The following is a transcription of the interview:
Santosh Sankar 0:40
Hey ladies and gents Welcome Back to the Future supply chain podcast. I'm your host Santosh Sankar, and joining me today is Rich Tompkins, VP of Southeast ops for Variable. Welcome!
Rich Tompkins 0:52
Thank you very much for having me. I appreciate it.
Santosh Sankar 0:54
Yeah, absolutely. Before we kick this off, I'd love to level-set the knowledge here. Some folks in our audience might be familiar with Variable, but would love to get a quick overview of what you and the team are doing there.
Rich Tompkins 1:09
Yeah, absolutely. So fundamentally, what we are is a digital manufacturing tool to help businesses create more operational flexibility. And really what that looks like for us is creating an on-demand labor marketplace for manufacturing and distribution. So we are a two sided marketplace model that enables businesses to be more competitive, to have some more operational flexibility and how they are sourcing labor, as well as giving the other side of the marketplace (the workers or the operators in our context) visibility and opportunity to work in a variety of different environments. So, playing into that sharing economy model.
Santosh Sankar 2:03
Makes total sense. And I'd be curious, how did you end up getting into the world of supply chain? What's the rich Tompkins story?
Rich Tompkins 2:14
So my professional journey began, unbeknownst to me, when I was working for a number of different clients as a management consultant in my prior life and projects were primarily focused on business process improvement, human capital strategy, and digital transformation across a handful of different industries. Ultimately, I gravitated more and more towards the supply chain focus of projects or working with those businesses that were kind of more on the logistics and manufacturing side of the house. And I think take that and complement it a bit with a "type-A" personality of, you know, being somebody who's always tinkering and testing and you know, trying to be as efficient and productive as possible. It all kind of led me to this place of being excited about and interested in, not only the supply chain world, but how technology helps optimize and improve processes and the way businesses are operating.
Santosh Sankar 3:18
Sure, sure. So I guess putting ourselves in the mindset of a prospective customer: What are they usually grappling with or struggling with when they turn to you for a solution?
Rich Tompkins 3:32
I think it's fundamentally how to win in today's market in the world is moving really fast around them. And there's a lot of different challenges coming from all directions. So, whether it's changing workforce preferences and demographics or increasing customer expectations or a lot of the mega trends that are compounding on their business. I think a lot of it is trying to keep their head above water and trying to figure out how best to navigate a lot of these challenges that they're confronting. Where we stepped in is providing that lifeline and that point of view on how to win in today's market. And we fundamentally believe that's about being more agile and flexible in their operations and enabling them to delight their customer. To be as fast and as agile as possible to increase their capital efficiency. Ultimately, what that looks like for us is how to better supply demand balance from a labor perspective, enabling them to really again have maximized labor productivity, and a cost structure that mirrors their demand movement.
Santosh Sankar 4:52
So at the core, it's providing them a reliable flexible workforce solution. Would that be the right way to sum it up here?
Rich Tompkins 5:01
Yeah, I think that i think that's fair. We are that that reliable source, and really unlock that potential for them to be flexible to chase more orders to be more competitive, to be better protected in trough cycles, for example, when there is a downswing in demand, you know, maybe in a time like, right now with COVID-19 impacts. But yeah, exactly that is to be competitive and as efficient as possible. How we're addressing that is through labor enablement.
Santosh Sankar 5:35
How does that practically happened? I've seen it with assets. I'd be curious, you know, what has Variable built that allows this interesting scalability, both in times of surge and peak demand, as well as in times where there's frankly not enough work. So you, as a manufacturer, as a warehouser need to be able to offset some of that by reducing labor, what's practically there?
