Ep 240: Creating an Aligned Supply Network With Aligned Incentives feat. Justin Dillon

Welcome to the Sourcing Hero Podcast, produced by Oona, a group purchasing organization that empowers sourcing heroes, and Art of Procurement, the world's largest procurement podcast network. I'm your host, Kelly Barnard. The goal of the Sourcing Hero Podcast is to capture the epic stories of people who are rising up and beating the odds to create exceptional value within procurement, directly from those heroes themselves. Today, my guest here on the Sourcing Hero podcast is Justin Dillon.

Justin is the founder and CEO of Freedom AI, a solution that helps companies map their supply chain, isolate risks, and access risk mitigation tools. So hi, Justin. Thank you so much for being with me. Yeah, thanks for having me on.

Absolutely. So I talked a little bit about your role at Freedom AI, but bring the audience and I up to date. Give us a little bit of backstory on your career and then maybe tell us a little bit more about the company. Oh, sure.

I'm happy to tell you what the company does today and how we got here. Freedom is a supply chain risk and resilience platform, which is just, you know, kind of hand wavy noise for saying that we help companies identify risks that could hurt their business or hurt the world in some way. So companies come to us for understanding geopolitical risk, human rights risk, any different type of risk that has a regulatory burden or an operational burden to the company. And we sit right alongside procurement.

So we were kind of birthed out of procurement where we worked very closely with SAP when we initially kicked off. That's where I learned about procurement. And so we really kind of sit with sourcing teams to help them manage these risks, which have grown over the time since I started this company. The menu of risks.

We initially started the company just to address human rights risk. That's why we're called Freedom. And that goes back to work that I did before. I guess my career starts way, way back.

I started off as a musician, a full-time musician, and did that for a big part of my life. I learned about human rights abuse and modern-day slavery, and that kind of captured me and the band that I was in, captured our imagination. And so we started incorporating that into our shows and finding ways to raise awareness. And that led to me kind of breaking off and making documentaries about the issue and connected to music.

And then that led to working with the State Department. That was a big jump. I get it going from to jumping. But the State Department had seen some of the work that the awareness that we'd raised.

And so asked me to help them raise awareness around forced labor and supply chains and did that. And that was a pretty successful project called slaveryfootprint.org, which could tell consumers how much forced labor it takes to run their life. And once that raised a fair amount of awareness, I realized the best way to address these issues is to fix the opacity issues inside of supply chains.

And so here we are. Well, let's stay with that point of opacity. You know, there's so many reasons for us to want to resolve the risks in our supply chains. And I love the fact that you talked about the consumer perspective, because certainly most of the people in this audience are procurement sourcing supply chain, but we're also consumers and we want to think that we're buying products where nobody was knowingly hurt in the process of getting those to us.

With all those incentives, why is it still so hard for companies to get visibility into their supply chains? And even if they can make some progress, why is it so difficult to keep that visibility going? Visibility in supply chains needs a business case. Unfortunately, a moral case is not enough.

And I'm okay with that. I don't need altruism to change the world, to make an impact in the world. I actually think the best way to make change in the world is a business case. When we started the company, the business case for visibility and supply chains was maybe more altruistic and moral than it was more money based.

But since COVID, since tariffs, since increasing regulations, and now just the need to understand risk in the supply chains and businesses, understanding of how supply chains really is the lifeblood of their companies. The business case has grown. And I think that's encouraging. I think for your listeners, it would encourage them to understand that there is there is opportunities in the world to both do something that is good for the world and good for your business.

They're rare. They're very rare. But this is one of them. Building visibility in your supply chain improves operations and decreases reputational and operational risk.

just that's irrefutable. It also exposes challenges in the supply chain that quite frankly are hurting the stakeholders and the workers in the supply chain and possibly the planet as well in some cases. So this is one of those rare opportunities where increased visibility is a situation where everyone wins. Visibility alone is not enough.

And companies are starting to realize that just bolting a solution like Freedom onto their supply chain also means that there going to be a few not a lot but a few changes that may need to be made in the supply chain as well But we big believers that the era of the supplier questionnaire and audit are over. Using that as your supply chain due diligence tools is like using a pager today. It just, it's just, you know, there are other ways to communicate. There are other ways to do due diligence.

