Rheaply’s CMO, Tom Fecarotta, met with Espen Sivertsen of Ivaldi to discuss Ivaldi’s work and its involvement in the SAP.iO Foundry Cohort.
This is Part 2 of 2 in Rheaply’s discussions with other SAP.iO cohort members. View our earlier conversation with Cogniac.
Tom Fecarotta: Please give a little introduction about who you are and what your company does.
Espen Sivertsen: My name’s Espen. I’m the founder, CEO, chief troublemaker, sometimes chief dishwasher (when we’re in the office), and generally the planner and communicator of things.
The origin story is pretty straightforward — I used to have a different startup building desktop 3D printers, but it failed miserably because desktop 3D printers kept getting faster, better, and cheaper over time. And so we realized if you can’t fight it, why not join it? So I started working on that, together with my two co-founders, Yngve and Stefani — Stefani is my wife and Chief Operations Officer. We’re a husband-and-wife team. I like to say I make all the promises and then she has to do all the delivering — and for some reason that works.
So we were looking and saying, “That’s an interesting trend, but what does that mean?” What we rapidly realized is that it was going to have some consequences to the supply chain. Because if you look at the last 30 years, production robotics, whether they’re 3D printers or CNC nodes, are getting faster, better, and cheaper. We realized that as a consequence of that we were rapidly reaching an inflection point where it was now actually better to print locally, next to the end user and send files rather than parts around the world, which is what people are doing today; people produce 10,000+ goods in a centralized location and then have to deal with the distribution chain. And I think the past year has demonstrated to everyone that there are some benefits to local manufacturing, particularly if you need things in a timely manner.
So we started out more with a question than a business, and that question was, “What’s the future of supply chain going to look like?” And then we went to some pretty large maritime players because we figured the maritime industry is interesting when it comes to that question because they’re a moving target. They have a lot of data not only for what they themselves need, but for what they’re shipping as well. And then, on top of that, they have a lot of spare parts needs. So we went and talked to the world’s largest ship service agency, which happens to be Norwegian, and said, “Look, robots are getting faster, better, and cheaper, and we think that will impact the supply chain. Let’s figure out what that means together.” And they said yes and invested in us, and over the last four years we’ve basically spent our time truly trying to understand what the future of supply chain is going to look like, in the context of digital distribution with local on-demand manufacturing. What we’ve built now is essentially a digital inventory management system that enables our customers to connect into their existing datasets and understand, through our software, what of their assets could be produced locally on demand. Then we help them digitize those assets and then connect into their existing ordering system. Working with SAP was a big milestone, because being able to connect into SAP means you don’t need to use a third-party software system for your order. You can just use your existing workflow.
So that’s a big deal for us. And so now we’re working with maritime, mining, across heavy industry, we’re focused on the spare parts aftermarket. We’re working with some of the dirtiest companies in the world because that’s where we think we can have the biggest impact.
We’ve been pretty clear about our values since Day One: people, planet, profit. We want to ensure that we create win-win-win solutions, and it really comes down to being able to take full advantage of this technological pivot point that we’re approaching.
I think a big part of what is happening now with the circular economy, with carbon traceability, and with companies like Rheaply and Ivaldi emerging, is that digitization has gotten to a point now where we have deep enough data and access to that data in a cost-efficient manner so that it’s now possible to take things to the next level.
If you look at the manufacturing supply chain, it’s built around the idea that you have to manufacture things in a central location. All of your spreadsheets, all of your financial data, everything is built around the idea that you have a procurement team that’s looking at the procurement costs, and they don’t care about logistic costs — that’s a different team — and then you have the logistical team come in and say, “OK, we both park there — how do we get it to the end user?” And they put consignments together and they attract the costs around there. So you’ve already lost the true cost of the part going through the system. And then you’ve got the operations team that again tends not to look at the end of the product’s lifecycle. And I think that’s where you guys come in as well — to say, “Well, there’s actually more value here to be had.”
Tom: You’re looking at hyper-local situations where you can just tap into the resources already available — in our case it’s within sprawling campuses of organizations, but in yours you’re looking at more industry-specific parts and materials, where you know that at the drop of a hat there’s something available nearby and just feed it back into the system.
Espen: Yeah, and there’s a lot of manufacturing already locally, it’s just that they typically do prototyping, and so helping them shift to a low-volume, on-demand methodology is an interesting play because it enables us then to — well, say you have a piece of equipment you’re no longer using or, as in a lot of the cases we see in heavy industry, they have a piece of equipment that they were using but now they can’t get the parts for the equipment anymore, so now it’s something that they just want to get rid of typically. But if you’re able to 3D print the spare parts, maybe instead of scrapping that piece of machinery, even if you don’t want to keep it for yourself anymore, now you can have a fully functional piece of machinery that a lot of environmental resources went into building in the first place.
