond procurement and just operations, and it
enters well into governance, risk, and compliance.
Who should be looking at this in a large organization or how many different types of groups or
constituencies in a large organization should be thinking about this unique service?
Kamakshisundaram: We have found that it depends on the vertical and the industry. Typically,
it all starts with the procurement, trying to understand, making sure they can assure supply, that
they can get the right suppliers.
Very quickly, procurement also continues to work with supply chain. So you have procurement,
supply chain, and depending on how the organization is set up, you also have finance involved,
because you need all these three areas to come together.
This is one of the projects where you need complete collaboration and trust within the internal
procurement organization, supply chain/operations organization, and finance organization.

10. As David mentioned, when we talk to aerospace, as well as automotive or even heavy industrial
or machinery companies, some of these organizations already are working together. If you really
think about how product development is done, procurement participates at the start of the black-
box process, where they actually are part and parcel of the process. You also have finance
involved.
Assurance of supply
To really understand and manage risk in your supply chain, especially for components that go
into your end-level product, which makes up significant revenue for your organization, Supplier
Management continues all the way through, even after you actually have assurance of supply.
The second type of customers we have worked with are in the business services/financial/
insurance companies, where the whole notion around compliance and risk falls under a chief risk
officer or under the risk management umbrella within the financial organization.
Again, here in this particular case, it's not just the finance organization that's responsible for
predicting, monitoring, and managing risk. In fact, finance organizations work collaboratively
with the procurement organization to understand who their key suppliers are, collect all the
information required to accurately model and predict risk, so that they can execute and mitigate
risk.
Gardner: It’s definitely a team sport within the origination, but a great deal of value comes
when you do it properly in that fashion.
I’m afraid we’ll have to leave it there. We’ve been talking about how improved visibility,
analytics, and predictive responses are improving supply chain management. And we learned
how the Supplier InfoNet coupled with the Ariba Network now allows for transparency and
predictive analytics to reduce risk in many ways across multiple verticals in the supply chain
arena.
So a big thanks to our guests. We’ve been joined by David Charpie, Vice President of Supplier
InfoNet at SAP. Thank you, David.
Charpie: Thank you, Dana.
Gardner: Also, we’ve been here with Sundar Kamakshisundaram, Senior Director of Solutions
Marketing at Ariba, an SAP company. Thank you.
Kamakshisundaram: Thank you, Dana.
Gardner: And also thanks to our audience for joining this special podcast, coming to you from
the 2014 Ariba LIVE Conference in Las Vegas.

11. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of
Ariba sponsored BriefingsDirect discussions. Thanks again for listening, and come back next
time.
Listen to the podcast. Find it on iTunes. Sponsor: Ariba, an SAP company
Transcript of a BriefingsDirect podcast on how companies can get a better handle on supply-
chain risk using big data and community involvement. Copyright Interarbor Solutions, LLC,
2005-2014. All rights reserved.
You may also be interested in:
•
Ariba's Product Roadmap for 2014 Points to Instant, Integrated and Data-Rich Business
Cloud Services
•
Arlington Computer Products Simplifies and Speeds its Billing and Payments Using New
AribaPay
•
The Future of Business Success Hinges on How Well Innovation Drives Supply Chain
and Procurement Advantages
•
Workforce of the Future -- and Why Preparing Means Rethinking Human Resources Now
•
Spot buying automated by Ariba gives start-up KooZoo a means to shop more efficiently
•
Combining big data and cloud capabilities for ecommerce matches buyers and sellers like
never before
•
Here's Why Healthcare Businesses Must Efficiently Manage Their Suppliers, Purchases,
and Processes