Inspectorio: Digitizing the Supply Chain for Actionable Insights

By June 7, 2022

In this episode of Industry Insights by SAP, Tom Raftery from SAP spoke with David Klein, president and co-founder of Inspectorio, about how Inspectorio is revolutionizing production chain management with a digital network platform.

Hear how Inspectorio brings value to some of the largest brands, retailers, and vendors in the world with technology to manage risk efficiently across the supply chain.

Podcast:

Podcast transcript:

Tom Raftery: 00:00 Welcome to the Industry Insights by SAP podcast series. I'm delighted to host this podcast and share key trends and innovations for each of the 25 industries we serve. At SAP, we like to say that we speak the language of our customers, and this language is industry. We've been supporting all industries for more than 50 years now and it's exciting to launch this podcast and discuss with industry experts the business value that they get from our solutions.
Tom Raftery: 00:36 Hi everyone, welcome to the Industry Insights by SAP podcast. My name is Tom Raftery and with me on the show today, I have my special guest, David. David, welcome to the podcast. Would you like to introduce yourself?
David Klein: 00:48 Yes. Thank you, Tom. My name's David Klein. I'm the co-founder and president of Inspectorio. What that means in practice is I oversee product development. Nice to meet you, Tom. And thank you everybody for listening.
Tom Raftery: 01:03 Thanks David. So what's Inspectorio?
David Klein: 01:07 We are a digital platform that focuses on quality management, production management, and compliance management. We're built as a network platform. So we allow factories, suppliers, and brands, and retailers to collaborate across those three activities by digitizing that production process, providing automation, actionable insights, and machine learning and AI for a lot of predictability.
Tom Raftery: 01:35 Okay. Superb. And you came to us, we became aware of you through the SAP.iO accelerator program. Is that correct?
David Klein: 01:45 That is correct. Indeed. Yes.
Tom Raftery: 01:47 Okay. Superb. So David, what kind of problems were you seeing there that you had to solve for yourself and now that you're solving for others?
David Klein: 01:57

Yeah. So when we look at production chain, again, there's three main pillars. There's quality management, production management, and compliance management. And within each of these different activities, there's a lot of inefficiencies, a lot of manual work. Time to get any form of reporting or actionable insights takes a lot of time. It's very hard to collaborate across the different stakeholders within a production chain that is factories and suppliers. And once you do have that information and you're turning it into reporting, it's very hard to make that reporting actionable. Managing corrective actions across all of this massive supply chain also becomes very hard. So we looked at the problem in a way where we wanted to replicate that interconnected nature of supply chains, which means building a solution that is a platform where factory suppliers and brands and retailers are all part of that network and have one instance, right?

