We discuss about supply chain management with our guest Tim Hendrix - a Venture Capital investor and General Partner at Agility Investment Fund and understand how we can enhance our broken supply chains using blockchain technology.
Tim Hendrix on LinkedIn: https://www.linkedin.com/in/timhendrix
Transcript and Chapter Markers: https://bit.ly/3ve3jZL
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Roy: Today we are going to be talking about the role of blockchain in supply chain management. Our guest for today is Tim Hendrix, a VC investor at the US based Agility Investment Fund, where he serves as general partner in San Francisco, California.
Hello, everyone. This is your host, Roy, welcoming you to a brand new episode of The MetaRoy Podcast. Every week on this show, we simplify one aspect of the crypto and the Web 3.0 space.
Before we start, though, just a quick disclaimer. The following content is informational only and none of it should be interpreted as financial advice. So please do your own due diligence before making any moves in the crypto and the Web 3.0 space.
So with that out of the way, let's get started.
Tim, thank you for joining us and it is my absolute pleasure to welcome you today on this podcast. How is it going?
Tim: Hey, Roy, thank you very much for the warm introduction. I greatly appreciate it. Things are going good, my friend. I am blessed, blessed beyond belief. Excited to have a conversation and talk about blockchain.
Roy: Awesome. So team, let's start with your background. And can you please tell our audience about your backstory a bit?
Tim: Absolutely. So most of my early career, I focused on supply chain management. That was my bachelor's. I also focused on operational efficiencies accounting. While I worked in the automotive industry, I was able to draw attention from a couple of up and coming electric vehicle manufacturers out here in California.
After a few months of recruitment, I did join Tesla during the launch of Model Three. I spent a few years working with an amazing team to achieve profitability, the accountability of the assets, and I got the opportunity to watch Tesla become the largest automotive company in the world. I made the jump after that into early stage startups. That's where I help scale a billion dollar value weighted company, a unicorn.
And then during that time, I was recruited via a previous Harvard professor of mine in venture capital. He wanted to launch a US operations venture capital firm, partnered with our sister company, Agility Ventures in New Delhi. Today, mostly I focus on investment strategies, client company relationships, new verticals technologies, which is something we'll talk a little bit about today, and being a resource to founders as they start their journeys to become successful leaders and world changers.
Roy: Awesome. And the new technology that we have been talking about is obviously blockchain technology.
What piqued Tim's interest in Blockchain?
Roy: So my next question is, what is that which piqued your interest in blockchain tech? What made you interested in this field?
Tim: So my early interest in blockchain began as me, a lover of finance and investing, trying to understand the growing trend of cryptocurrencies. Blockchain, of course, is the foundation of crypto decentralized finance, which is often shortened to DeFi, NFTs and smart contracts. If you didn't already know, which I'm sure most of your listeners do know, blockchain utilizes a distributed ledger technology DLT to store information via cryptography to a block. The block is added to the ledger and is not able to be changed irreversible, if you will. These blocks hold data around transactions, payments, movement of goods, and are kept via millions of ledgers. Every ledger must match for the block of data to be valid, thus transparency and accountability in real time.
There are a ton of use cases for blockchain, but I've seen a lot of potential in implementing it into supply chains to help drive ethical practices.
Roy: Got it.
What is Supply Chain Management?
Roy: Since you mentioned supply chain management, and you have obviously been exposed to it a lot, can you tell us briefly what exactly supply chain management is?
Tim: Sure. Supply chain management is something that affects each and every one of us. It's the management of the flow of goods and services that transform the raw materials into a finished good. This includes sourcing that raw material, transportation, logistics, manufacturing, distribution, retailers, customers purchasing them, and the reverse logistics of used items, damaged products, recycling, destruction. So every step of the way is important to me.
It's important to you, a distributor, a manufacturer, a trucking company, but it's also important to our planet. The supply chain is extremely important and complex. It's full of contracts and third parties. And at times it can almost be impossible to track for some of our largest companies that are producing some of the most well known goods that you and I use every day.
Current Problems in Supply Chain Management
Roy: I think one of the challenges that we are having is, like you said, it's impossible to track for even some of the largest companies out there. Right. So what are some of the other problems that you have observed in the current supply chain management system now?
Tim: There's quite a few issues within supply chain management. I can think of three that I believe to be the most important issues that need resolution.
