Episode 60:
Leveraging quality and compliance tools for better supply chain management

Alex Hersham:
Hi, everyone, and welcome to another episode of Freight to the Point. I’m Alex Hersham, CEO and Co-founder of Zencargo. And today I’m joined by Jacob who’s the CEO and co-founder of Qarma, which is a software company which provides quality and compliance tools to help businesses improve processes and collaboration in the supply chain.

In today’s globalised marketplace where businesses are intricately interconnected, ensuring the quality and compliance of your supply chain is paramount. It’s not just about delivering products, about delivering trust, reliability and transparency to your customers and partners, but how can we achieve this level of excellence in supply chain management. Today, Jacob and I will be exploring answers around this question, so welcome Jacob and maybe you want to kick it off by giving us a brief background to yourself.

Jacob Nedergaard:
Sure. Thank you very much, Alex. Thanks for having me here. And I think as we just talked about prior to this, I think it’s kind of fun that you founded Zencargo, I founded Qarma, Zen and Qarma, it kind of like, I think we kind of into the same spirit here. But just really brief. So I’m the CEO, I’m also the co-founder of Qarma. We established back into 2016. I’ve always been working in sourcing, in production, and I was kind of lacking some simple tools to be able to go a little bit more on site and drill a little deeper into the supply chains.

And one of the obstacles that we saw in this space is really quality and that’s kind of how we started off. So that’s my baby and we started the company as I said in 2016 and we’ve kind of been taking it forward since then. So really short, we headquartered in Denmark. We have all our engineers are sitting in Denmark. We are, as you mentioned, a software company, but we try to act very little as a software company because our customers are not in that space.

They’re more using it as their tool pack. We operate globally. Our customer base is brands, retailers, sourcing companies, importers, manufacturers that have some kind of remote production or complicated production where they need a little bit more visibility into their quality or compliance, et cetera. So that’s the short story about Qarma.

Alex Hersham:
Brilliant. So just a small target market there. Anybody importing, it’s like 7% of global GDP is your target market or something. It’s brilliant. So just tell me briefly about Qarma before we dive in in terms of how digital quality and compliance can help supply chain management. So Qarma is specifically involved in the quality control and compliance junction within the supply chain, or maybe just give a bit more detail as to where exactly Qarma gets involved.

Jacob Nedergaard:
Yeah. So where we kind of fit in is really when a customer is placing a PO towards the supplier, and then in order to get a little bit more visibility on the product and really as early as possible, we tend to say that if we can get as close to the product as early in the production, then we might be able to catch the defect or catch some of the findings that can be improved before it’s too late.

Really what we see and what some of our customers face is that once they detect these defects or quality issues, whether that is you can either do it in their factory. That’s a little cheaper because you might be able to rework it or fix it or at least you haven’t paid the check yet or you can do it in your warehouse when it arrives in UK or Europe or US or where you have your distribution or you can let the customer find the defects and that’s by far the most expensive one, because that’s also when it kind of touches on the brand and the recognition in the market.

So what we really try to do is we try to go as deep into the supply chain and into the production to help customers or brands and retailers really check the products, make sure that what they exit order, what they placed an order off is also what they get in return from their suppliers. Some of our customers, they will have remote production and they will not own their own suppliers, so they will be buying from various different factories across the world. Others have a much closer relationship with some of their suppliers and we also have customers that have their own factories in place remote as well.

Alex Hersham:
Brilliant. And so, you’re getting in my mind a lot of sense. There’s probably a huge amount of value that can be driven through digitising these processes, both the sort of tactical value, solving problems as they occur or preventing them going further downstream as well as more strategic value. How do you leverage this data? How do you better understand your end to end supply chain blockages, designing, procuring, et cetera? But maybe you can tell me and us a bit more about how digital quality and compliance tools work in supply chain management and how they really help boost productivity for businesses.

Jacob Nedergaard:
Yeah. So what we experienced with a lot of our customers that they have, when we are talking about their tech pack or they’re set up from an IT perspective, it’s very much centred around a PLM system, a PIM system or ERP system. But when we are going deeper, deeper into the supply chains, probably also what you experience with your product is that it’s very, a lot of manual processes and a lot of processes structured around various different documents, different channels to communicate, et cetera.