David Klein: 02:59 Software is you install it, you custom adjust it to your own operations here. It's a platform that means everybody has one instance, you connect so you don't have to input data in multiple different places. We've digitized all of those operations as the foundation, right? And once you've digitized those operations, then you can start bringing a lot of automation so that you can start moving your activities from manual to a lot more value added activities. Once you're automating, that's when then you can start using that data to bring a lot of actionable insights, right? Understanding trends, understanding benchmarks, really being able to identify where do I need to put my focus. And then, because we had built that infrastructure in the way where we knew that data was ultimately, they're the greatest asset, we started using algorithms proprietary algorithms, to start then predicting where are you going to have quality issues, where you might have production delays, where you might have other environmental or social risk with the ultimate goal of having a platform that allows you to manage all of these different activities really by exceptions.
Tom Raftery: 04:13 Okay. And how long ago was all this?
David Klein: 04:17 We started five years ago.
Tom Raftery: 04:19 Okay. Okay. Superb. And what stage are you at now? I mean, you mentioned you've come through the SAP.iO accelerator. Have you got, for example, customers you can speak of with outcomes you can talk to?
David Klein: 04:34 Yes. So first in terms of where we are, as of today we started with quality, right? Addressing the quality management aspect of the production chain. That is our most mature offering. Then we moved to compliance management. That was just the natural evolution. And very recently just before announcing our Series B, we have launched only a month and a half ago a production tracking solution. It's our third offering. So you can track a production at any stage of the production chain. Think of it as a time in action calendar, just digitized. We work with three out of the five largest brands and retailers in the world. Some of them are the largest in the US and in Europe. The level of adoption for these large brands and retailers that started with quality that then have moved to compliance are now moving into production tracking.
David Klein: 05:46 Overall, we work with more than 8,000 companies because a lot of these large brands and retailers have thousands of suppliers and thousands of factories. In terms of outcome, if we look at digitization as a journey, we've digitized all of those operations. Thanks to the automation, things can be done a lot more efficiently, and by leveraging AI, a lot of predictability. So what that means is we've seen on the quality space significant improvements when it comes to defective rates. We've seen a lot of improvements on defective rates overall for the whole supply chain of suppliers and factories. And doing that with a reduction in cost, which is a formula that in the past was very hard to even conceive because typically when you want to approach quality or compliance issues, we need to add more money, more oversight. And that naturally turns out into more money, but when you actually look at the bottom line, quality doesn't move and then compliance doesn't get better.
David Klein: 06:56 Here, we were able to prove that you can improve compliance and you can improve quality while reducing your budget. Why? Because you're just using those resources a lot more efficiently. You're maximizing those resources by taking action only when it's needed, only where there's risk.
Tom Raftery: 07:17 Okay. Interesting. Now, obviously 8,000 people on board, some very large retailers, how do you do that as a startup? Because very often large organizations are hesitant to work with startups because of the inherent risk. So how do you get over that?
David Klein: 07:37 Yeah. Well, a couple of things. I think that large companies, enterprise in particular, are starting to realize that them trying to do it themselves doesn't work, right? They have massive teams of engineers and they've tried to innovate internally by building their own solutions. They're not a technology company. The speed in which they need to innovate, the speed in which they need to be able to deliver value is just not worth it. They've tried, some of them continue to try and they continue to fail. Service companies that have been providing the service of quality and the service of outlets and compliance, it's the same. A lot of them have tried to add their own technology branch to it and they continue to fail. We are a technology company at heart. That's what we do. That's what we specialize in. Brands and retailers, enterprise companies in general, starting to realize that, "let these specialists work in what they do best and find ways to address the potential risks."
David Klein: 08:43

What are those risks, right? Security and data privacy, right? So for us, as a company, from day one, we recognize that we needed to bulletproof everything connected to security and data privacy, right? So we have a very robust program and we go through very rigorous evaluations across our contracts with these large enterprise companies. So that's something that we knew from the beginning. Second, we also knew that we needed to be able to scale the operation also very, very fast and very, very well because you need to deliver value quickly. These are supply chains that are all over the world. So working really well on making sure that our product is very easy to implement, right? Very flexible when it comes to adapting to the different production processes, because there's many variations within one company, but even more across multiple companies, right? So making the product extremely easy to use and obsessing over understanding the user, right? And I think that is what enterprise companies are realizing that just technology product companies do better.

Tom Raftery: 09:50 Okay. Very good. Obviously, any kind of platform play is very subject to the network effect. So for people who are listening who might not understand what the network effect is, basically when you invent, for example a phone, say Alexander Graham Bell invented the phone. By itself, it was useless because there was no one he could ring because he had the only phone in the world. So then you invent a second phone and suddenly the two phones are relatively valuable. But once we start getting four phones and 10 phones and a million phones, each new phone adds value to the network because it's one more node that can contact everybody else, and exponentially the value starts to increase. So in a platform play like yours, David, I mean, when you start out, you are a startup with one phone as it were, how do you get that platform to be more valuable for everybody?
David Klein: 10:59 Yeah. So a good question, Tom. Actually, I'll answer in two parts. First of all, how do you build a network? And then second, what's the value of the network, right? So I think point number one is, when you look at, again, that interconnected nature of supply chain is that a supplier that produces a shirt for brand or retailer A also is a supplier that produces a very similar shirt for brand or retailer B, right? So in essence, brands and retailers have many common suppliers and factories.
David Klein: 11:34

And so, our strategy was to first go to the, what we call power users, right? Large brands and retailers. Understanding their pains really, really well and understanding also what are the pains for the suppliers and the factories. A lot of those pains were that they had to operate in multiple different systems, right? They were purchasing just software. And so they were logging in to disclose X, Y, and Z information or manage the operations for one client in one system. They would go and do the exact same thing for the other client on the other system. And when you sit on the chair of the supplier, if you want to evaluate quality, to give an example, you're having to then kind of export and then paste the data from all of these different systems for you to understand, how am I performing overall? Where do I have more issues, right? Where am I having problems that I can focus on? To improve my quality will ultimately improves the quality for my client. That was impossible, right?

