Walmart Inc. (WMT) Earnings Call Transcript & Summary

Good morning, or good afternoon, depending on where you're tuning in from across the world. I'm thrilled to be able to bring you this roundtable webinar on supply chain risk alongside our partners at DLT Global. We've truly got an exceptional panel of speakers to tackle the topic at hand today. And at this time of mass disruption across the world and in supply chain, in particular, the importance of showing ideas has never been greater or higher. And so I'm really grateful to everyone in this panel who has dedicated their time to share ideas and opinions and lessons learned with each other and with yourselves listening in. So you guys don't want to hear too much from me, I'm sure. We've got 5 expert speakers who I will be asking the kind of questions of. And feel free to pose your own as well, and I'll try and get to as many audience questions as possible at the end. But without further ado, I'll ask the guys to introduce themselves, and then we'll get stuck into the content. So perhaps, Brant, you're next on my screen, so I could ask you to introduce yourself first.

Thanks, Jamie. I'm really excited to join you and the panel to talk about this really relevant and interesting topic. First, I'd like to start by acknowledging the McCormick employees and our supply partners, who are working tirelessly to help maintain our food supply. McCormick is really proud to be an essential business, providing consumers around the world the products that they rely on. So my role in McCormick is responsible for our global procurement activities. We've got teams in the 14 countries around the world, making sure that we can service our customers in the best possible way and drive growth for McCormick.

Fantastic. And Josh?

Good morning, everyone. My name is Josh Buchanan. I work for Walmart International in Bentonville, Arkansas. And in all of our 10 international markets, this crisis has affected us differently and the same. We have some common problems and different problems. Super excited to be here this morning. I work in supply chain design and innovation with our partners in our international markets.

So you, Gary?

Yes. Thank you, Jamie, and thank you, panelists, looking forward to the discussion today. So I'm Gary Allen, Vice President of Supply Chain Excellence at Ryder. Similar with Brant, we have thousands of truck drivers on the road that have been working through the COVID crisis, warehouse employees, technicians in shops, and they're getting it done every day. My role at Ryder is similar to Josh's. It's supply chain design, modeling, continuous improvement, engineering, automation and data analytics and looking forward to the discussion today. Thank you.

Thanks, Gary. And Loudon?

Thank you very much. Hello, everybody. My name is Loudon Owen. I'm the CEO of DLT Labs. We are very, very pleased to be here today with such an extraordinary panel. Our job is to -- you will be moving the goods, we're moving the data. We move the information. And we have been considered an essential service. I'm based in Toronto, but we're spread across Asia, into Japan, several offices in India. And very, very busy over this period of time, like everybody. But certainly, my appreciation to everybody, whether it's the DLT or the other organizations that are helping put goods on the shelves and PPE in the right places. So thank you.

And last but certainly not least, Tim, over to you.

Yes. Thanks, Jamie. I'm Tim Danks, VP, Risk Management, Partner Relations for Huawei. Huawei is a global ICT provider in 172 countries, 193,000 employees. Our challenges have been very early in the COVID-19 dilemma or pandemic and also quite varied because we had some additional challenges during this time. So I've spent myself many years in telco ICT operational risk management and worked across the globe on both operator and vendor with my focus the last 9 -- 8 to 9 years or so more on cyber and privacy risk.

Thanks, Tim. And so when we look at the virtual lobby, beforehand, I've warned the speakers that I may ask them to look into their crystal ball and predict the future. And I'm afraid my first question is going to be kind of along those lines, around how the current state of play is expected to impact risk appetite, in particular. And so Loudon, perhaps I could ask you to anchor on this one. What are your expectations for business risk appetite going forward? And how do you expect things to change over the coming kind of months and even years?

If you look back to -- there is no comparable time for us. But if you look back to 2008, there were a series of organizations that made substantial investments in new technologies. In the financial service sector, in particular, it was JPMorgan and Goldman's, who did so, certainly, the companies I'm aware of, and they had a 10-plus year very powerful run as a result. And I think what's going to happen here, to be blunt, is there are going to be winners and losers. And the organizations that embrace innovation successfully, it's never easy, it's a tremendously challenging area, are going to be the winners. In our view, companies don't really compete anymore. It's supply chains that are competing. So it's a strange kind of world because it's going to be divided into friends, enemies and frenemies, and working with other parties in the supply chain has to be a collaborative effort. But what we believe is that there'll be innovative technologies. We're of course, involved in distributed ledger technology that will help benefit all the parties in one supply chain, if it's used properly. So that's what I see happening going forward over the next short to medium period of time.

Fantastic. And Gary, what are your thoughts on potential changes to risk appetite over the short to medium term?