And while sometimes we just get stuck in our old ways of this is how we check boxes and all the rest of it. So I think the biggest challenge for companies is to move out of their antiquated motions of checking boxes and starting to move into more of a resilience position. And that's what technology affords them. No, and that's really interesting.

And it's funny because we may evolve this as we go, one of the things I was going to ask you about was whether you see the amount of data that we have today as an opportunity, as an obstacle, but given what you said about us needing to rethink supplier questionnaires and that being an acceptable form of supplier due diligence, I actually wonder if we should be rethinking this beyond even the data that we're working with. What sorts of inputs or evaluation process do you recommend over what procurement has certainly worked with for many years in terms of gathering data and then using that to try to make the best decisions we can?

Well, procurement doesn't have a really good history with gathering and managing data. I think we all know that we have terms called digital transformation, which I think that term is starting to antiquate itself because I was just at a procurement conference last week and people are still talking about it, but it's just been completely squashed with terms like AI. I think a lot of it has to do with just our willingness to do hard things with the intelligence of our data. You have to think of it as like fitness or health or nutrition.

None of those things are fun per se, but so necessary to run, to stay healthy. And I think, you know, one of the challenges that we run into, and we hear it every time we talk to companies is, ah we've got so many erps uh we can't get our data in line and there's not a whole lot we can do with that because you know we require a very small set of data it's not difficult um to find the information that we need but if if you don't really know who you're buying from and what you're buying that start there um that is that is the number one challenge to supply chain visibility is not actually knowing what you're purchasing so and i know that's a big uh that's That's a big challenge for some companies.

That being said, we need very little information to expose, unfortunately, even more data about their supply chain. And that's not always welcome, right? It's necessary but not welcome. I think for us as technologists, we're not excited about giving someone information.

That to me isn't an accomplishment. That's like the equivalent of raising money for your startup and saying you've succeeded. You've just started. There's no measurable success by raising money or forging data.

I think the age that we're in now, and this is what AI affords us, is can we build intelligence for our customers on top of that? Because more information just means more work. And I think this is a problem set for AI that we just, you know, it couldn't have come at a better time. And giving our customers more data just gives them more problems because they're already dealing with their own data transformation internally and all the rest of it.

If we can give them more intelligence, and what is that? Intelligence tells you what to do with the data, what types of actions you should take today, tomorrow, the next day. That's doing your thinking for you. And that's a lot of what we're focused on right now.

Yeah. Now you had shared with me previously that about 80% of companies cannot see beyond tier one of their supply chain. So first I'm curious, is there anything we can say in a generalized way about the 20% who can? Or are they a very diverse mix of companies that have a variety of conditions they operate under and incentives to be able to see?

Is there anything at all you can offer us about that 20%? Well, for some, they just they have to. It's defense. It's it's it's finance.

It's it's pharma. Right. There is just there's an there's a reason for them to look upstream and downstream in their supply chain from from a regulatory and compliance standpoint. There's that.

And then there are those that are just the mavens of the market, the ones that are, you know, want to be ahead, want to get ahead of the get ahead of the curve. And they're the technological, you know, advanced companies. We get to work with some of those. And honestly, Kelly, they teach us far more than we can come up with ourselves.

They teach us and guide us how to build the features and the tools for the 80% who will be coming soon. Yeah. And for that 80%, which certainly, you know, that's the vast majority of teams, of companies, is there a practical first step? I mean, we've talked about how overwhelming this challenge can be.

And certainly even the first step in the right direction sounds like, oh, good. more data, a greater challenge. But is there an attainable first step that a company in that 80% can take just to start themselves moving in the right direction? Yeah.

I think that getting their information out of questionnaires and exposing it to supply chain risk analytics platforms like ours is a good first step even if it just for those tier ones Having an understanding of risk beyond what suppliers will tell you. And to be clear, I'm a supplier, but I'm also running a business. And I really don't want to help you check your boxes. That doesn't help my business.

So you've already got misaligned incentives when you send me a questionnaire that is asking questions that aren't relevant to my business. So getting outside of that, just bolting on something that is identifying risk without needing to ask questions of the suppliers is a good first step. A good next step beyond that is then starting to look at what's going on in Tier 2 and Tier 3 and to be, here's a pro tip. You can't.