The first one is complexity. So many companies utilize third parties, and those third parties use another third party, so on and so on and so on. It can become a huge spider web of different vendors and services. And that is impossible to keep track of if you are a large company.
Another issue is unethical practices or contracts, whether that be intentional or not. This is closely related to the first problem of complexity. The stronger the negotiation of, let's call it big companies selling product A, the tighter the margins become for their suppliers. This can incentivize those suppliers to continue to outsource their workload to cheaper and cheaper and cheaper staffing in lower wage countries. Those lower wage countries may not practice ethical working standards or basic human rights. Thus, you create a situation where, again, big companies selling product A essentially is using inhumane practices to generate higher returns.
That gives me the third problem, which I consider to be the root cause - transparency. We don't always know where the raw goods come from to create our cool trendy gadget or the beautiful jewelry that we wear. The lack of insight into the complete supply chain keeps the buyer at a disadvantage of practicing responsible buying and it keeps companies at a disadvantage of practicing sustainability. True sustainability.
Why do we need Blockchain in Supply Chain?
Roy: So where does blockchain tech fit in this puzzle? Where is exactly the supply chain broken?
Tim: The supply chain today is fundamentally broken, as many companies are operating ethically blind while claiming sustainability and focus on human rights. I think that needs to change.
Blockchain is the technology that is going to change the way supply chains work. Specifically, I'm thinking of smart contracts that will answer many of the problems that plague supply chain right now. Smart contracts, if you're not familiar, they are computerized transaction protocols that execute terms of a contract and they store those terms via the blockchain. They make transactions and agreements traceable, they're transparent and again, they're irreversible. You can't go back and make an adjustment to it once it is on the DLT.
These smart contracts would allow for companies to better review the practices of their third parties, include verbiage around human rights and safety, and focus on ecologically friendly supply chains that benefit us all. Those agreements would be viewable by retailers, distributors and consumers. That would give us all the ability to uphold our shared social responsibility of holding companies accountable for their business practices and the vendors that they use.
Examples of Conventional vs. Blockchain Systems in SCM
Roy: You have obviously seen the conventional supply chain. Right. And you have obviously also seen the other side, which is blockchain based systems. So can you give us some examples to understand the differences, like how conventional versus blockchain systems will work in the supply chain?
Tim: Sure. So today supply chains are very basic. Company A signs a deal with suppliers one, two and three. Suppliers one, two and three tell them how they practice and even allow company A to come and view their practices anytime they want. Company A usually breathe a sigh of relief and agrees to the business terms, which are likely renegotiated every few years and almost always in the favor of company A.
And they will renegotiate until suppliers one, two and three are completely squeezed of margin and company A will then move to another set of suppliers that offer lower costs. It's how we continue to see products become cheaper and cheaper, more affordable. You squeeze your supplier until that cost of goods has gone down enough that company A still shows revenue growth.
So the problem here is twofold. Company A may or may not take a deep look at where the suppliers employees are coming from, their pay, their health, or any of the benefits that are provided for their safety day in and day out. Company A is also trying to show year over year growth in their returns, and it's almost always at the expense of the suppliers. This leaves the suppliers in a pinch to either lower their costs or do something else. But lowering their cost is almost always at the expense of the employees. Thus you can see the cycle is created that only leads to inhumane treatment, lower pay, while the cost of living is going up, mind you, and a larger gap in human rights in the workplace.
To me, a blockchain driven supply chain would force companies to only work with suppliers who could provide their smart contracts and thus leaving suppliers to only work with third parties who could show their smart contracts. This creates a new cycle. This creates an environment of transparency where companies can audit their suppliers, suppliers can audit their third parties, and probably most important here, independent auditors can audit everyone. That's what I would call a not just sustainable, but ethical supply chain.
Roy: Got it. So essentially what the blockchain enables is this mode of transparency where everybody can see the transactions that have been done and it can be independently audited by a third party if required.
How Blockchain Makes Ethical Supply Chains Possible
Roy: So what exactly ethical supply chains are and how do you think blockchain makes them possible? Like what was missing in the earlier system?
Tim: I think it's the transparency, the transparency that blockchain provides, the Irreversible ledger, the ability to track to the very, very beginning of a raw material. That's very powerful. Blockchain isn't just a use case or DeFi, crypto, which is how we have seen it used primarily. It can literally change the way we look at our buying, the way we invest in those major companies, the way we conduct business, and the way that we treat humans, employees and our planet. I'll say it again, that's powerful.