Yes. I think it's similar to Loudon. I do think one of the most important things we'll talk about today that we've kind of learned through this whole pandemic crisis is the first and foremost, the safety of our people, right? But beyond that, it's understanding what's happening across your supply chain globally or even regionally. And how do you manage data to kind of transform that into information and insights. And it's as simple as data that we'll talk through is like knowing where everybody is, every single employee across your network, right? And knowing if they show up, how many call offs, what's the attendance look like? So Loudon kind of talked about the importance of technology. It's not only the technology, it's what do we do with that data to make sure we're making the right choices. And really, any time you talk about resiliency, there's 2 dimensions, right? The one piece is that from planning activities that we can do better, whether it's business continuity planning. And then the second piece is then how do you recover, right? And so how do you stabilize and then recover. And I don't think it's going to take as long as people think. I mean if I look at what we've been doing and Ryder being a logistics outsource provider, we're still moving shipments every day. In fact, the volumes have increased. It depends upon what industry. Certainly, retail has been down. Some of the automotive industries have been down, but they're rebounding pretty quickly. I certainly think the gap over the last 2 months will be difficult to recover through the end of the year, but we see a recovery going into next year. I think the big risk or the 1 item out there that everybody is thinking about is, are we going to have another spike? Are we going to have to slow back down? And are we going to shut back down at the end of the year? So that's kind of the balancing act. But we see a recovery going into next year.

Fantastic. I think the data and the visualization and transparency kind of across the supply chain topic is probably something that we're going to, I'm sure, in this session, dive into in more detail. But Josh, can I ask you what your thoughts for risk appetite and how you see that changing and trending over the next few months or so?

I'm not sure that I think that risk appetite inside our organization will change. I do know that in our processes of refreshing supply chain strategies annually for our international partners, we're going to see all the leaders that are reviewing those strategies are going to have this as a lens for the very near future, right? It's going to be a value on agility and contingency planning and those supply chain strategies, right? The ability to react to something that we would have said was completely off the board just 6 months ago. Now suddenly, there's not going to be a dismissal of what people would say would be impossibilities.

Fantastic. And Brant, perhaps I could ask you to kind of chime in your thoughts on risk and resilience and the appetite within McCormick and how you guys are approaching resilient supply chain, I suppose, over the next kind of 6 months in reaction to the current situation?

Yes. Just building on the comments, and we know that how companies respond today will have a long-term impact on the business with all the change that's happening. So we're really looking at accelerating our strategies, investing in operational improvements that really matter to the customer. It really matter to our consumers and customers that we support. One of McCormick's key priorities is that how do we do some strategies today that really will help us emerge stronger from this event, and that's been framing a lot of the activity that we've had in place. And from a supply chain perspective, the supply chain resiliency and supply chain as a function, it's never -- I don't think it's never been as important to a company to have a resilient supply chain than now. And I think that fact will help sort of elevate our function and continue to prioritize investments in supply chain going forward in the immediate term as well.

Yes. And Tim, if I can ask you to maybe kind of add your thoughts to that point. What's kind of clear from everyone's perspective so far is the importance of resiliency in supply chain. And potentially, that will mean winners and losers in this space. So where do you see the key battlegrounds for long-term supply chain resiliency as we come out the other side of the current situation and enter into what will be a new normal?

Well, I mean, from Huawei's perspective, we've been looking at business continuity for quite some time since the 2008 time frame. I think that we've been faced with some additional challenges even prior to the pandemic trade tensions and geopolitical issues kind of have already undermined the global supply chain. So I think that COVID has really just kind of exaggerated that. And I agree with what Josh said about the -- we've seen a spike and how is that changing things, and how is that going to change things in the future. I think from an ICT perspective, one of the things we're concerned is the rise of tech nationalism and the force decoupling of a lot of these supply chains out of fear of one country getting sick or another country getting sick or other factors. So at least in ICT, trying to see the risk appetite is lowered somewhat. And that, again, is kind of creating this rise of a little bit of tech nationalism. And it's concerning for the global supply chains because we've developed these integrated supply chains over so many years. It's very difficult, challenging, and in fact, to some degree, impossible to disconnect.

And how -- for those in the audience who wouldn't be familiar with the term, how would you define tech nationalism? And where would you -- where is the threat within tech nationalism?

Tech nationalism is really about reshoring for whether it's economic or national security concerns. It's about bringing manufacturing or supply chains out of some countries or other countries or just in general, just back into the fold. But the challenges are you're still going to have issues. If you look at the COVID pandemic has created problems, not just with the global supply chains, but also the local supply chains. Everybody's had and seen problems in the local supply chains as well. So it's not that -- we've got to find that balance between global, local and ensure that we have diversity of suppliers, diversity of whether it's countries or whether it's companies, that's a big thing to ensure that we have that resilience, that continued resilience.