David Klein: 12:31 So we started approaching first the brands and retailers, because then they would naturally mandate their suppliers and their factories to start using Inspectorio. And as soon as the suppliers and the factories started realizing value of this, then they started operating in Inspectorio for their own operations and then inviting their other brands and their other retailers to also join. And so that's how the network started expanding.
David Klein: 13:00 Now, where's the value of this network? And if you don't build a solution from the get go with the right data infrastructure and the right data pipelines to manage this, it's impossible to actually realize upon that value that you're hoping to achieve. And then just technically it doesn't work. So because we have the right data pipelines, the right data infrastructure, what we do is we take all of that information, right? We anonymize it. And then we're able to assign through our own proprietary algorithms what is the risk associated for a particular supplier or a particular factory, and based on that risk that it's being defined by data that is being generated by the whole network. So what that means is every single activity that takes place makes everybody else smarter. Everybody else is benefiting without you necessarily, to your point about security and data privacy, disclosing that this particular activity was done for client A or client B, right? That gets completely anonymized.
David Klein: 14:14 So the more any person uses, any user uses the platform, everybody else benefits by being able to have a much more accurate and effective way of understanding risk. And not only at the facility level, but also at a particular product category or style level as well. And that's where it becomes a very, very powerful.
Tom Raftery: 14:38 Interesting. I mean, I can understand in the quality space, but compliance is a very different animal. There are different compliance rules and regulations in every different region. So how are you helping customers with that?
David Klein: 14:56 Yeah, very good point. So when we look at compliance, there's two parts, right? There's all of these regulatory expectations that governments have, and they're only becoming more and more strict. And then you have your own internal codes of conduct with your own programs that you're evaluating on a continuous basis to be able to then compare against your own standards, right? So you have your own code of conduct. Then you have, let's say government's "codes of conduct" and the data that you're generating from your own proprietary outlets or even third party outlets that you're using for your own evaluation of the standards of your facilities against your own codes of conduct or against the regulations of the governments. These are all data points that provide you very interesting insights of potential areas of risk when it comes to social standards or environmental standards.
David Klein: 15:53 But when we look at social standards and environmental standards besides this data that you're capturing yourself directly through your proprietary outlets or through third party standards, this is data that exists publicly, right? You can understand to what extent do we have law that is mature enough that you can have greater confidence that X, Y, or Z policies are being implemented effectively in one particular region. There's intrinsic risk on social standards or environmental standards depending on the region. So then that's the third component. Let's think of it as an external component that you're bringing in. Once you have these three and you have the right, again, algorithms to look at that and evaluate that information, then you're able to also assign risk when it comes to compliance, right? So those three sources. And simple things like a particular certificate or a particular document is about to be expired. That's a risk. Why? Because if it gets expired, then I won't be compliant to a particular regulation, right?
David Klein: 17:05

So being able to centralize that information in a very efficient way, being able to quickly identify what are potential areas of risk of non-compliance, and what are potential areas of risk of not meeting particular standards against my own code of conduct is how at Inspectorio we provide a lot of value. But then more so, ultimately if you do find an area of improvement, you need to be able to actually take action, right? What are those corrective actions? And if you don't have a mechanism to manage those corrective actions at scale and effectively, then you're never going to be able to actually move beyond compliance. I think that's a very important point, right? Compliance just for the sake of compliance is one thing, but ultimately what more and more brands and retailers are recognizing is we need to move beyond compliance. And for that, you need the ability to centralize the data, make sure that the data has the right levels of integrity, that you're able to collaborate effectively, and that you have the right tools and mechanisms to be able to manage those corrective actions. Everybody seeing information as a single source of truth.