So I tend to say we are off now against Excel sheets or kind of like a mess of different channels, emails, WeChat, WhatsApp, very fragmented information. So what we are really trying to achieve or supporting our companies that we work with is trying to bring everything into one central source. That’s kind of the key for us. We are not always the central source here, as you know we can input information into other systems like yours, like Zencargo, but we could also feed information into to ERP system or PLM systems. But what we are really good at in Qarma is that we are good at collecting information.

We are good at getting into the factories and trying to collect information. And in order to do that, you need to provide companies and their suppliers with a very, very simple tool, something that can capture things. What we realise is that obviously most people have a phone. So a Qarma is very mobile in that sense. It’s a simple app you can download. It works on Android, iOS, it comes in plus 25 different languages and it actually enable companies to empower their suppliers to capture things, whether that is quality findings, or other conditions in the factory that they want to capture.

So once we start collecting this information that our finest task here is really to help companies take proper actions and also make sure that these information feeds into their workflows or communication flows within the company. So for instance, if a product does not live up to the quality tolerances or standards that they have set out for that product, we don’t want to ship that product. So we need to make sure that that shipment is put on hold or the BL is not released or payment is not done, et cetera.

So I always see us more as a collector. We are really good at collecting information and we are really good at collecting what we call contextual data. It’s not just data that we capture, it’s actually really on site as deep into the production as possible. That’s really what we are trying to digitalise for a lot of our customers here.

Alex Hersham:
And when you’re speaking, you’re hearing a lot about cashflow benefits, cost benefits because you’re not shipping stuff around the world and sort of storing it and taking it further down the chain that always has additional costs, but also significant customers and customer satisfaction benefits, you mentioned at the beginning. When working with prospective customers, are those the sort of key benefits that you’re talking about? Do you quantify them for the customers? Is it very obvious in their mind? How does that conversation work?

Jacob Nedergaard:
To be really honest here, I often get the question from our customers, what’s the business case here? And I always question back, “I cannot write your business case because it’s so individual from company to company what values they will get out of Qarma.” Of course, for some companies, it’s the fact that they can actually start to work much more remote so they can streamline the whole effort in working with their internal QC team or their third parties or even with their suppliers.

In Qarma, we offer unlimited users so you can really, you decide who you want to enable to perform these inspections. That could be the factory, it can be a third party or as a supplier. So there is definitely a great value in being able to have one tool to manage, plan your inspections, perform your inspections, report on your inspections. So that’s very much about kind of streamlining the daily operation.

If we are looking more on a management level, it’s often relating to getting data, data that you can use to take better decisions, have a better way of managing your corrective actions, have a better way of blocking shipments or being able to actually set up a continuous improvement program with the suppliers, being able to actually score them, et cetera.

And then, if you’re looking at the more strategic perspective, it’s definitely the digital thing that is driving a lot of these things. We see it now. Now we touch on quality, but as we are collecting a lot of information deep into the supply chain, there’s a lot of information here that can be beneficial for companies within other aspects, just like the ESG aspect, supplier compliance with the new Global Supply Chain Act that EU is coming out with being able to actually understand your supply chain, tier one, tier two, tier three.

So I always say, and that I can write their business case, but I can definitely kind of highlight where we see some values, whether that is an operational or management or strategic. That really come down to the maturity of the company and the customers that we work with and what kind of journey they’re on.

Alex Hersham:
No, 100%. And again, as you’re speaking there and as we in Zencargo, huge advocates of sort of pulling all information onto a digital platform. It’s so clear that what’s happened over the past, let’s say three to five years with all these different major shifts that have made supply chain management more important. If I was a CEO of a business and I was hearing your pitch, I’d probably now fully understand how it fits into where I want to take my supply chain, where it’s digitally connected, where the day-to-day escalations can be married, where my buying and merchandising teams or inventory management teams have great visibility where they live, but then my planning teams can leverage data, my operational teams can be more efficient.

A big risk in supply chain management that I see is when you miss that data, you create single points of failure, which is difficult for team management. You don’t allow the sort of tactical resolutions of things which has significant cost implications and then you make the same mistakes over and over again without knowing about them. So I completely get the benefit and I love the fact that it integrates into different systems, giving that data back to customers where they live and not massively changing their own workflows, maybe you’re changing it a little bit on the QC side and we’ll come onto that in a moment, but it’s imperative in terms of supply chain management success.