And Brant, with your sourcing hat on, there's diversification of suppliers and that kind of method of derisking. Does that resonate with your approach? Or how do you see it? Or do you see other kind of prominent battlegrounds when it comes to supply chain resiliency?

Yes. Clearly, when we think about risk management and supply chain resilience, clearly, redundancy is 1 of the -- I guess, the traditional, the core areas to have redundant suppliers, redundant supply and things like that. We're thinking about it a little beyond that as well from an agility and flexibility perspective. When there's unforeseen shocks to supply and foreseen shocks to demand, what's our ability to respond? And every company faces different challenges. We source over 14,000 different materials from over 85 different countries from around the world. We rely on agricultural value chains that are in small holder farmers in a lot of developing countries. And the complexity of what we buy is pretty extreme. So when we think about long-term supply chain resilience, we're really thinking about how do we enable the supply of our core ingredients or iconic ingredients such as cinnamon and black pepper and red pepper. And how do we make sure we've got a resilient supply and system that will supply that not only today and tomorrow, but for future generations as well. And as part of that, where the choices that we've made, the strategic choices that we made is to really enable the resiliency through sustainability to promote that.

And Josh, from your perspective and from the Walmart International perspective, to what extent is responsiveness a key kind of priority on the agenda for you guys as you think about the key battlegrounds for supply chain resiliency?

So our ability to work as one company has greatly aided us in the last 6 months, right? A great deal of the learnings out of China essentially informed all our international markets and our U.S. market, right? And there's a lot of technology and processes today that can be done faster, they may not be perfect at this point, but that can be done faster than anybody would have said possible last year, right? The ability to onboard an associate in less than 24 hours, right? That was something that we saw in China in January that the U.S. needed by March the ability to stand up a WMS instance in a matter of days as opposed to a matter of weeks or months in order to stay -- to get a new distribution center operating. So the ability to be agile and move faster, I think, is going to be key for contingency planning and for preparing for shocks like this in the future.

And so would it be fair to say that the kind of disciplined mindset is kind of in place across supply chain businesses at the moment where time frames have been accelerated because of maybe exacerbated issues due to COVID-19?

I think so, right? There's -- supplier collaboration is much more fluid and dynamic, I think, inside Walmart, than it's ever been before. The ability to work with suppliers in order to find product to put on shelves, to change the order quantities or the channels that those products move through and to adjust both locally in different markets and globally across the world.

Got you. And for your perspective Loudon, where do you see the key supply chain resiliency battlegrounds? And I guess as a kind of a baseline for that question, and we've talked about data briefly in this conversation so far. But how should supply chain leaders be approaching mapping out their network to identify where risk is and where that sits, and what kind of technologies and processes can be useful with that objective in mind?

A couple of answers. One is that I like when you said supply chain leaders because I think what's going to happen, and I was reflecting on your first question, I think there's going to be a lot more organizational leadership given to supply chains. And if you look at organizational charts, I think they're way out of date. There should be a big circle in the middle of the supply chain because that's really at the heart of any organization. If you look at the types of resiliency that has to occur, something we often forget about is that our consumers, the ultimate end clients now have a digital window into our organizations. And they're watching. And so it's a combination of internal and partner resiliency, but it's also the ability to demonstrate and communicate that to the end consumers because they're -- when you talk about sustainability, as Brant said, and it's really fundamental and it's driving a lot of decision-making, it's not just internal. I'd say from an internal perspective, this panel has already very well identified the core elements in terms of agility and change. I'll just give you an example. We've been looking at PPE numbers in a lot of jurisdictions. When organizations are trying to acquire PPE, they're over ordering, but it's for a reason. So if you look at certain jurisdictions that I know well, 10% of the PPE that was ordered was received, and 25% of that PPE was usable. So you're looking at 2.5% of something that is fundamental and essential actually arriving. So everything in terms of quantification, time compression, agility and knowing who you're dealing with, they're all fundamental to being resilient.

Got you. And Gary, could I ask you too, I guess, chipping on that same question. So when we were talking about -- I guess, visibility was the start of that question. What are your -- what is your approach to marketing supply chain visibility in identifying where risk sits within that?

