Joe Krkoska, Dow AgroSciences at SCCPulse2017
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Joe Krkoska, Supply Chain Director and Business Manufacturing Leader for External Mfg Dow AgroSciences
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Joe Krkoska, Dow AgroSciences at SCCPulse2017
- 1. © 2017 Bristlecone | www.bcone.com | Confidential© 2017 Bristlecone | www.bcone.com | Confidential Using the Power of Digitization to Transform Business Models The Agriculture & Food Industry as a Case Study Joe Krkoska Supply Chain Director and Business Manufacturing Leader October 26, 2017 Dow AgroSciences
- 2. © 2017 Bristlecone | www.bcone.com | Confidential Said another way… BUSINESS PLANETDIGITIZATION
- 3. © 2017 Bristlecone | www.bcone.com | Confidential Agriculture Context People & population growth Land & Land scarcity Soil Seeds Crops Weeds Insects Disease Energy Demand Food/Feed Demand Farming FoodandFeed Innovation
- 4. © 2017 Bristlecone | www.bcone.com | Confidential Farm Size 178.4 111.7 32.3 10.7 4.9 2.4 1.8 1.4 1.0 0% 25% 50% 75% 100% 0 25 50 75 100 125 150 175 200 %offarms<2(ha) Meanfarmsize(ha) Mean size (Ha) % <2 Ha
- 5. © 2017 Bristlecone | www.bcone.com | Confidential Global Distribution
- 6. © 2017 Bristlecone | www.bcone.com | Confidential The Supply Chain Operational Execution Procurement Logistics Commercial Region Active Ingredients Intermediate Formulation Packaging Warehouses Supplier OTD Tech BOM Tech PPP Tech OTS Supplier OTD F&P MPS F&P OTS Customer OTS/OTDWarehouse IRA Plant IRA Raw Material Customer 10 Years & $250,000,000
- 7. © 2017 Bristlecone | www.bcone.com | Confidential Population
- 8. © 2017 Bristlecone | www.bcone.com | Confidential Diet & Demand We’ll need 100% more food by 2050 • Better quality food • Diet with more protein • The “meat multiple” • Fertilizer demand
- 9. © 2017 Bristlecone | www.bcone.com | Confidential Land • Land availability • Industrial and Urban use growth • By 2020, 0.2 hectares per person • Significant pressure to boost crop yield
- 10. © 2017 Bristlecone | www.bcone.com | Confidential Water
- 11. © 2017 Bristlecone | www.bcone.com | Confidential Social…Politics & Pressure • Reliable • Safe • Transparent • Fresh/Quality • “Natural”/Organic • Nutritious • Healthy • Fast/Available • Labeled • “Curative” • Conflict Free • No “bad” Ingredients • Sustainable • “Local” • Authentic • Compliant
- 12. © 2017 Bristlecone | www.bcone.com | Confidential Technology Age of Mechanization 10 30 50 70 90 110 130 150 170 190 Year 1916 1933 1950 1967 1984 2001 Age of Chemicals Herbicides Insecticides Fungicides Productivity Age of Biology Insect Resistance Herbicide-Tolerance Agronomic Traits Quality Traits Corn Yields Wheat Yields Corn Hybrids Introduced Herbicide Usage Begins Fertilizer Use Begins Adoption of Plant Biotech
- 13. © 2017 Bristlecone | www.bcone.com | Confidential Agriculture in the 21st Century and Beyond • Crop yields need to be increased … even beyond 20th century gains • Inputs must be reduced… water, fertilizer, pest protection, energy • More robust crops must be developed… drought, flood, heat, etc. • Crops for human health and nutrition… providing essential vitamins, amino acids, and proteins to help eliminate malnutrition and disease • Novel energy crops… renewable source of biomass for fuels • The value chain must be digitized… better, faster, cheaper, more sustainable
- 14. © 2017 Bristlecone | www.bcone.com | Confidential Why Digital…the Value Case • Sell More • Revenue, Service, Loyalty, Capability • Cost Less • Asset Utilization, Network optimization, Event Management, Working Capital • New Competitive Advantage • Business models…new and/or improved • The Planet • Resource consumption and quality of life
- 15. © 2017 Bristlecone | www.bcone.com | Confidential What exactly does “digital” contribute • See waste/opportunity • Assimilate conditions • Scenario outcomes • Suggest/prescribe actions • Sense more • Redefine processes Speed & Augmentation of Human Capability
- 16. © 2017 Bristlecone | www.bcone.com | Confidential Digital Enabling Technologies & Themes • 3D Printing/Additive Mfg • Drones • IOT • Sensors • Cloud • In-Memory Computing • Robotics • Blockchain • Autonomous Vehicles • Wearables • Gig Economy • Artificial Intelligence/ML • On-Demand • Shared Economy - "uberization" • Combinatorial Innovation • Analytics/Visualization • Agile & Open • “Wiki Cognition” • Adjacency Orchestration