Rich Tompkins 6:06
That's a great question. What that looks like is really enabling businesses to treat labor as a true "variable cost" rather than a fixed cost, which is a lot of how businesses are treating it today. And so what we're enabling businesses to do is scale or flex labor up and down just in time with their demand movement. That's not only kind of in the the monthly increments that you might traditionally think about, whether that's hiring model or a staffing model, but really enabling businesses to attack the daily and hourly demand changes that happen for them. And so for businesses who are able to scale up and down within hours notice to take on more work to bring in more labor. Or, just as quickly to drop down or to drop to zero, for that matter, that's practically what businesses are able to do is be able to respond to those changes immediately, just in time in a way that, again, helps them to maximize labor productivity and not have any sort of excess costs hitting their books than what they need to have.
Santosh Sankar 7:25
How does that work? Is it that folks are employed by Variable? Is it that they walk into the relationship knowing that it's very much, you know, what you'd find in the gig economy, drawing on one of the points you made earlier about similarities to the consumer world? What enables that scalability? Because folks might not always be available in hours notice, equally that probably appreciate a week's notice. If they're no longer required. How do you bring that all together? Because it is very interesting; the premise you're enabling.
Rich Tompkins 7:58
Yeah, so all of the operators and workers on our platform are all 1099 independent contractors. And the actual operator supply of workers on our platform is pretty significant to the point where even some of the hours notice type of capacity is absolutely available to the businesses who work through variable. So we had a recent situation with the business that we work with: they all of a sudden had a surge in demand, and they needed to pick up a second shift. And they were able to do that within about a 30 minute period of time where they kind of posted work opportunities onto our platform, and were able to have 30 or 40 workers show up at their facility and help them stand up a second shift within a couple hours notice. So practically, it really is functioning that fast. And that's a testament to the available labor supply that is on our platform. But fundamentally, that isn't being tapped into in a full time job capacity. It's people looking for some of that opportunistic here in their work. Yeah, as well as full time work potentially.
Santosh Sankar 9:22
So like the types of metrics that I guess your customers get to maximise on you. You mentioned working capital, everything around cash efficiencies, that obviously impacts the financials, but also just the fact that for a large chunk of the population, they almost are viewed as a employer of choice because they enable flexibility and working when "I want to" as a potential worker on the Variable platform. Is that the right way to think through it?
Rich Tompkins 9:59
Yeah, that's it. Exactly right. It's part of the changing workforce demographics and preferences that the flexibility is equally important on the operator side of the equation too, and wanting to be their own boss and to have kind of a diverse set of experiences and opportunities and work schedules that complement and fit their life. Whether that's because they're a student, stay at home parent, a transitioning veteran, or whatever the case may be. They're able to have a lot more control of their economic earning opportunities.
Santosh Sankar 10:38
The one thing I've heard from folks who employ truck drivers, folks on manufacturing line, pick and pack and warehouse, has been that it's not always viewed as an industry where you could build a career. And I'd be curious, your thought; are there things that you help your workforce with as they think about this?Things like: you've served in the armed forces, you're starting to transition back to a more routine life as a private citizen. Are there types of tools or perspectives that that you've seen, or maybe offer in order to allow these people to build a career in some of these industries?
Rich Tompkins 11:21
Yeah, great question. From our point of view, it's all about removing barriers and increasing opportunities for individuals to take their career, to take their professional development, where they want to, at the pace that they want to. In a status quo or kind of past environment, you've got no kind of the full time worker option the part time worker option, or maybe you tap into some of these, like gig opportunities. But, fundamentally, if you're somebody who likes to work with their hands and work in a warehouse environment, then those options really haven't been available to you in a different capacity and you maybe don't want to go sit and sit in traffic all day and work for Uber or Lyft, when you like the warehouse environment. So, by giving workers and operators in our world exposure to a number of different opportunities, different industries, different types of work, different schedules; we're giving operators the ability to grow and progress their career in the direction that they want to at the pace that they want to and that might be working in a number of different facility environments. It might be just working here and there to build their experience, but fundamentally allowing them to do it on their own terms, on their own pace, in a way that again, kind of complements their their life and the speed with which they want to grow professionally in their career.