Yes, Jamie, I think really the other panelists hit on a lot of the points that I would reemphasize. And again, since Ryder, we don't really make stuff, right? Our focus of our company is really delivering products on behalf of our customer or manage the inventory on behalf of our customers. So what's key for us, and when I think of resiliency, it's around how do we ensure reliability around not only managing the product, but getting that product to the end customer when they expected and the condition that they want it. And I do think there's a few key areas that resonate, and especially looking forward in the future because these things will come ago. There will be other pandemics or be other emergencies and issues in the future. And we kind of ebb and flow around balancing safety stock and inventory across our networks. But I do think, and I made reference to it. If you don't have visibility into your supply chain network and you don't understand how to interpret that data, it's really hard to deliver reliable supply chain and react quickly. And so key to me going forward is -- and we've learned a lot through this, too. I mean some of the simple data elements or your master data, if it's not structured, not organized, it's hard to interpret what's going on. So I do think getting into more predictive analytics is key. So the more we can do upfront around that planning to either avoid or contain or kind of resist disruptions, the better off will be. And that's getting a little more sophisticated around the different predictive tools out there as well. But to be able to leverage it, you have to have the data structured across your entire network. I also think transparency is key. And I define transparency different than visibility because transparency is not only knowing what's going on in your supply chain. It's what's happening, who's doing, what exceptions are occurring. And then what you do when an exception or what's the plan to react and hopefully avoid exceptions or mitigate those. So transparency is crucial and I think Loudon made reference to it. I think this will emphasize how do we partner better, how do we collaborate across extended supply chains. And then the last point we'll probably talk about later, and I know Josh is living it, too. When you talk about modeling your supply chain and you get into network design, it used to be network design was like an annual thing that you would do. And whether you call network design or just supply chain modeling, you need to do it every day. You need to look at the flows, you need to look at inventory, you need to look at your network, you need to look at your supplier base. So the frequency of how often we're looking at this will continue to increase in speed and velocity. And that's a key enabler. Not only the tools are getting better, but the data going in and out of this is also getting better.

So perhaps Josh, you could speak to that point. How has supply chain modeling evolved? And how, I guess, over the last few months, has that process changed, if at all?

I would say that what Gary just said, right, we're accelerating how often and how fast we need to do it. And we're looking at scenarios that we've never contemplated before, right? We're doing a lot of worst-case scenarios about turning off different nodes if they're impacted, what that would mean. How we would react and writing up contingency plans that hopefully never get used. But it's giving us also probably a lot better insight in all levels of the organization. All in all, how critical or the -- basically, the critical nature of each node, right? There are some that if they went down, wouldn't -- would bother us, but wouldn't be a disaster, and there's others that would be a serious issue for our partners in international, right? And so as we weigh the difference between those type nodes and we start looking at the ability to react, if we lose a [indiscernible] distribution center, for example, much harder than if we lost an [indiscernible] distribution center somewhat, right? Much harder to replace space in a short period of time. And so we're starting to think about inter network design on about how we would approach contingency and ability in that particular vein, right?

So it seems, to the extent there's a changing cultural mindset where you say you're running scenarios that they wouldn't have been run before. And so you're taking an actual level of detail in that kind of scenario planning and modeling, which I think is really interesting. And for yourself, Brant, as well, you obviously run a huge global sourcing network. How do you think about transparency and visibility across that network?

Yes. Risk looks different all around the world and thinking about transparency and network design, it's got to reflect the business and the consumer needs in the external environment. And with the concept of going beyond redundancy and providing more agility and flexibility, really understanding the value chains, understanding the different tiers. And maybe not feasible for everything, but having a clear segmentation on what's important and what's critical and using that to drive the design is really, really critical. One example, we supply a lot of vanilla, vanilla flavoring to -- for people to bake some wonderful cakes and cookies and everything. Over 80% of the world's vanilla comes from Madagascar. Even before COVID, there's inherent challenges with sourcing vanilla from that region. Lots of weather volatility, lots of challenges with infrastructure, poverty, things to control a product theft and things like that. From a design perspective, a network design perspective, vanilla being such a key part of our business, it was prioritized. And combined with our sustainability strategy, really deeply understanding the value chains that are in place there, deeply understanding where the pain points are and putting in sustainable practices that -- to help the farmers, help the growing conditions, help the farmer communities and build resilience from that perspective. And the business benefit of -- that's provided is that during these challenging times, we've been able to have preferred access to vanilla. The farmers and communities on the ground are being supported through those efforts. So it really -- when we think about the triple bottom line and resilience, just an example of applying sustainability to network design to enable a much more resilient supply chain that we're really proud of.

Fantastic. And Tim, obviously, your business or your product is very different for your brands. And so do you have a similar approach when it comes to transparency across the global network? Or was it different in your case because there's a different product? And if so, to what extent?