Tom: So how does it work with the product itself? How would you describe the dashboard?
Espen: I think it’s worth noting that we didn’t start out thinking, “We need to build a dashboard.” We started out trying to understand, “What do the folks on the end-user side — the people on the ground operating the equipment and the folks making decisions about what equipment goes in and what spare parts — what do they need?” And in order to answer that question, we’ve literally traced parts through their entire lifecycle, so we’ve gone dumpster diving in Norway, crawling through mines in South Africa and engine rooms off the coast of Singapore, and walking through big manufacturing plants in Japan. We’ve literally been on the supply chain world tour across four continents to truly understand the lifecycle of all these parts and the need.
And we realized that there’s basically three things that you need in order to go digital, and a lot of it is tied to business intelligence — which I think is what you guys are doing as well — because the procurement and asset management teams aren’t able to see the true cost of things right now. And so the dashboard we built essentially taps into a whole bunch of data sets and algos that we built back in, then joins up with their data, and then we give them a dashboard that essentially outlines their inventory. Then we basically screen for three things and tell you, based on your purchasing and usage history, what parts are technically feasible to take on demand (what you can 3D print or manufacture locally), what parts you should do this with (in other words, what’s the business case?). And then really looking at the business intelligence to decide what parts are good candidates. Then you can select those candidates, and we will digitize, test, and certify those parts, either alone or together with the OEMs [Original Equipment Manufacturers] and other bumps on the log, then connect that into your order flow system. But it really comes down to two challenges: knowing what you can print and then having a way to get it printed. And the dashboard essentially helps you go through that load.
One of the things we’ve done with the dashboard that we think is truly valuable is thinking about assets not just as individual assets but as categories of goods. So yes, it may be the case that being able to get a single impeller saves you a couple dollars, or 10-20 bucks, but for a company that thinks about 15 minutes in millions or hundreds of thousands of dollars, that’s not really worth their time. But if you put it together as a category, now you’re looking at millions of dollars. That’s something that from a business intelligence side is giving people the tools to see where they can have an impact. And helping them — and this is something we’re working really hard on right now — understand the reporting mechanisms for each customer, in terms of what they measure as success, then helping them with either those metrics or additional metrics to encourage new behavior. That’s really what it comes down to — if you build a dashboard, it has to be built for someone. We spend so much time just working with customers on that.
Tom: That’s a great point. We built the Rheaply platform, AxM, originally for lab researchers to share both equipment and consumables, exchanging by the milliliter or by unit. Today, we are building technology for every organization trying to locate, share and measure the impact of their available resources. So you’re right — you do need to adapt to different audiences and understand the best path for reuse for each.
Espen: Do you find that the biggest part of your job is educating the customer about some of these concepts?
Tom: A lot of it is, because a lot of the decentralized organizations that we’re working with already have reuse programs, but the problem is that there are too many of them or they are too manual. When we go to customers, they’re excited because they know that they can feed their inventors system into ours and then it becomes a democratized way to share available resources across the entire campus. To that degree, you almost have to take a building-by-building approach — and in fact that’s our business model in terms of how we price Rheaply. And so when you talk about traversing different regions of the world to find out about these processes and workflows, we do something similar from an organizational standpoint. We want to know where the deconstruction workflows are, where the pathologists are scraping through empty labs. People don’t think that there’s value there, but the reality is that there’s tons, and it’s hard to even quantify. So there is an educational piece to onboarding a new client — you have to understand what they’re doing already when it comes to circularity and then you just have to digitize it.
Espen: And make it user-friendly. That’s the real key.
Espen: What are you guys doing about damaged or slightly broken equipment?
Tom: That’s a great question. We have a responsible recycler, a company called C2 Management, and any item that goes onto the platform that’s considered non-functional or broken, they can come in and put it through a remanufacturing process and thrust those resources back to the useful product lifecycle.
Espen: So they’re able to do repair and refurbishment from the platform?
Tom: Exactly, digitizing the Right to Repair movement by making it easier for people to connect to those organizations.
Espen: Which is like your manifesto.
Tom: I’ve got a couple questions related to the SAP experience. How did you find out about it and get involved? Why did you think it was necessary for Ivaldi to participate?