And I wouldn’t be surprised if tools like Qarma became ubiquitous over the coming years. You mentioned a little bit about that transition from physical to digital. You talked a bit about different teams, maybe your origin team or procurement teams that tier one and tier two supplier, et cetera. Talk to me about the challenges that companies face and how they overcome them in terms of that transition.

Jacob Nedergaard:
Yeah. So I think when we started off and we went into the factories to really make Qarma work, because again the closer we can get to the product, that’s where we want to be. So when we started off, we saw quite some resistance from suppliers here. First of all, they didn’t necessarily want that transparency in the factory, but I would say over the last few years and definitely COVID has helped this transition speed up a lot, we have seen definitely a change in mindset also for a lot of the factories and suppliers here, where more and more are actually welcoming such tools and wants to build a much closer collaboration between the brands.

And obviously, yes, a lot of companies have been able to go into factories, go into countries for the last many years. So they needed some kind of tool to track things. They needed tool to build a little bit more transparency, et cetera. And so, it’s definitely a change in mindset. A lot of our customers are coming from pen and paper and making that switch overnight is a tricky one.

For us, what we have tried to do here is really to remove those barriers. And one key thing in Qarma that we realised really early on is that if we can make the tool look much more local, they’re much more intrigued to actually adapt to it. So as I mentioned before, it comes in many different languages. We also have automated translation built into the system. So as an inspector, and trust me, these inspectors in the factory for that’s the ones you want to empower with Qarma. They don’t necessarily speak English.

So when they’re reporting on things, a global language is pictures. So why don’t they just use pictures and videos to capture as much as things. And if they have any additional comments, they can write their comment in Vietnamese and Chinese and Spanish or wherever they have the production. And then we, host an automated translation behind the scene.

So if you are a buyer requesting a factory in Asia to perform an inspection, you can actually sit, you can walk through all the pictures. That’s a global language. And if there are any comments or additional descriptions or explanations to that, you could also read it in English as well. And that’s one of the things that has helped us overcome some of these challenges that we have seen by bringing in a local tool.

Alex Hersham:
And I can imagine at the beginning it was probably hard to get people to adopt, to have enough sort of pressure top down as well as demand bottom up in terms of having both buying the tool, implementing the tool, adopting the tool. It’s a big rollout journey, but once it’s rolled out and once it’s effective, I wonder, do you often see sort of net network effects where either factories or local inspectors who maybe work for different customers as well, sort of advice their other customers to start using this tool as well? Are you starting to see those network effects in your business?

Jacob Nedergaard:
Yes. We’re definitely starting to see that. It’s a great way for us to build awareness, because obviously you can easily have multiple different companies brains producing in the same factory, and then suddenly you will have an inspector standing with their iPhone taking pictures, videos, swiping through different checkpoints and submitting the report before they leave the factory.

And then, next to him there is another person standing with their pen and paper and their old school camera taking pictures and they have at least one or two hours of work, when they go home in the evening, sitting in the hotel, uploading pictures, drop, cropping pictures, putting it into a report and sending it off.

And that report will reach the buyer later. And second, it’s a lot of work that needs to go into editing this report. So that’s definitely something we are seeing that as we are in the factories, we have about daily 40,000 daily users of the app itself.

Alex Hersham:
Wow.

Jacob Nedergaard:
So yes. It’s starting to get some recognition.

Alex Hersham:
That’s a big number for a B2B app.

Jacob Nedergaard:
It is probably yes. But you see, there’s also a lot of products being produced around the world here. I think just to touch on another point you mentioned. So you mentioned the bottom up approach or really coming as a bottom up tool. And that’s really the approach that we took from the very beginning. We are born in the factory, that’s really where we want to be. And it’s definitely more difficult and challenging to build a tool that can work in so many different settings, with that many users. I don’t know if they have a Xiaomi or Oppo or Huawei or if they have a network in the factory or phone signal, et cetera.

So we’ve done a lot of good learnings here and it’s not something you just build overnight. Sometimes I wish we’ve just had a simple web form, but that’s not the case. But it’s also the fun of it too.