Tom Raftery: 18:20 Yeah. Makes sense. So where to, from here, apart from global domination, what are your plans for the next five to 10 years?
David Klein: 18:31 Yeah. So very recently... I'll speak what are our immediate plans and then what are our goal for five, 10 years. So immediately we just raised our Series B, a very important raise, $50 million.
Tom Raftery: 18:45 Congratulations.
David Klein: 18:46 Thank you so much. With that, well, first we're putting a lot of efforts on continuing to grow our production tracking solution, right? The COVID situation or disruptions in supply chains made it clear that many companies don't have the finger on the pulse. So what's that status of production? And you need that in order to become a lot more resilient in how you react in the future, right? Having that clear understanding of where your supply chain is at all times makes you resilient and makes you able to be agile and pivot and move quickly. So we're doubling down on that, going all the way down into the shop floor of factories. Help them digitize effectively in getting them prepped for the future, right? They recognize that more and more demands are going to come from brands and retailers that require them to have the right digital infrastructure. So that's one point, because we work with thousands of factories, we understand really well their pains and the considerations that we need to take into account when we build product.
David Klein: 19:47 Second is traceability. I think, again to the point of regulations becoming more and more strict, we have the German Law, the WRO in the United States, we have new laws coming in France. Our compliance module has always been built with the goal of helping companies achieve their sustainability goals. So now traceability is a component of compliance that is becoming more and more important. So we're also very active in building a solution for traceability. It's still a hot and new topic. Companies are still trying to understand what is the best way to achieve that. There isn't yet a solution that is able to provide the solution that is solving all of those problems and more so how to do that effectively, right? So we're doubling down on that.
David Klein: 20:44 Naturally, when you look at traceability and you have that ability to map your whole supply chain, understand product all the way at the origin, then it becomes a very interesting connection that we already have with quality. You want to do lab tests at particular points on your supply chain. You want to do fabric inspections. You want to validate some of those documents. So it's very complementary to our other solutions
David Klein: 21:10 And then lastly, we also know that the world is moving towards carbon neutrality. So our natural evolution of our traceability offering is to be able to map carbon footprint and then have the mechanisms to set thresholds and try to set targets, and therefore work towards reducing that. So what does that mean for the future is we see Inspectorio as that one stop shop, that one platform where you're able to manage all of your quality, production, compliance, and this extending of course to traceability and carbon monitoring, right? Science-based targets monitoring. And what that means is our goal is to become the defacto operating system for companies to manage their supply chain.
Tom Raftery: 21:58 Lovely. Very nice. Super. David we're coming towards the end of the podcast. Now, is there any question that I have not asked that you wish I did, or any aspect of this we haven't touched on that you think it's important for people to be aware of?
David Klein: 22:10 Thank you, Tom. No, I think we've covered it all. If anybody wants to know more about Inspectorio or wants to know whom to reach out to, I welcome you all to visit our webpage. There's more information and in a lot more layman terms perhaps than what you've heard me explained today. So take your time to review all of our offering. And that is www.inspectorio.com. That would be the best place to know more about Inspectorio.
Tom Raftery: 22:42 And if people want to know more about yourself?
David Klein: 22:45 You can find me on LinkedIn. It will be a little crazy for me to give the exact URL, but yeah, if you go on LinkedIn to Inspectorio, then you can find me, David Klein, co-founder and president at Inspectorio, and shoot me a message. More than happy to speak to you directly.
Tom Raftery: 23:03 Cool. And we'll put a link to your LinkedIn account on the note of this podcast. So great. Super. David, thanks a million for coming on the podcast today.
David Klein: 23:12 Yeah. Thank you so much, Tom, and just the broader SAP team for the invitation and for SAP.iO program. We're in the SAP store. So for all of you that already have an SAP system implemented for any parts of your supply chain, just know that if you find us on your SAP store, we already have out of the box integrations to make that potential implementation of Inspectorio a lot more seamless. So again, thank you so much for the invitation. Always a pleasure and all the best.
Tom Raftery: 23:46 Super. Thanks, David.
Tom Raftery: 23:47 Thank you for listening to the Industry Insights by SAP podcast. If you want to explore our industry portfolio to find the solutions you need to run your business better, faster, and simpler, please visit us at sap.com/industries.

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