I think there's a lot of similarities. I mean we kind of have focused on the security elements of our supply chains, certainly, and applied some different methodologies using NIST, various different documents and publications from NIST has helped with that. And of course, using standards under ISO and so on. But I think it's really about understanding and identifying your risk upfront, identifying your assets, identifying your supply chain and really kind of mapping that out. And then stepping back and looking at it from a longer-term perspective to kind of be able to visualize it and then put visualization into more of a real-time thing where you can actually see things on the ground, see them moving. And obviously, we're a communications company so when it comes to visualization and seeing things happening in the -- out there, using IoT and on the coming 5G wave, all are things that enable that. But of course, whenever you bring new technology, that also increases your potential threats and risks. So we have to continue to look at that. And lessons learned, I think, obviously, lots of companies are going to take a lot of lessons from this current situation. We've certainly taken a lot of lessons from this, plus other aspects and challenges with our supply chains, and turning them and understanding just how we can improve and so on. I have one question, though, that is really about -- maybe for some of the other panelists is, are you seeing just-in-time modeling? Do you see that as potentially changing? I know we've seen that change certainly for -- in our world to moving to a little bit more than just-in-time because just-in-time seems to be if you had a just-in-time supply chain, you're getting hit pretty hard right now and through this event, but are -- is anybody looking at modifying those in any way? Any panelists, if you want to add to that.

Josh is probably best position to speak to it, Josh. why don't you go ahead?

I'd say inside Walmart, you are seeing -- think of as modeling channel shifts, right, moving things from being cross-docked to being stable-stocked based on the nature of the products and the ability to source it. I think that speaks to kind of the question that you're asking there, right? As we are working on how we change that from a -- in this environment versus where we were last year, right? And how we'd be able to dynamically or change those type settings faster in order to be able to react faster in one of these crises.

Yes. Exactly.

I think one of the other interesting points, I definitely want to circle back to the inventory conversation. One of the interesting points that I picked up on Tim was when you talked about the implementation of technology for better transparency and visibility, but they can come with their own elements of risk as well. I think that's a really interesting perspective to take and going into the actual level of depth around risk management. But I'd like to maybe get your thoughts on that, Loudon. So what's your advice around approaching transparency with technology? And to what extent do you feel there is risk in doing that or should companies look at the risk that certain technologies potentially might pose?

I suppose with any new technology, it's a risk-adjusted reward that you have to look at and not just the way one has to approach it. We tend to approach it in terms of what is fixed and what is variable. So organizationally, you'll find a lot of elements that are just fixed. And they're not going to change anytime soon. Hopefully, one of them is an organization's core principles. But if you look at what is variable, I don't think I would have believed 6 months ago how much was variable. I simply wouldn't have believed what could be done on this time line because it hadn't been done before. So the types of things that we're looking at and working with, we work in a distributed computing environment. And so there's a lot of inherent recovery and other elements to it. But we don't talk about recovery. We just talk about 100%, not 99.999% uptime. And in the distributed computing environment, it's very, very powerful. And that to me is, in a way, it's an innovation and it's something new. But on a risk-adjusted basis, in fact, it's derisking existing technology and existing infrastructure. So it's a real challenge because organizations have to -- and this is, I guess, the perpetual quandary, do more with less. So -- and everybody wants to have triple, quadruple redundancy everywhere, and yet cut the operating costs. And so this is the real tension within supply chain management, in particular, within the new technology adoption. And -- but what I am finding, and I'm extremely impressed by all the organizations on the phone, in particular, and what we've seen with our clients, which is how rapidly people are looking at risk-adjusted technology investments a bit differently. Because what's the risk of not going down that path? What's the risk of averting from what are very material and important changes?

Fantastic. Thanks for sharing, Loudon. I really want to get your kind of perspectives on that point in particular. But going to address the inventory policy question in more detail as well, that Tim posed. And perhaps, Gary, I can get your perspectives on that. Do you see -- and going towards perhaps just-in-case inventory management as opposed to just-in-time sort of inventory management with more baked in redundancy? Or do you see just-in-time continuing to be the primary method in the near future?

