This post is part of our new Future of Logistics series which interviews the leading founders and executives who are on the front lines of the industry to get a better understanding of what problems the industry is facing, what trends are taking place, and what the future looks like.
The following is an interview we recently had with Payson Johnston, CEO of Crowdz.
1. What’s the history of Crowdz? Where and how did you begin?
PJ: Steven Lee, Crowdz’s COO, and I (Payson Johnston, Crowdz’s CEO) are the two principle co-founders of Crowdz. We first met six years ago in C3—no, not the marketing trade show in New York, but the “Cisco Crucible of Crisis.” In 2011, I was Cisco’s global manager and owner of the company’s optics supply chain. Steven was the senior manager for global processes, including risk management. Steven's portfolio intersected mine, but also encompassed all of Cisco's other supply chains.
Our paths first crossed and our professional lives changed forever in a single few-week period in the summer of 2011. With the landfall of Tropical Storm Nock-ten in late July of that year, vast regions of northern and central Thailand become flooded—a problem that persisted until the following January and that ultimately became known as “the worst flooding yet in terms of the amount of water and people affected.”
The floods were a humanitarian disaster for Thailand, with 65 of 77 of Thailand's provinces declared disaster areas. But the floods also were a looming economic catastrophe for Cisco. Vast swaths of our global optics supply chain were shut down, and our rapidly mounting financial exposure quickly grew to between $250 million and $300 million.
The crisis was a dystopian nightmare. Most of our Thailand-based factories were under water—physically and not just financially. Stray tools and components floated about in the muddy flood waters like tiny long-tail boats. And the diligent workforce that once filled Thailand's industrial areas was replaced by congregations of alligators, who were adept at swimming but somewhat technologically challenged when it came to assembling optics components.
Facing a financially catastrophic situation, Steven and I were immediately pressed into action. Steven oversaw the re-routing of various classes of manufacturing commodities all over the world, while I ran recovery operations involving 50 key players across the globe.
It was a very dark day in Cisco's war room when Steven and I had to make a maximum-revenue loss commitment to Cisco VP of Supply Chain, but we made the commitment with faith, and then worked tirelessly over several weeks mobilizing and managing teams, communicating on a daily basis with managers and customers, and making enormously consequential decisions with sometimes almost no information on which to base our judgments.
Eventually, the floods receded, but our supply operations had long-since been restored and the alligators had decamped, fleeing roads and parking lots to return to their swampy homes. In the end, the cost to Cisco amounted to only about $20 million of lost revenue–a miracle of Mosaic proportions given our initial degree of exposure.
Steven and I have been working together since that time—first at Cisco and, for the past three years, at Crowdz. Throughout this time, we’ve worked with one goal in mind: to create agile, automated supply chains that prevent financial and operational disasters, like that that we experienced in Thailand, before they ever have the chance to rear their baneful, jaw-snapping heads.
2. What specific problem does Crowdz solve? How do you solve it?
PJ: Crowdz was a natural outgrowth of 20 years of Steven Lee’s and my professional experience managing supply chains for large global companies like Cisco, SanDisk, Dell, and Honeywell. In our work, we routinely encountered two significant problems:
– Lack of supply-chain visibility. As supply-chain managers, we knew very little about the financial and managerial stability, durability, reliability, quality, capacity, and sustainability of many of our suppliers, making it impossible for us to have the confidence we needed in the operation of our supply chains.
– Long delays. Long delays were commonplace when we needed to bring on new suppliers, to acquire a different class of products, or—in many cases—to execute transactions through antiquated EDI-based or even paper systems. Sourcing, negotiating, writing up contracts, and establishing fulfillment procedures often would consume weeks or even months before we could be up and running. These delays were challenging enough in normal circumstances, but potentially disastrous when we were in the midst of a supply interruption.
We knew that managers of supply operations in both large and SMB companies needed help in these areas because of our own experience as well as that of the hundreds of other supply-chain managers we've dealt with over the last two decades.
We also knew that there was a powerful market need for our solution—despite all of the other mature supply-chain solutions that already exist—because of such persistent market problems as:
- $472 billion in lost income per year due to excess inventory.
- $634 billion in lost sales annually due to stock-outs.
- $1 trillion-plus due to supply-chain interruptions
- $1.6 trillion in lost annual global trade opportunities, due mostly to delays.
In view of these problems, it became clear to us between about 2011 and 2014 that supply chains were growing increasingly ripe for technological disruption. We knew that most corporate spheres of operation, such as finance, accounting, marketing, sales, and HR, already had undergone revolutionary, technologically mediated changes. But supply-chain operations hadn't.