Alex Hersham:
Well, actually, as we’re speaking, I’m thinking to myself that most of our listeners might be saying, “Well, this is a pretty obvious thing to do, QC, a couple of photos, a couple of comments. Why aren’t other people doing it? Why isn’t this being universally used?” And I would sort of say, “Well, hold on. There’s a lot of complexity within supply chain, and supply chain, some of the things that you build seem simple, but they’re actually very, very complex ingesting the skew data, creating hierarchies, local languages, all the things that you’ve talked about that create a decent amount of complexity.

But also when you started this business, 95% of people are probably telling you, it’s completely fine the way it’s. So kudos to you for starting it, but also building it bottom up. And I want to touch on that point, we see this a lot as well where as a C-level exec, you might say, “I want to digitise my supply chain, I want to buy this tool, I want to implement it.” But actually there’s a lot of users when you think about your internal and external supply chain team, let’s call it, or stakeholders, there’s a lot of different users that need to be engaged to make things efficient.

And so, this idea of going bottom up really working at the factory floor level, making sure that it works for different users and sort of making sure there’s value both for the users. You talked about not having to go back to your hotel and do two hours of work. I think we all know that feeling, but also the value for the people receiving the data.

And anyone listening to this will know if you receive something with the time lags, if you receive it day one and you can act on it when you get into the office, it’s really very different to receiving it day two or late day one, missing that office handover, you might lose a couple of days. It doesn’t sound like a big deal, but that sometimes is the difference between something being loaded or not being loaded or having further downstream consequences.

So those two points are super powerful. Are there any other things that you want to share on this sort of idea of bottom up approach, encouraging supply chain stakeholders take ownership over quality and validation? Are there any other things that you’ve noticed or realised in terms of how can that create a smarter and more efficient supply chain?

Jacob Nedergaard:
I think, and this is I also know you live by this rule here, but I think in Qarma, when you go bottom up, the key thing is really making things intuitive and easy to use, because you’re touching on so many different processes within a company, you’re touching on so many different cultures and you’re touching on so many different people and workflows across the company.

So one of our mantras are really keep things simple. And I know it sounds easy, but it’s like if it’s not simple and intuitive, it’s easy to always add an additional column in an Excel sheet. But if you want to build a generic tool or if you want to have a process or tool in place within your company that can work across your supply chain suppliers, QC teams, warehouse team, that could be third party warehouse team, third party QC teams, buyers, customer service. There’s so many different people that are touching on this.

You have to think it’s simple, because if you start building complicated processes, you will start to lose sight and you’ll start to lose traction. So that’s really one key thing of succeeding with the bottom up model. Second that you might want to touch on this later in the conversation here, Alex, is also what we are seeing now with a lot of companies is data is starting to play a much more significant thing in their supply chain. They want to have more visibility, they want to have access to data. But I think a very important aspect of this is also being able to validate the data, being able to demonstrate due diligence in your supply chain.

And I think when you’re coming from a bottom up, you have an advantage because you are already there. And being able to actually drive that visibility and take that data and put it into other aspects of the business, that’s a key thing for what we do as well.

Alex Hersham:
How do you marry this sort of bottoms up approach with a top down approach to make sure that there’s adherence, but there’s quality in the quality controls that are being put in place, how does that marry together?

Jacob Nedergaard:
I can give a very good example here. For instance, when we go out and when companies use Qarma to perform inspections, we also tracking the GPS, if they enable that feature, we can track the GPS coordinator of that specific inspection. So suddenly, you’re starting to actually put a flag in all your production sites. Each time you carry out inspection, you’re actually putting, you can say a digital fingerprint in that production.

So if you want to actually map out your supply chain, yes, a lot of companies will start with very, as a desktop exercise to kind of list all their suppliers, tier one, tier two, and so on. But if you actually want to drive validation, if you can take that data and match it against the production, so we know where the production happens, because that’s where you do the inspections. So if you can take, for instance, and let’s say you carry out an audit with a GPS coordinate you know exactly where that audit was taking place. And then, if you take that data and match it against the QC data, then suddenly you’re starting to demonstrate due diligence in your supply chain.