There are companies out there that are mapping supply chains using questionnaires, which sounds like it sounds like a joke. It's like we're doing the same thing just in reverse. Yeah. I can't map a supply chain with questionnaires.

You can't. No one. If you came to me, if I was doing business with you and you said, hey, we're mapping our supply chain. We want to understand risk.

Go out and figure out who all your tier ones are, Justin, and come back to me. okay, so I'm going to go through my accounts receivables or payables and go through and figure out which one of those suppliers belongs to you. You've just created an enormous amount of work for me. That is what 80% of the solutions out there are doing.

They're just creating more work. And I just think we can do better. It's ridiculous. Now, it sounds like this is almost an exercise that to some extent, companies are going to have to do their own research, But especially to get into tiers two, tiers three, we're going to have to partner with the supply base.

Is this something that suppliers or let's say good suppliers are motivated to be active partners in terms of allowing companies to accomplish this? No, no, because we've scorched the earth with suppliers. We've just we've just raised them with questionnaires for 20 years. And the minute you come knocking with needing more information, they've got a callus and a defense mechanism for that.

And it is a just give them that that mechanism is just make them go away, give them what they need so they can just go away. It's a little bit different in some more regulated industries and strategic and all the rest of it. But this think about it. Is this a relationship that has been abusive for a long time?

So that relationship needs to be repaired. How do you repair that relationship? Well, the buyers need to start showing up to suppliers with something to offer, not something to ask. So what do I mean by that?

Your supplier is probably needing to give the same information to not just you, but several other buyers. You're not the only one with that problem. So we believe that if buyers can start to help suppliers strengthen up their own data processes, their own mapping, their own information, an understanding of putting all of their information in one place so that it's easy to find by other buyers. we think that that's really something to offer.

And that's, I guess it's more of a philosophy than it is a feature. For us, even though we create those features in our platform, our belief is that you have to get an aligned virtuous network with aligned incentives. And that is a new philosophy in supplier due diligence is going to your suppliers with something to offer them, giving them data that they didn't have to pay for, giving them some insights that they didn't have to go out and get. Our customers are able to go to their suppliers, showing their suppliers their mapped supply chain.

That's information the supplier didn't have to pay for. And by the way, they don't have to pay for it for us. And it gives them an understanding of how the world is seeing them. Because a lot of suppliers don't know that they're being mapped, don't know that they're being looked at that way.

And that is a commercial risk to that supplier. They don't know that there is calculations going on going, should we work with the supplier or not without ever talking to them. So sharing that information with the suppliers is an incredible first, second, and third step to be able to build an alliance around supply chain resilience. And when you frame it in resilience, just a little play of words, when you frame it around resilience and not risk, it sounds like you are partnering, not judging.

Well, and if you're immediately demonstrating that you're using the information that they've given you, whether you come back with better questions, you come back more informed, or like you said, you're showing them their own supply chain mapped. I do think, and I've done my time in procurement, I'm guilty of this. We send out a questionnaire, we get it back, we say, check, they submitted it, but nobody is reading in a detailed way what came back in that questionnaire. Suppliers know that.

They know it's not being read. They know it's effectively a waste of their time in a box check. And so I love this idea of what you're talking about of quickly with the help of technology, being able to come back and show that we're going to increase everyone's understanding and put some of this into use. I think that could change the whole, to your point, relationship with the whole playing field.

I think so too. And I think that there's been a number of companies, the biggest ERPs in the world have talked about building networks. And the reality is, it's hard to build a network when you're greedy. It's hard to build a network when you're trying to clip the ticket on both ends.

It's hard to build a network when someone has to pay to get in the room. So you have to give away to be able to get something first. And that just takes some belief that where you're going to get to is something bigger than some of the parts. So I think networks like this that we talking about people might roll their eyes and go and we heard about Discovery Network this and that Here why those networks don work I don want to pay to join your club if I don see any benefit for it If I have to pay you in order to get paid which I do with a lot of these ERPs, I don't care about your dumb network.