Espen: We’ve spent a lot of time thinking about how to be as user-friendly as possible, and a lot of our customers use SAP. We realized that having people who already have a fairly stressful day trying to coordinate logistics and stuff try to adopt a whole new interface just for a select number of parts isn’t really realistic. If you want to make it easy, from their point of view, for them to order on-demand parts, you have to be where they’re at. So we had internal discussions about connecting into SAP and looking at other ERP systems as well to create a more seamless interface and experience for our users.
And then a week later we got an invite from the SAP.io New York Foundry saying, “We think you’d be a good fit for this program.” We were like, “Yeah, that’s probably true.” So we applied and got in. We hit a lot of ESG tick boxes, partly because of our work and partly because we think it’s the right way to be. We’re 60% women, people of color, three out of five leadership team is women. Literally, as Viking of the Year 1998, I’m in the minority, and I’m pretty proud of that. We have a pretty diverse team, and that was one of the themes for this year’s Foundry, and the reason I mention that is because one of the things we got out of the SAP program that we weren’t expecting at all was getting to see all these other diverse startups — like Rheaply, Cogniac, and all the others — really excel, when we’ve spent the last three-and-a-half years in pretty non-diverse heavy industries.
That was really fun. And, in terms of business interests, we’ve learned a lot from you guys, just seeing how you’ve approached the same problems we’ve been tackling as we’ve been checking in over the last couple months. Same with a lot of the others. In terms of our goals, I think we met them in terms of connecting into the SAP family and being able to give our users the same level of connectivity we’d imagined when we first set forth.
Tom: That’s a great point and likewise – I was lucky to get to work on some of the SAP creative videos with our marketing team. Shifting gears again – can you walk through any productization happening around sustainability reporting?
Espen: I should have mentioned — we built our own carbon calculator for CO2e [carbon dioxide equivalent] emissions. If you connect your inventory to our platform, we can give estimates on what you’re actually spending on transportation in terms of carbon right now and what you could be spending if you were to go digital — and the difference is like night and day. To give you an example, if you send a package from Rotterdam to Singapore, which is one of the busiest routes in the world, for every kilo you send by air freight, you spend about 7.7 kilos in CO2 emissions. If you do it by ocean freight, it’s significantly less, but you’re still looking at about half a kilo in CO2 emissions. Sorry, I’m using European measurements, but I can convert them to American crazy units if you want.
Tom: No, I was on the EPA website looking up CO2 equivalent metrics today, so…
Espen: There you go, and what it comes down to is if you send a file digitally, it’s less than 20 grams, and that really depends on whether you’re using renewable or nonrenewable energy on the server side. So it’s night and day, and for us it’s really a no-brainer.
Really what it comes down to is cost and efficiency. I was hinting at this earlier, but once in a while you come across a technology leap or a pivotal moment where you can get time savings, cost savings, and quality improvements, be they environmental or functional improvements all at the same time. And most of the time you can two out of the three when you’re building a business.
I think we’re at the moment where we’ll see, with on-demand manufacturing having gotten to where it is right now, an inflection point, where a growing number of parts are now cost-effectively produced locally. If you think about it from a global supply chain point of view, this is pretty revolutionary, because it basically turns everything on its head. The spare parts aftermarket today is built around the need to plan everything in detail months, if not years, in advance in order to get spare parts from one side of the world to the other. And it’s being built in high volume at the factory in China, or eastern Europe, or the U.S., or wherever the main central facility is and then it gets stored for years in a central warehouse before being divided into smaller consignments that then go to regional and then local distribution centers. Every step of that journey you’re incurring environmental, time, and monetary costs.
Up until now, everything in the supply chain has been geared towards that because it was really the only viable option. And now that you can start printing locally — well, first off, you don’t have to have 10,000 parts in inventory anymore. Now you can start listening to your usage more. When a part breaks in the field, why replace it with the exact same part? Why not make that part better? When the part breaks and you’re producing a new part locally, maybe now you can start recycling that part locally as well, because really at that point the only thing you’re importing and exporting is raw materials. So that’s a cost at that point, whereas it used to be that you had to put things in the big shipping container and then ship the item to the other side of the world for processing.
If you flip the supply chain on its head and say we’re going to locally manufacture things, now suddenly you can be a lot more responsive, a lot more user-friendly, a lot more environmentally sound. Last year was a master class in what can go wrong in the supply chain, right, so we found ourselves printing PPE for large parts of the year. We were absolutely not the only ones — there was a massive distribution effort to get spare parts out into the medical space. And what it really comes down to is when you have local capabilities you can be a lot more adaptive to any local need, not just the ones for the industry that’s there. We’re working with mining clients in South Africa now, and one of the things that’s attractive for them is being able to boost the local economy and local businesses by creating more jobs locally and connect in the local community to this global distribution effort so that they actually (1) can come up with ideas and then ship them globally without having to become a multinational company themselves and (2) if they have needs locally — at the local sewer plant or whatever it is that needs spare parts — now they can suddenly start delivering on that aspect as well.