Santosh Sankar 13:00
Does this introduce for your customers, those corporations that employed the operators or workers: does it introduce this paradigm where they can actually think about labor planning? Where they have a base load of staff and during the holiday season, or if you're a grocer in the current environment, when you hit these peaks, you're able to then scale up to the peak, scale down off the peak, using something like Variable. That's how people should be thinking about their labor needs...is that is that what you've observed?
Rich Tompkins 13:39
That's right. And I'll take it one step further too. (Variable) is not just a tool for addressing the the peaks and addressing the surges, but also again, addressing the day to day, week to week type, demand variability that exists too. So again, right now businesses, as you will know are largely staffing for averages, they're paying over time. They're cutting hours, they're extending lead times, they're they're tinkering with a lot of different levers that ultimately impact the business's ability to be more competitive. Whether that's, you know, from a financial perspective or be more competitive in the sense of appealing to its customers and having as low lead times as they possibly can, and not compensating for a surge in demand by extending this. So what we're coaching is not only on businesses to kind of think about in those peak times or search times, but also think about it from a weekly basis. Are your Mondays and Tuesdays heavier than middle of the week or end of the week? And how are you compensating for that? If you aren't doing that in a way that is as agile and as flexible as possible, then there's some waste there that we want to help businesses address and attack so that they can be as competitive as possible.
Santosh Sankar 14:58
Specifically talking about the day to day, week to week, highs and lows, it would be great to have an example. Because I can think of some things when there are heavy volumes of inbound freight during the morning hours versus outbound in the afternoon hours. I'd be curious what what you've seen during the more routine course of business.
Rich Tompkins 15:20
A little bit of everything. But you know, exactly to your point, you've got businesses who they get a lot of inbound containers in on Monday. So, they have an additional anywhere from five to 15 operators who are just unloading containers in the morning, and then that's it. Otherwise, they were pulling people off pick pack lines to do that. And then they were getting a backlog of orders that was impacting their ability to ship things out on time early in the week. Then we've got other businesses, conversely, who are busier later in the week, or they don't know when shipments are going to come in from port and as soon as they hear that the truck is on the way they're posting work opportunities and saying, "hey, I need eight more people to help me unload this container so my, my core crew doesn't have to get off their machines and go help unload a container." So a ton of different interesting use cases all across the board like that, that are that are fun to see businesses are getting creative with it. So yeah, it's been been neat to see that.
Santosh Sankar 16:21
As a VC who's invested in robotics, I'd be curious, your perspective. What's the role of automation in of all this? How should people be thinking about the future of man and machine or woman and machine?
Rich Tompkins 16:41
Overall, automation is best for select tasks that are largely repeatable. Where some of the deployment benefits aren't fully realized is due to that inability to handle variation or pivots in the way that labor might be able to. And you think about it in the context of a lot of small and medium sized manufacturers, a lot of them aren't quite as "gung ho" to to allocate capital towards automation. Maybe they just don't have the money for it, or can't build a business case, or there's kind of too much uncertainty in the future for them to be able to do that. So, our point of view is that, contrary to popular belief that labor is the preference in terms of creating more agility and flexibility. Rather than taking on a pretty expensive capital outlay in terms of robots or automation, for a large majority of manufacturers. Granted that's not the case for everybody. Some people have a little bit more money to work with. But for most of the businesses, and especially small/medium sized automation can really only be as good as the businesses able to have a more flexible labor solution to help complement some of those necessary pivots.
Santosh Sankar 18:05
Sure, sure. I think that was well put. Along the same lines as automation... I end up having conversations with folks who are responsible for manufacturing operations, warehousing, trucking, and the question always comes back to, "I need to think about productivity, but I'm also sensitive to the fact that a lot of the folks on the frontline don't want to feel like they're being watched or tracked. And this IoT solution, super interesting, but how do I toe the line?" Because there is definitely a line. I'd be curious, given that you provide this pool of flexible labor: how have you been able to think about tracking productivity, ensuring you reward the folks that are super productive, coach the folks that are not, and also share that with your customers to whom I'm sure is very important as well?
