Toyota Partners with IBM to Build a Customer Centric Supply Chain

Disclaimer: The Six Five webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded, and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors, and we ask that you do not treat us as such.

Transcript:

Patrick Moorhead: The Six Five is on the road at CES 2024, in Las Vegas, Nevada. It’s been an excellent show so far. There’s been a lot of technology, AI for cars, AI PCs, AI smartphones, AI gadgets, pretty much AI for everything Dan.

Daniel Newman: Forget anything?

Patrick Moorhead: Nope. I probably did, but you can fill me in.

Daniel Newman: No, look, in the last 14 months there has been no trend line that has been more pervasive than AI. So anyone that’s acting surprised or comical, I already did that tweet.

Patrick Moorhead: Yeah.

Daniel Newman: We knew what was going to happen, but we are at this inflection now where I really do strongly believe that events like this, we’ll see this at Mobile World, we’ll see it in all the vendor events throughout the year. It’s going to be about implementation, it’s going to be about, okay, we’ve heard about AI, we know how powerful it is. It’s going to write your articles, and create your images, and build your PowerPoints, but what about the practical uses, the things that you and I talked about for the last decade with AI? What about building your supply chains? What about creating more productive workforces or helping us hire the right people? These are the kinds of things that we’re going to see this year, and CES obviously is part of that story, but it’s always fun, Pat, to see this technology come to life.

Patrick Moorhead: No, it is, and the automotive space is absolutely on fire. CES turned into the auto show, starting about 10 years ago, and each successive year we saw more and more auto technologies. And there’s auto design, auto technologies, but there’s also the practicality too of IT data challenges, right? Supply chain, cleaning the data, being able to get it ready for the AI, for all the benefits you talked about. And this is a great lead in. We have Toyota and IBM here. Shobhit, Audrey, great to have you here for The Six Five.

Audrey Mito: Thanks for having us.

Patrick Moorhead: Absolutely.

Shobhit Varshney: Thanks so much. I think we should just rename this as the consumer AI show at this point.

Patrick Moorhead: We can do that. We can do that, yeah.

Daniel Newman: Well, pat has declared at the automotive show, so after this conversation’s over, we’ll let you two thumb wrestle for it. But in all serious, I think, well, obviously consumers love cars and I love cars. So if I get over to the floor, get to spend some time, I’m going to be over there at Toyota. I’m going to be over there checking out what the automotives are doing because cars, there’s a huge passion with this. So as we electrify them and we make them autonomous, there’s still this relationship that consumers have with their vehicles. It’s so important. So look forward to talking about it. Audrey, I’d like to start with both of you, just giving us a quick chance to introduce yourself, the role and what you do. So start with you and Toyota.

Audrey Mito: All right. My name is Audrey Mito and I am one of the transformation leaders for our vehicle supply chain. It is a multi-year program where we’re rebuilding our entire end-to-end supply chain with respect to how we manage and distribute our vehicles.

Daniel Newman: Shobhit.

Shobhit Varshney: Shobhit Varshney, I’m a senior partner in IBM Consulting. I’m accountable for all of our AI, GenAI analytics and IoT business in the U.S., Canada, Latin America, across all the various industries that we serve. So I have the distinct pleasure of partnering with Audrey and the team on what we can do together in the automotive space with AI and IoT.

Patrick Moorhead: Yeah, so I want to start off pretty broad here, right? We’re here in Las Vegas, CES 2024. A lot of innovation going on here. So how are you using a lot of these innovations here to unlock enterprise value at the company? We’ll start off there. Shobhit, you want to talk about how you’re enabling this?

Shobhit Varshney: Yeah, absolutely. I think innovation is coming at it as a very rapid pace, but innovation has to run at the speed of trust. So within IBM, we are a hybrid and AI company, right, hybrid cloud. We are very focused on AI for business. So when you look at innovative technologies like AI, generative AI, we are very focused on how do you make sure that that works within the regulatory environment, within the trust that you have built, within the security needs and things of that nature.

So we partner with large organizations, like Toyota and others, where we take those innovations, we look at the actual processes of how things get done, how work gets done, the workflows of humans that we are working with and then we see where we can surgically embed those to really transform the way that process works, right? That has been the mission for IBM Consulting and in doing so, we partner with a very large ecosystem. We have one of the best AI technologies in the world with Watson and our IBM side of the family, but we also have our ecosystem partners with Microsoft, AWS, Google’s of the world where we tap the entire ecosystem to serve the one purpose of reinventing how company is doing their business. And ultimately it boils down to what do we do with the end consumer and what happens to those experiences.

Patrick Moorhead: Audrey, do you want to weigh in on that? And this is all about unlocking value, innovation, obviously in your purview of supply chain.

Audrey Mito: Yeah, technology is just moving so quickly and it’s so hard to keep track of everything that’s going on, and so we need to partner with a trusted company, and we feel like IBM is that trusted company for us and parts of our supply chain. So they help us see what’s out there. They help us look for applications, and POCs that we can try out, and test things out, and-

Patrick Moorhead: Right.