- 17. © 2017 Bristlecone | www.bcone.com | Confidential The Food Value Chain…linear view Active Ingredient Formulation & Package WAREHOUSE DISTRIBUTION RETAILER FARMSUPPLIER MANUFACTURING
- 18. © 2017 Bristlecone | www.bcone.com | Confidential A Food Value Chain…circular view Mfg Ecosystem R&D Ecosystem Logistics Ecosystem Growers Ecosystem
- 19. © 2017 Bristlecone | www.bcone.com | Confidential Value Chain Managing Principles Visibility Planning DesignMetrics People/ Leadership
- 20. © 2017 Bristlecone | www.bcone.com | Confidential Value Chain Design TBD Design • Lowest Cost? • Best Service? • Latest Technology? • Reliability • Resilience • Sustainability • CRM, SRM • Postponement • Service Level • Asset Scenario • Complexity • B2B or B2C • Selling Platform • Drivers • Sensing • Shaping • Development • Use to Procure • Order to Produce
- 21. © 2017 Bristlecone | www.bcone.com | Confidential Digital … Within - Adjacent – Across - Around • R&D • Engineering • Construction • Procurement • Planning • Manufacturing • Distribution/Logistics • International Trade • Channel Management • Marketing • Sales • Customer Service • Finance • Manufacturing • 3D Spare Parts • Drone Inspections • Big Data Correlation Discovery • AI for Prediction, Optimization • IOT for more Sensing • Robotics for Speed/Safety • Mobile Control Room • Wearables Aug Reality for Maintenance “Intelligent people are hard to find and very expensive”…Turkish retailer on the importance of technology and innovation
- 22. © 2017 Bristlecone | www.bcone.com | Confidential Use Cases Abound • Channel Inventory Telemetry • ROI on Deployment • ROI on Loading • Mobile/Apps for Effectiveness • ROI on Customer Relationship • Demand Gathering/Sensing • ROI on Asset Utilization • ROI on Planning Accuracy • Selling Yield, not “Product” • ROI on Greater Yield • Food Chain Provenance • ROI on consumer appeal/sales • ROI on compliance/License to Operate • Digital Planning • ROI in Asset Utilization • ROI on Inventory Qty/Deployment • ROI on planning time • ROI on talent/retention • Supplier Relationship • ROI on time and accuracy • Cognitive Computing Across the Chain
- 23. © 2017 Bristlecone | www.bcone.com | Confidential And Another…2 Billion Packages/Year • Loyalty Program Automation • Digital Marketing • Quality Feedback • Demand Sensing • Inventory Visibility • R&D Advice in Real Time • Customer Relationship • Tracking • Tracing • Authentication • Item Level Serialization • Automated re-order • Government Reporting • Customer Relationship
- 24. © 2017 Bristlecone | www.bcone.com | Confidential What next? The Process 1. Concept ID Agreement 2. Architecture Feasibility 3. Business Model Feasibility 4. Pilot Definition 5. Proposal 6. Implementation 7. Scale 8. Support • Plenty of Examples of IT Project Failure… • Fewer Examples of Business Project Failures… • Small Enough Pilots do not get Stuck in the Corporate Reviews… • Identify the Cross-Functional Core Team Accountable to Deliver…give Freedom-to-Operate…
- 25. © 2017 Bristlecone | www.bcone.com | Confidential What are the limiting factors? • Waiting for a comprehensive all inclusive scope • Failing to see digital as a strategic platform • Failing to fund a high ROI “R&D” program • Failing to make choices on resource allocation • Failing to hire the right skills
- 26. © 2017 Bristlecone | www.bcone.com | Confidential Why Digital? The Value Case • Sell More • Cost Less • New Competitive Advantage • The Planet
- 27. © 2017 Bristlecone | www.bcone.com | Confidential We have the know-how… • Sensors • Engineering • Digitization Know-How • Coding • Infrastructure • Speed • Platforms • Storage On August 25, 2017, NASA astronaut Jack Fischer photographed Hurricane Harvey from the cupola module aboard the International Space Station as it intensified on its way toward the Texas coast. The Expedition 52 crew on the station has been tracking this storm for the past two days and capturing Earth observation photographs and videos from their vantage point in low Earth orbit. Image Credit: NASA
- 28. © 2017 Bristlecone | www.bcone.com | Confidential