So there’s a massive opportunity that’s super untapped, but it’s all because of getting that business intelligence and being able to demonstrate to the folks making the procurement decisions that actually, from a cost point of view, the environmentally sound option is a good one.
Tom: Yeah, and it’s the socioeconomically sound option, too. How we think about where resources flow and how they build locally productive communities is a big part of it. How do you get a client who’s currently sourcing from all over the world to focus intently on community-based or localized sharing?
Espen: In terms of how and where you start, one of the things that we found when starting to implement the digital distribution part of the supply chain was to pick parts that they were already having issues with. If it’s already a pain point for everyone. There’s a whole category of parts we call unobtainables because you just can’t get them anymore. For heavy industry it’s not unusual to have a vessel with an average lifetime of 21 years. So you can imagine you get to like 40 or 50 years and the OEM may not even exist anymore and the documentation may be lost because the assets have been sold two or three different times. It’s hard to get the parts that you need, so what typically happens is if you can’t get the part and you can’t operate without the part, you buy new equipment. We’ve seen cases in the maritime space like this — there was a vessel off the coast of California that was missing a $1 plastic gear for a radio phone system. It’s a complicated system onboard — there’s a dynamo they need to be able to swivel if there’s a loss of power. Because they were missing that part, and because that system is critical, it would have been $30,000 a day to get stuck in port, so then they bought a new system for $20,000 and called it a win. And then, because they knew that they couldn’t get that part anymore for that vessel and they didn’t want to be in that situation again, they decided to buy the same new system for three other vessels — so they spent $80,000 because they couldn’t get the $1 part. And that’s pretty typical — but it’s also not being logged. And this is something I’m super interested to talk to you guys about. How do you measure the true cost of your assets that are being discarded just because they’re no longer in use or because someone simply didn’t have the tools or means at the time to fix them?
Tom: We use a salvage, fair market value estimate in our posts, but we also empower the admins. We have an admin council. If a procurement manager has the ability to source that information because they’re buying these parts or they’re buying materials over and over, then they’re best suited to bring that data into Rheaply, but it becomes a change management issue at scale, so we’re working through almost like a library of sorts to source recurring salvage value estimates.
Espen: So you’re building your own database, essentially?
Espen: That’s cool.
Tom: But that story really rings true to us as well. It actually got me thinking about NASA and SpaceX. Do you know the story about how Elon Musk procured the nitrogen tank from the Air Force base?
Tom: He was looking to source cheap nitrogen tanks for rocket boosters, because he’s trying to build reusable rockets. Someone from the SpaceX team noticed a nitrogen tank rusting out in a field at Cape Canaveral Air Force Station while they were rebuilding a launchpad there. He sent four emails to the procurement or sourcing team and he ended up procuring it for a dollar more than the cost of scrapping it, and now it’s part of the booster on the Falcon 9. It’s a story about perceived value – the way you perceive value is different for everyone, and your best bet is to make sure that every asset is discoverable.
Espen: I absolutely agree, and it just comes down to demonstrating true value and being able to communicate it to the decision-makers in a user-friendly way. And I think we’re both on the path to — not save the world, because the world is going to be fine, it’s the people, animals, and other life we need to look out for. And if we’re going to make a positive contribution, one of the main tools — which I’m dedicating my existence to and you guys are as well — is helping people make good decisions. It’s about enlightened self-interest and making it easy for people to do the right thing. We’re doing well by doing good, essentially. I have been to UN summits in South Africa as an observer and done my share of demonstrations and tried to engage on a number of different levels, and my conclusion is that personally the most impact I can have is to help other people make good choices. And that’s really what this comes down to — both Rheaply and Ivaldi, and in fact a lot of the other companies we’re seeing make a positive impact now, are basically helping people make decisions.
This is Part 2 of 2 in Rheaply’s discussions with other SAP.iO cohort members. Read the other discussion with Cogniac.
Rheaply was selected to be a part of SAP.iO’s Fall 2020 NY Cohort to help further drive innovation in the procurement and supply chain industries. Rheaply’s Asset Exchange Manager (AxM) is working to integrate with SAP products and be available on the SAP marketplace for existing customers to utilize. Through this platform, existing SAP customers will be able to start implementing a circular economy within, and outside, their organizations.
Rheaply’s partnership with SAP is just a small step towards the United States realizing the potential $630 billion dollars in savings.