Why Microsoft Is Making a Strategic Bet on Supply Chains

Charles Lamanna, corporate VP of applications and business platforms at Microsoft, talked to Bloomberg Línea about the tech giant’s new product

Charles Lamanna, corporate vice president of applications and business platform at Microsoft, talked to Bloomberg Línea about the company's new supply chain product.
December 02, 2022 | 11:38 AM

Bloomberg Línea — Microsoft (MSFT) plans to bring a newly announced supply chain management product to all its markets by 2023, Charles Lamanna, corporate vice president of applications and business platform at Microsoft, said in an interview with Bloomberg Línea.

Lamanna said the idea to develop a supply chair-focused platform and hub came from the need to help customers respond to the dynamic and fragile supply chain environment, which has faced lockdowns, high shipping costs, and inflationary pressures.

In November, the company launched the product for the United States and plans to expand to the other markets where it operates next year, including Brazil.

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The following interview has been edited for length and clarity:

Bloomberg Línea: Why did Microsoft decide to bet on a specific product for the supply chain?

Lamanna: Customers are looking for solutions that allow them to address supply chain problems digitally because they can move very quickly without huge capital investments to improve their supply chain. APIs, Internet of Things (IoT) are a kind of a groundwork of digital technology that connects systems and creates a harmonized view of the supply chain and automates it.

We kind of have been eating around the edges of this problem for 18 months, and we saw an opportunity to have a holistic supply chain solution that helps our customers from end-to-end in planning.

We have a substantial investment in the order of hundreds of engineers to enable this. It’s a major investment for Microsoft for us to help consumers digitally transform their supply chain. It’s a big investment area for us.

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We have a pandemic boom in warehousing and supply chains. But right now there is a slowdown in warehousing, as e-commerce is slowing its pace given the imminent recession. How can Microsoft products help companies manage warehouses and mitigate possible costs?

This is one of the areas where we think that there is a real opportunity for the supply chain center because the supply chain center is all about how you make your existing investments in warehousing, transportation, and logistics more efficient.

How do you reduce your carry inventory, reduce the time that you hold an inventory, reduce the time it takes to deliver products to your customers, and even reduce the number of fulfillment centers in the warehousing you need to maintain while still providing the same quality of services?

The supply chain center is all about using data understanding AI to make all of your existing investments more efficient. That is kind of why we think now is the moment for what consumers are looking for. They want to be able to run the operations with fewer capital investments, and digital technology makes it possible and a lot more affordable.

The way the supply chain center works is that it gives you that end-to-end view from demand to procurement and allows you to find places where you can optimize your supply chain and allow your customers to do more with less.

How much does it save in comparison with not having the product?

We are still in the early days of a broad study, so what we will do as we go to our preview is we will only publish a report after a significant population to say ‘here is what it can hold to the inventory, here is what it can hold to the providers you need’.

We expect that to be significant. We are really creating a new type of supply chain software, something that can operate in the core of supply chain execution systems, but which can operate across them. We are really excited about it and eager about the ability to take this new product to the market. We think the values speak for themselves.

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Shareholders usually ask about the FX impact on Microsoft’s earnings when you look at emerging markets revenues being lower due to a strong dollar. Given the product is coming to Brazil, how do you aim to deal with this issue?

For now we are not sharing the exact pricing terms for the product. When there is a general availability in 2023, we will share pricing details. We are a global company and we want to make sure our software is available for every organization. We build pricing strategies that go well in the local market, we are local with data compliance, and data residency, and we have a price that makes sense for customers there and supports challenges unique to Brazil, and to other countries.

Can you explain in practice how this new tech works?

It’s really easy to get started, you can go to our website, sign up in seconds and get started in minutes. It’s a cloud app. We have a very simple no-code and low-code experience for data preparation and that is how we connect to our customers’ existing systems, Microsoft and non-Microsoft.

We seamlessly connect to your data sources, and with that low-code/no-code data injection process we can map and match together to have a single view.

We use not only standard, analytics capabilities but also a lot of advanced AI mapping data preparation capabilities that we build from data products in Microsoft like Product BI, and Dynamics 365.

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Once we have data harmonized it has a record across all different systems of how the supply chain works. Based on that record, we can do all kinds of amazing capabilities. We can help you do more intelligent demand planning and get inside demand for your product and what it will take from a supplier perspective. It is a lot of AI and machine learning to build things like future predictions and forecasts based on historical performance and external signals.

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We have risk and resilience predictors so we help you manage and understand how to fulfill orders that you will receive based on what suppliers can provide. We can do that based on AI, but also with something we call smart news, which is the AI understanding things that happen in the real world, to say whether geopolitical events or security events may impact your supplier.

For example, if there is a hurricane in Florida, we can tell suppliers that are shipping through Tampa Bay, and you can look for the impact of this.

Another item is order management. So, if you have an e-commerce website and you get an order on the website and you want to ship to someone in three days, it’s not like an easy thing going to this warehouse and shipping, you have to choose which fulfillment centers you should use based on the right inventory, based on shipping providers and based on costumers.

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It’s a very complex order fulfillment calculation which we can do very intelligently because we have that view, so also can help you manage things like sustainability and understanding the carbon impact of logistics.

There are different scenarios to help customers do better planning, help customers be more sustainable, and help our customers meet the needs of their customers. It really improves the experience of supply chain planners, of supply chain operators. The platform brings it all together in one place and is integrated with Microsoft Teams.

What is the expectation of how much the new product would represent in revenues for Microsoft?

We don’t have any forward-looking statements for the Supply Chain Center but we do believe it’s a major growth area for us. The Microsoft Supply Chain platform, which is an umbrella of bringing together Microsoft products as well as other third parties products to tell a single unified story of supply chain transformation, we think is a major killer for Microsoft’s strategy.

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How many engineers worked on that?

Within the Supply Chain Center, there are hundreds of product engineers working. The Supply Chain Center is an inflection point for how Microsoft is approaching the supply chain area and how we think we can help our customers optimize real-world supply chain problems through digital solutions.

It makes it easy for customers to scale and run worldwide operations in a way that is responsible from our environmental perspective.

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