Yes. Again, since we don't make or own the inventory, typically, we'll manage the inventory on behalf of our customer. I see it as somewhere in between. I think to Josh's point, I think the importance is the frequency around how often you look at it and then how quickly you adjust the dials, right? And I think -- and to be able to do that, you need to have kind of the insights and the visibility into what you're managing to be able to dynamically model that, right? And so I mean just-in-time is kind of an older term, I think it's probably what legacy automotive-type terms, I think it's around what's the right inventory policies to meet your service levels. And you need to look at it on a regular basis, and it's not just like a monthly, weekly thing. It's -- you need to look at it every day. And that's not saying you change your policies every day, but you need to look at how much inventory you have across your entire network. And through the whole COVID pandemic, and especially Brant's and even Josh's on the retail and the CPG side, the CPG companies, the food companies have been slammed but then the downstream or, I guess, downstream supply chains couldn't handle the deliveries, right? And so while we're putting in more drivers and more trucks for like the McCormicks of the world, the retail supply chains couldn't handle it. And so I think it's a frequency of how often we're looking and modeling it, and kind of the flexible companies will be able to adopt. And just to kind of add on Loudon's comments too, and Tim's as well. I mean technology is critical, right? And I think most of us on this call have gone through kind of whole agile transformation. But just the ability to move rapidly, quickly test things, see if they break, see if they don't. Obviously, that puts pressure on our IT and certainly, our security and risk groups get concerned with that. But any time you hear about redundancy, that slows you down. It's the opposite of resilience, right? So you got to do a bit of both, and you got to kind of test and move quickly. And some things will break and others won't. But I do think the advent of IoT and automation and data analytics is imperative. I think those are a key feeder into being able to move quickly and be resilient.

And Tim, would you agree that IoT and automation and data analytics are a crucial in this sense? We've spoken a lot about modeling and getting visibility across the supply chain. Are those technologies that you see as being influential?

Yes. Of course, I support them. Certainly, they're going to change the dynamic of how we work in the future. I think there's a lot of talk about 5G, but 5G is just really an enabler for the technologies and the applications and the services that are yet to be realized. And I think if we look at it from the broad perspective, a lot of that's going to depend on those IoT devices, whether it's a locator on a truck or a container or even an actual physical part and how those inventories are tracked. And as I mentioned earlier, visualized across the globe and how they're moving, I think, it -- a lot of things are going to change, and we're going to have a lot better visibility into these. But along with that, to Gary's point, is the fact that along with this comes an enormous amount of data that then we can do the analytics on, we can understand how we can fine-tune the supply chain, we can also start to identify trends. We can also -- and to Josh's point, identify those things that we need to make a change to because of the -- yes, I'm an old school guy a little bit, maybe the just-in-time in my reference. But again, or to Jamie's comment just-in-case, I think that just finding that balance, I think IoT and enablement of technologies is going to be critical in doing that. But again, as I mentioned before, it's not without risk. As we increasingly use technology, the bad guys also find ways to use that technology against us. So we need to work together to bring the technology and bring the capabilities, but also to protect ourselves and our supply chains.

And Loudon, what technologies do you see as being crucial going forward? So in the short time, but perhaps also thinking towards the long term as well?

It's a bit of an unfair question, considering we're in the field of distributed ledger technology. There's going to be somewhere predictable. Listen, the way we look at the world is so simple in some ways, which is that companies exist for the purpose of working together and systems exist to serve the one master. Systems are not built for that purpose. So you have a whole universe where there's a lot of challenge in trying to work across different systems. Hence, the emergence of this massive system integration marketplace and industry. So what we think is going to be fundamental is literally and in every other way, same paging people, ensuring that the -- it's the same information at the same time, right people, right information, right time. And it's very easy to say, but it's -- what we found, and this is not futuristic, we're finding that, in particular for us, distributed ledger technology is achieving that. And if you look at the whole shift, we're just going through another cycle and batch processing was a phenomenally powerful addition to the tool sets people needed. But today, it's a real-time actionable information. So the trend we're seeing, as Tim quite properly pointed out, is whatever is being done, you have to keep at least 1 eye open on security and a trending to distributed computing, both through redundancy. And also to do things you cannot do outside of distributed computing universe. So without getting wildly technical, we just -- we think that's going to be fundamental because we're seeing organizations now where disputes are disappearing. And I mean, let alone trying to find out where something is and the quality and who it is you're dealing with and that horrible feeling that one is flying a little bit blind. But we're finding today that by doing this and putting people on the same page, disputes are literally disappearing overnight. And levels of disputes that are understandable because it's not based on anything wrong. It's simply a lack of information and a lack of both transparency and visibility. So we think that's going to be a huge trend, both for organizational purposes and because the consumers are demanding it. I mean it's really -- somebody has to buy these things again. And you walk in a store and people want to know where it comes from. And is it safe? And what are you doing about it? And are you conducting yourself on an ethical basis? So it's internal and external.

Fantastic. And Brant, you spoke a lot about kind of the ethics of sourcing with regards to your responsible sourcing model and sustainability and so on and so forth. It seems that the technology could potentially play a role in that as well. But continuing technology and maybe other approaches, too, what are your kind of key considerations when it comes to global sourcing strategy?