- 29. © 2017 Bristlecone | www.bcone.com | Confidential© 2017 Bristlecone | www.bcone.com | Confidential For any queries or suggestions, I can be reached at JMKrkoska@dow.com 765.481.9823 Thank You
Notas do Editor
- We humans seem to at our best when inspired and challenged…in fact, when inspired and challenged OPTIMALLY, we are unstoppable. My objective today is to inspire and challenge you. Not only do I believe there is great business opportunity, and significant benefits to quality of life around the world, but I believe we have a mandate for the good of our planet.
- Here it is as a diagram…digitization as we in this room know, is the next Big Thing And when we approach this with the right vision in mind…everybody wins
- To provide some context, and assuming that there may be a few in the room who have not thought much about the food value chain, I wanted to get a few things on the table I would label these bubbles as SOME of the basic elements of the equation By no means comprehensive And innovation and change are happening across it all I want to drill down on several of these to set the stage for the challenges and opportunities ahead
- First, just a graph of the differences globally around farm size In the US and Argentina, we have mega-farms with mega machines In many other parts of the world, we have farms no larger than this room where the grower uses a back pack sprayer And in some cases, virtually no use of technology applied to farming…at least not as we would define it
- Now a look at who has food to share, and who relies on others to feed their people Also in this graphic In the developed world, we’re spending 10% of our income on food, 60% in the developing world And virtually all of the nations in food crisis are in Africa
- What about upstream of the farm…here a diagram showing the main segments of the Crop Protection product supply chain These supply chains have end-to-end cycle times between 6 months and over 3 years Please imagine that if you will, this past growing season, we sold finished product, whose raw materials were ordered in 2014 Speaking of cycle times…before these supply chains are operating, R&D took on average 10 yrs and $250MM to discover and prepare to launch
- How about population…we’re at 7B and headed to 9B by 2050
- But food consumption will not only increase by 28% due to population growth Food demand will grow disproportionately because as nations develop, the first thing they tend to spend more money on tends to be protein in the form of beef, pork and poultry…look at the difference illustrated in this graphic So population growth combined with these factors results in needing a doubling of yield The first expectation of many consumers in regions with accelerating economic growth is better quality food This means a diet with more protein, primarily from meat, which requires additional grain to feed more animals It takes approximately 7 kilograms of feed grain to produce 1 kilogram of beef, 4 kilograms per kilogram of pork and 2 kilograms per kilogram of poultry Rising meat consumption has an immediate effect on grain consumption, thus substantially more fertilizer will be needed
- You might think bringing more land into agriculture is the solution, but that trend line is in the opposite direction And for good reason, we don’t need or want any more deforestation As world population grows and urban areas expand, the quantity and quality of land available for agriculture declines Conversion to Industrial and Urban uses continues to grow at a rapid pace China feeds 22% of the world’s population on only 7% of the world’s arable land By 2020, there will be just over 0.2 hectares per person for animal and crop production This puts significant pressure on farmers to boost crop yields to get production out of a diminishing land base
- And I probably do not need to convince you that fresh water availability is also a global challenge And agriculture is the single largest demand on fresh water consumption
- As all of that is going on, we as a population are becoming much more aware So we are asking more of ourselves Unfortunately, in many case, we don’t have all the answers And in just as many case, we have apparently opposing objectives And as you read this list, I think you would agree there is not even one item, that is unambiguous So…are you feeling challenged yet?