Real Life Blockchain Use Cases in the Supply Chain
Roy: Tim, obviously you've been used to seeing a lot of use cases in the supply chain, right? So can you tell us about some real life blockchain use cases where it is exactly being used right now in the supply chain?
Tim: Yeah, absolutely. So a supply chain starts at raw materials. It goes through refinement, it goes through manufacturing. It is then transported to distributors, distributed to retailers, retailers will then sell to a user or a distributor will deliver to a user's home. That is the current system that we all know and love.
But we're still only using blockchain. And probably the very end of that supply chain, which is tracking and tracing, said differently, where is my shipment and where is my order? That's how we are using blockchain today. This is just the very beginning. And that is very exciting for me because that means that we have a long way to go and a lot of value to bring.
The first step is getting comfortable with this technology and then the different parts of the business begin to find new use cases within their areas. So I predict that this technology is so powerful, it could essentially change the world and the way that we act as consumers, investors and businesses. All it needs is a foot in the door. And right now, that foot in the door is what we are seeing tracking and tracing.
Futuristic Blockchain Use Cases
Roy: So, Tim, you must have seen or you must have thought of some futuristic applications of blockchain in the supply chain. Can you tell us about anything that you feel will be the new normal in the future, which is an application of the blockchain in the supply chain?
Tim: Every time I try to predict the new norm, I usually get thrown off by some cool new technology that changes the way I thought the new norm would be. But if all things remain the same, I have this idea that in the future we would be able to scan a product that we receive in our home or we see at the store, and that scan would unlock the entire life cycle of the materials in your hand. It shows where you purchased via an ecommerce marketplace, how it came to be at that marketplace, the raw materials within the product, where those raw materials came from, the recycling and refining process that created those raw materials, and essentially every step in between. So with that, companies begin to hold value based on their ethical practices, their true sustainability and carbon footprint across the globe.
Imagine every company having a scorecard that shows how they are doing based on the smart contracts that they sign. Imagine a world where companies are incentivized to create the most sustainable supply chains rather than the greatest financial returns. What good could we do as a people with that technology? What good could we do for our planet with that technology? I believe that blockchain in the near future is going to spread outside of supply chain, outside of finance, and we will start seeing use cases everywhere, including governments. Imagine that. Transparency from a government. Wild.
How Tim became passionate about Supply Chain Management
Roy: So, Tim, can you tell us about when you first became passionate about supply chain management?
Tim: I first became passionate about supply chain management at a young age. I was in school. I was working in a warehouse. I was trying to figure out why I was doing what I was doing and why I enjoyed it so much. But the supply chain is a big, complex, complicated web of systems. To me, that was always very exciting. How do you make those systems work together? How do you take that web and expedite it? How do you make it efficient? I started doing that probably high school, college, trying to take big ideas and break them down to fundamentals so that I could improve them.
So to me, supply chain has always been a giant puzzle that I have constantly been putting together. So it's been 15, almost 20 years now. I have been playing with this large supply chain puzzle. And I will tell you, it never gets old and I never get tired of it. It truly is a passion.
The best advice that Tim has received from an industry mentor
Roy: You've obviously met a lot of people who have been experts in that industry. Right. So can you tell us what's the best advice someone has? Like a mentor, for example, what's the best advice that somebody has given you in this industry?
Tim: I believe the best advice I have ever heard, and I will paraphrase a little bit, keep it simple. Supply chains are not meant to be overly complex. If you can keep it simple, if you can set action items and you can measure those action items, you can break a supply chain down into not one big web, but a lot of different steps. Whenever you're measuring those steps, you can plan for all kinds of disruption or interference that may come along.
I remember working with Nissan, there was an earthquake overseas and because there was an earthquake, that puts a little bit of disruption into the supply chain of where some raw materials were coming from. Thus you have to pivot and you have to figure out, okay, what was plan B? What's nice about being able to break it down into little steps? You can always make a plan B, a plan C, a plan D. You can always have a backup vendor. You can always have a backup trucking or ocean freight.
So I think the best advice I ever received was keep it simple, break it down into actionable steps, measure those. And I guess just always plan not for if, but plan for when, when the bad things can happen. It's helped me create a lot of sustainable supply chains and it's helped me avoid a lot of headaches.