Rich Tompkins 19:05
Yeah, it's a great question. And I'll kind of segment it into a Variable perspective. Operators are rated by businesses based on a few different kinds of performance measures: quality, safety and timeliness, and some things like that. And so there's kind of that real time, both feedback to the operator, but also visibility and transparency to the business about an operator's performance. And we think that's important. And we think that's fair to reward those individuals who are showing up on time and doing good work and more power to them. And they should be rewarded as such and at the same time, for those individuals who aren't performing: let them know and give that feedback so that they can course correct and make the necessary improvements to get a better rating if they so choose. So in our world, that's how the tracking acts. And as far as how a business kind of focuses on tracking productivity and monitoring movements...it's obviously kind of business discretion. Their discernment of what degree of kind of command and control and visibility they want to have or not. So ultimately up to them in that respect. But, again, we're all about businesses, being competitive and improving labor productivity, and people are in there to perform work then there's a lot of really excited and eager and quality workers out there who would love to go in and do work at each facilities. So, what we're doing is trying to promote those individuals who are trying to grow in their career and make the best of every opportunity that they have.
Santosh Sankar 20:52
Shifting gears a little bit. We've touched on the ongoing COVID-19 dynamics as we've seen supply chains respond. I'd be curious; you're working with the folks on the frontline. How have you been at variable, and how have your customers responded to the current labor situation? Because I would characterize it as lumpy. Not everybody is benefiting, but equally not everybody is totally hurting from it. So I'd be curious about your views and perspective.
Rich Tompkins 21:26
It's been, frankly, pretty inspiring to watch some of these businesses pivot from being an alcohol distillery to all of a sudden making hand sanitizer the next day and working with a couple of businesses who have done that scenario I mentioned. I alluded to earlier about standing up a second shift. That was a company who helps manufacturers recycle and sort primarily like healthcare uniforms and clothes. They were able to stand up a second shift overnight. Seeing some of those examples have been really, really neat to see, again, businesses thinking creatively about how to sustain volume and how to kind of provide those essential services. Then at the same time, you know, other businesses who whether non essential or demand is down our, our coaching to them right now is really about preparing to play offense. And there's a lot of pent up demand that's about to be unleashed. And really using this time to be opportunistic or using this event as a catalyst to kind of unshackle themselves from the way they've always done it. And I think now is the right time for them to think about: "how can we be as agile and flexible as possible moving forward?" So a lot of different and unique and interesting conversations happening all across the board with the businesses that we work with.
Santosh Sankar 23:03
What has been the approach or approaches you've observed in regards to securing these people. Because they're probably working in normal environments and in close quarters, maybe shoulder to shoulder in a lot of cases, but have you seen certain precautions taken that maybe some folks in our listener base might be able to adopt or mature further.
Rich Tompkins 23:29
It's something where we defer to the business on how they want to treat it. We've had some businesses shut down their entire facility for a day or a few days at a time to do cleaning and thereafter doing temperature checks and additional precautions or using more PPE then what they were previously using. Maybe they just had eye protection as a requirement, and now they're using gloves and other things are some more mandatory check in and checkout procedures at sanitation stations. So again, a lot of different tools and tactics and processes that people are trying to use. Ultimately trying to make the best decisions possible for protecting their workforce, but keeping the wheels moving, especially for those essential businesses right now. Knowing that product needs to get made and out the door.
Santosh Sankar 24:27
Yep. Well, with that Rich it was great having you on here. Wish you the team and all the operators in your network, a safe, healthy and sane period as you continue to mobilize lines and warehouses. Look forward to seeing where the Variable journey goes. Cheers.
Rich Tompkins 24:48
Thank you so much. Really appreciate you having me on.
Transcribed by Otter