I just need my money. But when you say, hey, this is free and we're doing this together and there's going to be benefit for you and the benefit for you is immediate and maybe down the road, I'm going to get something out of this and your other customers are going to get something out of this. That's how you build a network. Yeah.

Now this is going to be interesting, Justin, because we've talked about business case. You've also sort of couched that in terms of philosophy. I think both of those definitely apply, but we have a tradition here at the Sourcing Hero podcast. So given what you and I have talked about, I'm going to give you the choice of two questions.

You can pick either one. And I still, to this date, have not heard a wrong answer. So your options are, what does the idea of a sourcing hero mean to you? Or if you'd like to go a little bit broader, what do you think heroism looks like in a business context?

I like both of those questions. Well, what is a hero? What is a sourcing hero? I think that's interesting.

What are heroes? Heroes are people who solve other people's problems. They don't solve problems for themselves. We remember people and call them heroes because they didn't solve the problems just for their own life.

They threw their lives at solving other people's problems. So if you take the term hero and put that to sourcing, how can sourcing solve other people's problems other than your business? That's a lot of why we started this company is if there are actions you can take inside of the work that you do, then what is sourcing? Sourcing is choosing to go with this one or that one.

That's pretty kind of binary. I mean, when it comes down to it, it's like, how much can we get it for? Who are we going to go with? It's an enormous thing about that, that lever that the sourcing industry has is one of the biggest economic levers in the world, because this is all B2B commerce.

I'm going to go this way we're going to go that way or we're going to choose this one over that one so when i think of what type of people the problems that other people's problems that sourcing professionals can can do when you think about it and you you involve risk risk is just the removal of obstacles in order so that you can flourish we we have insurance on our cars so that we can go fast so that our lives will flourish. And this is why we reduce risk with insurance is so that we can flourish.

Reducing risk in your supply chain creates flourishing, not just for your business, but for others. You're solving other people's problems because you're removing things that shouldn't be happening that somewhere down the line, your dollar, consumer or business or otherwise is allowing to happen. And I'm big on this. I started this company because I saw firsthand the bottom of supply chains where children are working in mines to produce sparkles and minerals that go into our cosmetics and our electronics and our shirts and everything else.

I've seen the bottom of supply chains. And there isn't anyone I've met that is okay with that, except for the traffickers who I met who control them. So there's very few people in the world that are okay with that. And when you think of, well, we have this aligned incentive to do good in the world, and we have this lever that we can pull to say, we're going to go this way or that way.

Well, what's missing? Intelligence to make the right decisions. And so I think sourcing professionals, probably more than anyone in business, have the opportunity to be absolute heroes just based on how they choose to who they, with whom they do business. And I think it's such a powerful point When we think about that in the context of what we've discussed today around the tiers of the supply chain, because yes, in an immediate way, I'm choosing, is it supplier A or supplier B?

But I am also choosing either actively or passively every single company standing behind them going as far as it goes. And whether we knew we were making a good choice or whether we didn't dig deep enough and made maybe a bad choice by mistake, we still made the choice. And so the more information, the more intelligence we have, the better. And let's be clear.

There is no perfect choice in this world. There's only good and bad, but there is no perfect. No, for sure. Justin, fascinating conversation.

I love how you've taken sort of this idea of sourcing and just reminded us of the bigger picture that it sits inside of. if people are meeting you for the first time or learning about freedom AI for the first time through this conversation, what is the best way for them to connect with you individually or to learn more about your company? I'm easy to find on LinkedIn and it's easy to find us on at freedom.ai, frdm.

ai. Awesome. Justin, thank you so much for being here. Keep up the good work.

Appreciate the transition that you've made. I'm sure that the world one step at a time is going to start to feel the benefits. Hopefully we've inspired some people through the conversation today, but glad to have you with us. Thank you for having me.

Thank you for listening to this episode of the Sourcing Hero podcast. Join us again next time for more true stories of sourcing and business heroism performed by your colleagues and peers. Look for the Sourcing Hero wherever you get your podcasts and don't forget to subscribe. Finally, don't forget, Sourcing Heroism is taking place all around us, every day.

Keep your eyes open and you're bound to see it. Until next time, I'm your host, Kelly Barner. Stay well and always remember that you can be a hero too.