Audrey Mito: … get things out there quickly because traditionally it takes a long time to build applications and new features, and one of the things that we are trying to really push is the speed at which we get it out there, but without disrupting or losing the trust of our customers.

Patrick Moorhead: Yeah, I love that. It’s funny, all we do as analysts is we track the technologies and make recommendations to enterprise. And the technology, it’s hard to track, but we’re not actually implementing it. Okay, it’s a lot harder to do it than to write research reports and talk about it. And yeah, the trust factor of doing that and realizing that you don’t have to do everything, you should figure out who you should partner with is a great step on that. And you’re not alone in the enterprise AI world.

Daniel Newman: It is interesting, when I was listening to you say that, Pat, I was thinking, what if there was an AI solution that generatively could tell you what are the important technological advancements that are coming out that you should be spending your time on, and how do we parse through based on my role and responsibility? Can I get a summary of that? No, I’m just saying, you actually think about, we’re sitting here going, we should start to think about the practical implementation of it and here’s Audrey going, well, I run supply chain or help lead supply chain for this massive global organization and I can’t keep up. And it’s like, well, maybe there’s a company that builds a solution that wouldn’t be able to ingest all that data. It’s like, well, this really works well, so Pat, we may be paratroopers at time and we just trooper in and we give our ideas, –

Patrick Moorhead: Right.

Daniel Newman: Consultants, right?

Patrick Moorhead: Exactly.

Daniel Newman: Consultants.

Shobhit Varshney: I think it’s really important to understand how process and how human work happens in our organization, the workflow itself, right? And quite often, and this entire year, we did a lot of pilots, put a lot of generative AI into production, and at the end of the day when you look at the way workflow is working, there are multiple steps along the way. It could be a seven step process to go figure out what’s my ETA for my vehicle? Or I need some help for my car, and things that nature, right? Across the seven steps, we focus a lot on understanding which technology would be applicable. There are certain places where you just need to call an API and you’re done. Certain cases, you have a traditional AI model, for fraud detection as an example, that’s working really well.

But then there’s a step in the way where, say there’s an invoice coming in supply chain, you want to read that invoice and make some sense of it, cross compare three-way, four-way matching and stuff and then approve that invoice. That step could be very applicable for generative AI. So the entire year we have spent a lot of time looking at which specific subtasks, in a whole workflow, have delivered real ROI for organizations. So this is back to your question about an innovative technology surgically inserted and how work is getting done in organization, and then everything around it. Showing a demo will take us a few minutes-

Patrick Moorhead: Right.

Shobhit Varshney: … but then productionizing it, all the security and the data, and everything that has to come before and after for audit purposes and stuff, that’s what takes us time to go put these into production so we can ensure the trust.

Daniel Newman: Audrey, from your lens, talk a little bit about the partnership. It sounds like you’re trying to do a lot. You’re trying to move very quickly and you said that you feel that IBM’s that… What are the characteristics and the focal points that have helped you come to that realization, and what are you all working on together?

Audrey Mito: As part of our transformation, our goal is to improve the customer experience. That is our guiding light. That is what we’re doing.

Patrick Moorhead: It’s like end to end-

Audrey Mito: End to end, yeah.

Patrick Moorhead: … from all way choosing to-

Audrey Mito: From supplier… Yeah, yeah.

Patrick Moorhead: … and making it and servicing it. The whole customer experience.

Audrey Mito: Absolutely. Exactly, and we have an old system that we run our supply chain on historically, and we needed to do some technology uplifts on our side.

Patrick Moorhead: Right.

Audrey Mito: But rather than just do just a tech uplift, we decided to focus on the customer experience and to build a new system that’s designed to meet and exceed our customer experience requirements or expectations. And that drives every decision that we make, how we do it, what would a customer want? What is the ideal customer experience? And it’s not the same for everyone. So it has to be very flexible. We want to be able to help a customer pick the best vehicle, recommend the best vehicle for each of our customers individually.

Shobhit Varshney: And Audrey, I’ve been a Toyota customer for the last 25 years, within Toyota and Lexus and others, and I’m on the receiving end of everything that you’re doing for all of us. So thank you so much, from the millions of us across the world.

Patrick Moorhead: Can you talk about co-creation, from the IBM standpoint?

Shobhit Varshney: Yes. I think it’s very important for us to be embedded together in the teams. At times, if you can’t tell IBM and a Toyota person apart, then that’s success for us, right?

Patrick Moorhead: Right.

Shobhit Varshney: Because a sense of understanding of the complexity of how work is getting done, or how the business works, or the constraints that we have to work within. That comes from years of doing this within Toyota. So the subject matter expertise that we get from Toyota’s side side of the family brings that depth, right?

Patrick Moorhead: Right.