Yes. Clearly, building on some of the comments and distributed ledger and a lot of the other capabilities are definitely being incorporated into the strategy. And I think with digitalization as a key enabler for agility and the technologies that are out there, it presents a lot of great opportunities. And I think not only to shore up supply chain for the benefits of supply chain, but to provide business benefits and consumer benefits that sort of transcend supply chain and help justify those investments that are normally challenging to get approved. Clearly, and building on the IoT and some of the ways that we're -- we've initiated use of technology is in our cinnamon value chain. So cinnamon is the bark of a tree, a lot of cinnamon grows in Indonesia. And we've leveraged technology that really understand the supply of cinnamon. So starting with some historical satellite imagery and real-time satellite imagery to understand and be able to map the number of cinnamon trees that are in a certain region. We've been able to leverage the sort of at the next level down, sort of drone technology capturing a lot of imagery in determining the concentration of cinnamon trees in a certain area, coupled with mobile technology on the ground with data collection. And what this does is that it lets us sort of validate the supply of cinnamon, but it does so much more in that it lets us map where the higher quality cinnamon trees are as a function of age of tree, lets us do some different quality checks from a traceability and transparency perspective. On the ground, we've got visibility that shows where those cinnamon trees come that provide the higher quality, the higher flavor profiles. So just one example, really specific for our business, but there's so many opportunities out there with the technology enhancements to let them sort of drive better resiliency.

Fantastic.

You're making us all very -- I'd just like to point out, Brant is making us all very hungry with his description. So...

I know it's going [indiscernible]

Absolutely. There's an exceptional amount of depth that you go into with the technology to get that kind of visibility, which is incredible to hear. Tim, something that we've spoken about before is the kind of supplier's suppliers or your kind of your Tier 2 and 3 suppliers and getting visibility around that. Could you please speak to Huawei's approach to that? So looking at supplier's suppliers and mapping risk in that sense.

Yes. I mean, certainly, there's challenges. I mean there's been recent legislation in Europe, the GDPR and CCPA in California, plus a variety of other things that kind of start -- have started to focus more and more on supply chains, and the vulnerability of systems due to the supply chains and what we need to do. And I think understanding your third, fourth and end party supplier is -- suppliers is absolutely imperative. I mean we use a variety of frameworks, as I mentioned before, in this publications and taking guidance from regulations, but it's really about understanding your supplier's suppliers and so on. I think, unfortunately, part of our past experience is that trust-based relationships, human trust-based relationships sometimes undermine that operational risk management practices. We oftentimes -- in procurement, we're very diligent about doing that analysis and that risk about a third party. But once we go into operation and the operations teams are directly or working with operators or, sorry, suppliers on a regular basis, that formality seems to disappear. And we've got to really work on kind of the post procurement complacency and make sure compliance auditing is really kind of forced and it's not dependent on an individual or a human trust relationship, but it's based on factual data that we can gather from a supplier and proven compliance and on-site audits and continual on-site audits and so on. So I think it's important that we really understand that whole chain because you could be getting a supplier that has a -- if you look at it, I mean, to say a link in a chain kind of, if you have that first chain link could be fantastic, but if one of those links behind that chain has some kind of weakness or vulnerability or risk associated with it, and you may not know that, you're hanging on to this chain, and it could potentially break. So it's important to be diligent, I guess, is probably the word for.

Yes. I think that's a really good match for you. Look at it as the whole chain as opposed to kind of separate parts of that chain. I'm interested to get your perspectives on this as well, Josh. How you look at the chain and look at those third, fourth end suppliers as Tim could see it, when you're looking at mapping and modeling the Walmart International network design?

So in terms of what we're modeling in our network designs, aside from our links to suppliers overseas, right? So now containers coming out of Asia or Europe for our markets, and some movements between markets that we -- between countries and in one of our markets. There's not a lot in the way of modeling links further than 1 step up from our distribution network. There's probably opportunities there. And I know there are -- in terms of in-sourcing in Walmart, there is an effort going on in order to map those upstream links and understand those better to understand the risk and potential exposure in where our products are coming from.

Got you. Thanks, Josh. Well, it seems that something good that is happening is a lot of positive things are coming out of this disruption. Things are being accelerated. Time frames are being brought forward, more risk and attention is paid to things like resiliency and there's a slight cultural change which is kind of coming through in this conversation. So Gary, could I ask you whether you think that supply chain resiliency is going to be strengthened after this? And is this something that is going to have a positive outcome in some respects?