- Well here comes inspiration…technology to the rescue! Here is a graph of corn and wheat yield progress since the turn of the century Farm equipment, hybrids, fertilizer, herbicides/insecticides/fungicides and finally biotech So what's next on this picture…I think you know my answer…digitization technology
- Sell More Growth through enhanced opportunistic revenue capture Growth through enhanced service Growth through increased loyalty Growth through unique capability Cost Less Increased asset utilization through better planning Logistics & network optimization - freight/warehouse/duty More effective event management Dynamic optimization of working capital New Competitive Advantage New business models More effective and faster current business models The Planet Reduced resource consumption Raising the minimum expectation on quality of life
- The timely ability to see waste/opportunity The timely ability to see & process: conditions The timely ability to process: scenario outcomes The timely ability to suggest/prescribe optimized actions The ability to sense more The ability to redefine business, channel and factory floor processes
- Forgive the laundry list…but its worth taking this in Partly because its not often we see it all at once in a menu Also because each of these will be has a place…a use case and an opportunity And finally because sometimes, it wont be one of these but a combination that unlocks value
- So we know digital will drive the next step change in performance And we have a list of enabling technologies…and some, by the way, we have not imagined So where is it applied Here is a linear view of the value chain from raw material supply to food consumer…you and me
- I prefer this view because it illustrates the closed loop of this value chain It also highlights the collateral value chains And if you don’t mind a reminder…please think about the lack of digitization currently, or the pockets of isolated digitization Now imagine the power of connecting these lakes and streams of data and overlaying algorithms and AI
- Add a few principles on VCM Each of these can be detailed…but I’ll pick my favorite to illustrate…DESIGN
- As we know, businesses are made up of functions And these functions each have opportunities to apply digital enablers beyond the current state Technology…in this discussion digital technology…not only changes performance, but locks it in But this Turkish retailer I think says it more memorably
- Waiting for a comprehensive all inclusive answer vs understanding the principle that it all connects and each pilot has independent ROI…and the combinatorial impact amplifies the ROI Failing to see this (digital) as a strategic platform Failing to fund a high ROI “R&D” program Spending resource on the familiar incremental gains vs the transformative platform capability Not hiring data scientists, data engineers, data analysts, code writers…directly or through technology partners
- Remember the Golden Rules of any value proposition…
- We have the know-how AND the capability We have the resources AND the implementation process Maybe what we lack is the sense of urgency?
- So if you are paying attention to global events, even loosely, like me you may be sensing that the heat and pressure are getting turned up. Statistics and causation are stubborn things, but as best as we can see into the future… Climate change discussion Population growth forecast Emigration/immigration forecast Geopolitical stability discussion These to me provide the sense of urgency…combined with the clear benefits to business economics and the vast number of Use Cases…the mandate is clear.
- Thank you for your time today and I hope there was a reasonable dose of inspiration and challenge. I'm happy to take any questions now, or by email later if you prefer. Thank you!