Shobhit Varshney: We have a maniacal focus on understanding how technologies can be shaped and morphed into fit into those processes, right? So those subject matter experts, co-creating together, are able to then have a meaningful insertion of innovation inside of a organization. And there’s everything else around it, around change management, how do you reshape your talent around it? IBM as a company, we are just such a big massive global organization. We’ve had to do this to ourselves first, before we come and do this with our clients.

Supply chain, great example, our hardware, our IBM technology, we have an insanely large global supply chain that has to deal with all sorts of complexities around it. We went through COVID and whatnot, in order to make sure that we are able to have a resilient, transparent supply chain. So I think Audrey, if you can hit on a little bit of the complexity that you see within Toyota’s supply chain, and that’ll explain to you why co-creation is so important to make sure we address those.

Audrey Mito: Yeah, so we sell over 2 million vehicles in the U.S. and the challenges over the last few years, of parts and limited resources-

Patrick Moorhead: Right.

Audrey Mito: … just overall, has really challenged us in terms… And made us think and look internally and say, “What do we need to do to better manage that? How do we bring value to our company while meeting the needs of our customers?” And so we knew that we didn’t know everything, and we didn’t understand truly how to do customer-centric design. And so we searched and found our IBM partners that could help us there, but also we did change the way we develop. I’m part of the business, we have IT partners that are with us and we have different other partners like IBM, but we truly are one team. We sit together, we make decisions together, everything that we do, so that we can bring the best of all of our SMEs, all of the knowledge that’s available, so that when we build something, it’s truly value-add. We build for production and we implement quickly.

Patrick Moorhead: Right.

Shobhit Varshney: Yes. Yes.

Patrick Moorhead: It’s a great testimony to the multi-decade long relationship that the two companies have had together, for certain.

Shobhit Varshney: Yes, and there’s a method to the madness. There’s getting people’s creativity within the constraints and stuff. We have had an IBM Garage methodology for the last decade, where we have refined it over time. That helps us focus the teams on where it matters, understanding, walk in the shoes of a end customer, understanding an employee’s experience or a dealer’s experience, things of that nature. You map out those journeys, you figure out where the pain points are. We do that work together in a room and then you get to see where it’ll be a big impact of deploying new transformation.

Patrick Moorhead: I’d like to end…

Daniel Newman: Go ahead.

Patrick Moorhead: I’d like to end the conversation where we started, which was around AI. We had a great conversation in the green room. I think it was ETA window, something along those lines.

Shobhit Varshney: Yes.

Patrick Moorhead: Maybe let’s wrap, just with some specifics on what you’re doing, AI, generative AI and some applications. What are you trying to achieve and what’s working now, and what are you looking at maybe to the future?

Audrey Mito: Yeah, so especially over the last few years, the ability to predict when a product is going to be available to you- that’s just expectations, right? And as a purchaser of a vehicle, you would expect even more, right?

Patrick Moorhead: Right.

Shobhit Varshney: Yes.

Audrey Mito: And so-

Patrick Moorhead: Well, you’re making a lot of decisions based on availability too, right?

Audrey Mito: Yeah. Yes, and so we had our first opportunity for us to really use AI and GenAI was to start using it for predicting ETAs of our vehicles. When is a vehicle going to arrive at our dealership so our customers can pick it up? Right, so that was our first opportunity. And we are looking at other opportunities to… Again, I mentioned earlier, how do we recommend the best vehicle for you as an individual? What’s important to you? We want a system that can be very unique and that is able to treat you as an individual.

Shobhit Varshney: And Audrey simplifies it. There’s a lot of data exhaust to deal with. There’s all kinds of data supply chain that you deal with. That fabric has to give you a very authentic answer. And every time you tell a customer that, here’s your ETA of the window for arrival, you have to back it up. It’s grounded in data. There are AI models that you can explain behind the scenes and things of that nature. So I think the fact that we are able to understand the complexity of the business, deploy AI in a trusted responsible way, combine the two to deliver better customer outcomes, me as a customer, that’s this goal for me.

Patrick Moorhead: Right.

Daniel Newman: And of course, it sounds like the partnership is really solid and congratulations on that. Shobhit, to your credit, both Patrick and I have chronicled pretty extensively the IBM Watson governance and the progress you’ve made in both-

Shobhit Varshney: Yes.

Daniel Newman: … getting to market early GA, and then actually following it up with governance, indemnification. Of course, with the right grounding and the right database and algorithms, you can minimize risk, but we want to move fast. The industry wants to move fast. So you’ve helped de-risk for clients as well, and so congratulations on that. Congratulations on your partnership, and thank you both for joining us here on The Six Five.

Shobhit Varshney: Thanks so much for having us here.

Audrey Mito: Thank you.

Patrick Moorhead: Thank you.

Shobhit Varshney: Thank you.

Daniel Newman: All right everyone, thanks so much for tuning in here, to The Six Five. We’re at CES 2024 in Las Vegas. For Patrick Moorhead and myself, it’s time to say goodbye. Hope to see you all really soon.