Things Tim wishes he knew before starting his career
Roy: You obviously started a lot earlier, right? So is there anything you wish that you knew before starting your career in supply chain management?
Tim: So the one thing that I love equally as much or maybe more than supply chain is finance. I love finance. I love financial technologies. I love everything that revolves around that. So I wish that a younger me would have understood the foundations of personal finance, the foundations of where does money come from, how does money work? What is leverage? What is borrowing? What are interest rates? And why is that important to me?
I wish someone would have sat down, explained that to me because I believe any of us probably could have made better decisions growing up if we just would have known about the building blocks of personal finance. My wife and I are working on a book together which is very similar to a podcast. There are 25 subjects that I feel like I wish I could have given to the 16 year old version of me. And she's going to ask me a lot of questions around that. She does not have a financial background. I'm the one that has that background. And so she's going to ask a lot of questions from the aspect of explain this to me as if I were a kid. Why is that important? It's a book that I would probably hand over to my kids. I would hand over to my nieces, my nephews, anyone, I would hand it over to a school that was trying to teach their students, and I would do that probably free, because it's that important to me that I hope younger generations understand how important it is to be financially sound. There's a lot of pain and suffering that can be saved and avoided just by being responsible like that.
What has fundamentally changed in SCM since Tim started his career?
Roy: So you have obviously worked for a lot of time in this field, right? So what has fundamentally changed from when you started versus what it is as of now in the supply chain, for example?
Tim: I think the one thing that has changed for me over the years in the supply chain, probably the one thing that's changed for a lot of people, data analytics. The things that we measure, the things that we capture and store, machine learning, AI. To a certain extent, data has become a very important part in how we make decisions and how we execute those decisions.
So to give you an idea or an example, I am now measuring this truck that is traveling from point A to point B. I am watching via technology on the truck how quickly it's moving, where it's stopping. And because of that, I can now measure different types of driving logs. I can make sure that drivers being safe, compliant, wearing a seatbelt, going the speed limit, making sure they're not missing any way stations, all kinds of important things. But I can also see, are they on time? Is there an issue I can take into effect or take a factor of the weather in? I can see what weather is ahead of that driver. I can reroute them.
Data points have allowed the supply chain to turn into what Toyota originally started, which was a just in time type of system, meaning everything arrives just in time as it is needed. Almost every supply chain today is set up in that aspect, which is why we hear a lot of stories about supply chain interruptions or “Sorry, there's a delay in the supply chain. We can't get that product right now.” That's because we're no longer carrying months of supply. We're no longer carrying weeks of supply. We're carrying days. And in some instances, let's say an automotive plant, you're carrying hours of material, and it's always coming in, always being pushed to the production floor and being consumed from there. I believe that that is probably the coolest change I have seen.
Those data points have allowed for tremendous growth. At some point, though, you can only become so efficient with those data points, and that's where innovation comes into play. A good example would be Nissan has done a tremendous job of using data points to drive their production facilities to the highest level of efficiency. Toyota just the same. What changes that innovation? I saw that at Tesla. I've seen that in a couple of different vendor manufacturers or supplier manufacturers. Whenever you have squeezed the lemon dry. You have to innovate. Now is that time.
We're starting to see that innovation. You see it a lot in rapid machine operators, RMOs. They're the cool mechanical arms that are grabbing and moving and spinning. Those are going to be tremendous. And not just for manufacturing anything that is a repeatable motion. Think of it as simple as grabbing this box off a truck and placing it on this cart that goes to a market. The other day at the San Francisco airport I ordered a coffee and a robotic arm made my coffee for me. To me that is still so cool. It's so cool that I took a video of it and I shared it with my family, my parents. I sent it to a few friends. That is amazing the type of innovation that we are seeing that improves our lives, astounding, truly astounding.
Possible Areas of Innovation for Startup Founders building in SCM
Roy: Speaking of innovation, a lot of startup founders are actually listening to this podcast right now or they want to do something in supply chain management. They want to use blockchain in innovative ways, right? So what is that one advice or which are the few areas where you think they can work towards with their startups or with their teams? Where are these areas of innovation which you think could be vital for building a good startup?
Tim: So we talked about this earlier today. We're seeing tracing, tracking. Where is my order? Where is the truck? Where is the product within the manufacturing plant? Where is the product within the distribution center? That is not new technology that was being done beforehand by a slew of other SAS products.