Alex Hersham:
The more I listen to you, the more I think to myself, obviously there’s a lot of value and we spoke about that at the beginning, but this idea of getting all these stakeholders to work on this and you keep on speaking about simplicity, and I don’t want this message to be lost to our audience.

It might be simplicity for one user, but you have so many different stakeholders that you are managing and driving value for, but I can completely see why it’s taken many years to build a product that really now is best in market and that’s super exciting. In terms of maybe just sort of one last focus area for me, because we’ve spoken, I think it’s quite apparent the value that Qarma can bring, how it integrates with other tools in the ecosystem, personalised, bottoms up in creating that sort of personalised simple approach for creating top down compliance and quality and driving the tactical versus the strategic and operational value.

What did you say? Sort of seven and a half years, eight years in to building Qarma, which is a long time in an entrepreneurial journey. Let’s roll another seven years forward at the 15th anniversary of Qarma being built and you’re sort of sitting there and very happy with everything that you built. What could Qarma look like and how will it play with the ecosystem in seven and a half years time?

Jacob Nedergaard:
I think one thing that I’ve realised in the last few years is that there’s not going to be one system that can solve all problems in the world. It has to be a network of tools. So I think a key thing for us is really being able to connect with other best in class tools, applications, and also looking at the supply chain. It’s becoming much more complex.

I tend to say where we are, we’ve been very much focusing on the physical product in the last few years. So capturing findings around the physical product and I think what we see now, there is definitely a trend of focusing more on the digital product. And you can say that if you have a product, if you look at a coffee cup or any product that you’re buying, whether that is furniture or a piece of apparel, I would say looking ahead, there will be two versions of that product. There will be the physical version, which is what we capture with the quality. And then, there will be a digital product.

One of the topics in the EU these days are the digital product passport where you need to, together with the product or along with the product, you also need to start sharing additional information around your supply chain, the carbon footprint of the product, et cetera. So what we are looking into is really how can we support companies in building up that digital product and building some validation and behind that digital product.

So how can you actually, whether that is a transaction document or it’s a carbon footprint or other information that needs to go together with that product. That’s kind of where we want to make sure that we can support companies in that journey. So they’re not just succeeding with designing, buying, shipping a product, but they’re also succeeding in delivering a product together with the required information, whether that is demanded by the authorities or through legislation or if it’s a demand from the customer or even from the shareholder or stakeholder of that company that we have worked for.

So I think that’s where we are going and we will not be the single solution to solve that. It will definitely be in a network with a lot of different other providers, some bottom up, some top down. So I’m quite excited about that and that’s why I often get the question, “Can you solve everything?” And we always say, “No. It’s not going to happen. And if someone comes in and says, ‘Hey, we have a end-to-end solution.’” Don’t trust them. It’s not going to happen. It has to be a network of different solution, applications here.

Alex Hersham:
Yeah. And I can see why Qarma well positioned for that, but also your point around playing nice with other systems. For me, at least, when we build Zencargo, yes, we build an interface that our customers can use, it can be used by different members of their teams in different ways, similar way to what you were talking about, and manufacturers can use our product, but we’re not trying to be the ultimate storer of data going forward. If our customers want to live inside the ERP and want that data to float in and out of the ERP, that’s perfectly fine.

We don’t want to hold a monopoly on their information. We want to be part of an ecosystem. And I think that’s part of the beauty of what you built at Qarma in terms of how nicely it fits into a broader ecosystem rather than trying to do everything yourself or monopolise that data. And that in itself is extremely powerful. And so, I wouldn’t be surprised, if we had more time, and we were to speak about you other partnerships.

I wouldn’t be surprised if you talked about your product catalogue software or ERP software as huge ecosystem partners for yourselves, just like businesses like Zencargo as well. But just because we’re running out of time, I’m going to sort of wrap it up there. Thank you to everyone listening, for joining us for another episode of Freight to the Point.

Don’t forget to like and subscribe to our series on Spotify, Apple Podcasts or Google Podcasts if you enjoy this episode. Jacob, thank you very much for your time.

Jacob Nedergaard:
Thank you very much.

Alex Hersham:
If anybody has any questions, feel free to message me or Jacob will comment below on the LinkedIn post and we’ll get back to you. Thank you so much everyone. And thank you, Jacob. Take care.