It was this set of revelations that led Steven and I, in 2014, to found Crowdz. While we were determined to improve supply-chain operations, we weren’t content to introduce another ERP-style, within-the-corporate-walls solution. What was new about the Crowdz vision was that we would be adding artificial intelligence and end-to-end automation to supply chains through our Smart Transaction Networks.
With our Smart Transaction Networks—real-time, blockchain-based interconnections among buyers and sellers—we give supply-chain managers the ability to continuously monitor their suppliers' viability, reliability, quality, capacity, and inventory levels. Supply-chain managers also gain 24/7 visibility into the sustainability and ethical practices of their suppliers—even in distant parts of the globe.
Managers also will be able to pre-negotiate purchase contracts that will automatically activate as supply needs appear, without the need for administrative delays or human intervention. And they'll be able to automate the process of selecting new, pre-vetted suppliers within milliseconds without having to spend weeks or months doing moment-of-crisis due diligence.
In addition, supply-chain managers will receive automated, as-far-in-advance-as-possible of imminent supply-chain interruptions. They'll be able to maintain supply flows with automated failovers to alternative suppliers, minimizing or even eliminating the effects of supply-chain interruptions.
And they'll be able to tap into robust, real-time, predictive data analytics that will greatly improve their ability to forecast demand while further optimizing their supply chain’s operations.
None of this is possible today. But with Crowdz, we are convinced, it will be.
3. What’s the future of logistics?
PJ: Our three top predictions for the future of logistics are:
Prediction #1: Logistics will become almost fully automated. Artificial-intelligence based routing systems will automatically select the optimal logistic provider based on predetermined timing and financial criteria, without the need for human intervention.
Prediction #2: The combination of blockchain and Internet-of-Things (IOT) sensors will make logistics operations fully visible, so that managers will know the location, destination, and arrival of every individual item in their supply chains at every point in time.
Prediction #3: With technologies like Crowdz’s Smart Transaction Networks, supply-chain interruptions one day will become a problem of the past, as blockchain-based networks will dynamically pre-position suppliers and products ready to intervene instantaneously at the first sign of an interruption.
4. What are the top 3 technology trends you’re seeing in logistics?
PJ: The answer to this question should be surprising to no one who has been following industry trends over the past few years:
Trend #1: Blockchain, particularly with regard to authenticity, auditability, & provenance-validation now, with real-time automation and 24/7 visibility to come along soon, as well as the replacement and ultimate elimination of antiquated payments technologies like EDI. Crowdz’s goal is to kill EDI (Electronic Data Interchange)!
Trend #2: Internet-of-Things (IOT) sensing technologies, which make it possible to track the movement of goods on a real-time, moment-by-moment basis.
Trend #3: Predictive analytics, which are already improving the ability to forecast demand and foresee potential transportation challenges and supply-chain interruptions.
5. Why is the logistics industry ripe for disruption?
PJ: Since its inception, the logistics industry has been highly segmented: individual logistics providers would handle one small part of the overall journey of a shipment, and that’s all they would need to be concerned with. As long as the shipment moved in a timely fashion between Point D and Point E, their job was done.
Unfortunately, with logistics, successfully moving from Point D to Point E isn’t sufficient. Shipments need to move seamlessly from Point A to Point K—and every point in between. While most logistics providers today provide at least some visibility into the progress of their shipments, the much-needed 24/7 visibility into supply-chain logistics is still lacking. That, in itself, is enough to justify disruption.
But that’s not all. In an era in which profit margins have been increasingly squeezed by rising raw material and labor costs on one end and the price-depressing effects of intensifying global- and ecommerce-fueled competition, many companies can eke out a profit only by paring production and related costs to a minimum. Logistics represents not only a significant part of the overall supply chain, but it is also one area where technologically-driven efficiencies can play the greatest role.
Finally, because logistics is necessarily a concrete, physical operation, the need for automation and optimization historically has been less apparent than is the case in more digitally- and data focused sectors, ranging from finance and ecommerce to marketing and health care. But this assumption—if it ever were true—no longer is.
For all of these reasons, logistics is rapidly becoming undeniably ripe for disruption.
About Payson Johnston
Payson serves as the CEO of Crowdz, a Blockchain-based supply chain startup in the Silicon Valley, focused on accelerating business commerce. He has worked for 20+ years in the supply chain area on such projects as building Cisco’s first commerce system, managing global supply chains, and building analytic platforms. He has taught at the University of San Francisco as an Adjunct Professor and recently as an Instructor at the University of California, Berkeley Extension on the topics of sustainability and ethics, supply chains, risk management, and marketing channels. Payson holds an MBA from the University of San Francisco and a MA from the University of Nottingham. His research interests include supply chains, blockchain transformation, sustainability, business ethics, and robotic ethics.