Yes. It's a great question, Jamie. I think so. I think the positive outlook, and it's a couple of different dimensions is that, yes, I think the value prop changes slightly, right? And so when you think of -- I mean, first off, it's about the safety of our people, right? And that's the #1 priority for everything we do. But it's emphasizing different elements of the value prop, right? What's the cost avoidance? How do you derisk things? What's the value of data? How do you get to reliability and speed? And so I think it's really heightened the awareness of what's important. And for our -- what we do -- your previous question around the network, we don't source a lot of stuff ourselves. It's our customers that source it. So it's kind of their networks. We operate warehouses. And we have like 500 warehouses and about 270,000 vehicles on the road and 9,000 drivers, but we are managing our supplier's or customer's supply chain on their behalf. And so the opportunity, I think, that this is really posing for all of us is how can we look across networks, collaborate more frequently. For us, our value prop is not only reliability, it's efficiency and productivity and speed and providing that confidence back to our customers. But when we look at -- and we did this with COVID, we were looking at sharing network, sharing warehouses, popping up fleets, moving fleets across the country from one customer to the next because one customer's volume was down and that our food customer's volume was up. And so part of it is how do we use that information to look at kind of networks in networks and kind of collaborate collectively. And I think that's going to be kind of an emphasis of what came out of this is, how can we do more not only within my individual supply chain is, how can I cascade that out to others? And you only can do that with sharing information, the transparency, all the stuff we talked about is really the only way you can do that because it's a whole sharing phenomenon, right? We've been doing the whole asset sharing. We have initiatives around sharing trucks. We launched an app around it. But if you don't provide reliability in the data from one buyer, seller, customer supplier, they're not going to believe in it to be able to do it. So I think through all of this, it's really emphasized, we need to understand what's going on in our supply chain at a much higher frequency, near real-time to be able to react quicker and then share that across our partners. So I think it is...

Yes, Gary, Fantastic. I definitely feel like collaboration is kind of trending. Would you agree, Brant, do you feel like COVID has been a driver for more collaboration across the industry and working together with sharing data and sharing ideas as well for greater resiliency in sum?

Yes. Absolutely, absolutely. I think the whole -- the entire supply chain has -- I think, the level of ingenuity, the level of creativity, the level of innovation has just been amazing. I mean supply chain practitioners, we love solving problems. And I think none of us have ever experienced these -- this amount of problems to solve in such a short period of time. So clearly, lots of collaboration. I'm incredibly proud of the team at McCormick and our supply partners for really, day in and day out, it's been a marathon, and it's not -- we're not through it. But to be able to work together, the level of trust, the level of transparency has greatly been enhanced through that as well.

Fantastic. And from your perspective, Tim, we're in a situation where there is mass disruption, and actually, there's more emphasis on risk resilience and these kind of themes. But how do we, in the long-term, avoid slipping into a culture of complacency or stepping into a situation of potential apathy? And how do we ensure that we're resilient in the long term?

That's a good question. I think planning, identification, I think we talked about it a little bit earlier. I think a lot of what we're talking about here today is directly related to that. So how do we continue to improve that? I think, Gary, you mentioned that visibility and understanding that or getting that near or real-time visualization of the -- of where something is and where -- who's got it and so on, along with the transparency of knowing all the details behind that I think, is imperative. And I think, as I mentioned, 5G and IoT are enablers of that. So I think from a long-term perspective, that's what we've got to use and do is try and use technology to improve our visibility and to control our risk.

Fantastic. And so we've only got a couple of minutes left of this session. So I was wondering, Loudon, if I could hand over to yourself to offer a summary of sort. Or maybe some kind of key takeaways that everyone listening can kind of take back to the office with them?

Well, thank you. I think that inertia is what stops innovation, and this is certainly not a time of inertia. But I think the key is going to be results driven. What are the results? So talking about different technologies without the benefit of tangible results is -- it's a good starting point, but it's not going to take us there. So in solving problems and anticipating problems and being able to sleep at night, to me, what we have seen our results. We've had the great honor and it's been publicly disclosed, building a national network with Walmart Canada, where every third-party truck moving with IoT is tracked every second. And where the information is put on the same page, and the results are just astonishing. So to us, it's a -- it's reaching as deep as we can to work together with partners together, up and down the supply chain. And not just data, by the way. I mean, in our particular case, it reaches all the way to individual workflows. And being able to, on a confidential and secure basis, share workflows to, again, expedite. So we think the future is bright. And I guess where I started at the beginning, my personal view, and I think it's the -- peers' view, is there'll be winners and losers. And it's actually the time to invest, but measure and ensure there are tangible results.

Fantastic. Well, on that note, I think we were just going towards the hour, so good time to wrap up. So personal thanks to all of you guys, Brant, Josh, Gary, Tim and Loudon, thanks very much for taking the time today to share your opinions and perspectives with us all. It's hugely appreciated. Special thanks to our partners, DLT Global, for helping us to put this on. And to everyone listening in, stay safe and healthy, and we look forward to seeing you all again soon. So thanks a lot, guys.

Thank you.

Thank you.

Thank you.

Thank you very much. Great day.

Thank you, you too.