My advice would be stop thinking small, start thinking big. Start thinking of not necessarily how do I make this product move more efficiently. Start thinking of what would truly drive value to the people. A consumer a consumer wants to know where their order is. Sure, I understand that. But do consumers also care about where it came from? And I don't mean did it come from Thailand, did it come from the UK? I mean, where did it essentially the very, very beginning, where did it come from? Were these materials recycled? If they were recycled, what were they recycled from? If this material came from a tree, where was that tree and how did we replace it? Did we even replace it?
I believe whenever we have people start thinking with much more social responsibility, we all can uplift the system. Big institutional systems, large company A, company B, trillion dollar organizations are not changed because the government asked them to change. They are not changed because there's a new idea in the space. Those systems are changed from the consumer back. If we can provide the consumer, if we can provide people the customer - value - to make responsible decisions, sustainable decisions, there is no choice but for companies to comply.
So I say if you are a startup, if you are a new company, if you are a founder. If you are just someone listening with an idea, think big, go out there and shoot for the moon. Worst case scenario, your blockchain can be used for a new cryptocurrency. Not a bad gig.
How listeners can connect with Tim online
Roy: Tim, it was really nice and great learning about these insights from you. If our audience wanted to connect with you online, where do you suggest we can connect with you?
Tim: Roy. I'm a simple man. The best way you can always contact me and you will almost always get a response from me is LinkedIn. You can find me there. Again. My name is Tim Hendrix. I love having conversations. I love talking with startups, I love talking with founders. I love just hearing about big ideas. Above all else, I am a helper. And so if there's any way that I can help, I will try to help. Other than that, I just love a good conversation, Roy. That's how we found each other. I just love good conversation and I love the conversations you have.
So I really do appreciate our time today. I know it was fast and I know we had a lot of stuff we covered, but, man, there's a lot of subjects we can stem off of the idea of blockchain. Exactly. I think you and I probably are going to need an entire podcast just to talk about all of the crazy things that are out there that either blockchain can touch. Cryptocurrency can touch.
If I could just rock your world for 1 second, Roy, imagine if your government decided to start using a cryptocurrency instead of a physical piece of fiat, a piece of paper, a piece of coin. Imagine if we all moved to a digital currency, even crazier. Imagine if your government would stimulate your economy via air dropping that cryptocurrency into your wallet. The US just went through that during the pandemic, during COVID-19 pandemic, everyone received a stimulus check dropped directly into their banking account. Imagine if it just dropped into your crypto wallet. Holy cow, the things the world could accomplish. Next time, right?
Roy: Next time. Absolutely. For next time, for sure. But Tim, on that note, it was really great speaking with you today and it was great learning about your background, your journey, and about all these insights in the supply chain management, which I would have never thought about, but thank you for making this so easy to understand and how blockchain is being used in supply chain management in real life use cases. Thank you for sharing this insights and I wish you all the best.
Tim: Thank you so much for being here today, Roy. I appreciate it. I said it earlier, man, I'm blessed. You are, too. Thank you for the time. I look forward to continuing our conversations.
Roy: Absolutely. Thank you.
Tim Hendrix is a venture capital investor at the US-based Agility Investment Fund, where he serves as a General Partner in San Francisco, California. His specialties include early stage startup operations, organization building, and rapid business scaling.
Alongside his General Partner responsibilities, Tim operates Spain Hill Capital as Managing Director; providing angel, pre-seed, and seed investments for early stage founders paired with business management, consulting, and professional services.
He also serves as a Senior Director of Strategic Operations, previously Head of Operations, for healthcare technology startup Truepill in San Mateo, California.
Previous to healthcare tech, Tim served in multiple operational and accounting roles with Tesla, Nissan North America, Universal Logistics Holdings, and ecommerce home furnishing companies.
He earned a master's degree in finance at Harvard University where he concentrated on investment theory, including: portfolio optimization, venture capital, and financial analysis. He holds a bachelor's degree from Bellevue University in Supply Chain Management and multiple certificates. Outside of formal institutions, Tim has pursued additional training and education in real estate investing, strategic management, alternative investments, corporate finance, and business consulting.
Tim has been recognized through his academic career for presentation and public speaking excellence. Outside of professional and educational settings, Tim often appears as a guest on multiple podcasts, lecture series, and fundraising events. Connecting with Tim is as easy as a direct message on LinkedIn where he is often sharing his passions and expertise.