Mapping Your Way to the Digital Product Passport, with Raphael Gutierrez, Director of Global PXM and Product Strategy at Valtech

Transcript

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Peter Crosby (00:00):

Welcome to unpacking the Digital Shelf where we explore brand manufacturing in the digital age. Hey everyone. Peter Crosby here from the Digital Shelf Institute. The drive towards a more sustainable future is gaining a lot of momentum under the requirements of the digital product. Passport regulations passed recently by the EU. The DPP will reshape data transparency across the value chain to ultimately allow retailers to, distributors and most importantly, consumers to select products that match their environmental values. We hit for the compliance deadlines for some categories in 2027, and the journey for every actor in the supply chain will be complicated. Raphael Gutierrez, director of Global PXM and product strategy at Valtech. Join Lauren Livak Gilbert and me with a primer on the digital product passport and how to build the foundation for compliance. Starting now. No surprise, it starts with people, goes to process and ends up at technology. Welcome to the podcast, Raphael. We are so excited to chat with you today.

Raphael Gutierrez (01:16):

Yes, thank you for having me. Very good, thank you.

Peter Crosby (01:19):

We're going to be diving into this new digital product passport regulations that many companies are going to be subject to over the next few years. And it's not a simple thing, right?

Raphael Gutierrez (01:31):

No, exactly. You're right. When you have new lows passing like this, especially in certain regions, you may wonder how is that impacting my day to day, my company, my business? So I think it's something that needs clarity. I for many companies,

Peter Crosby (01:48):

Yeah, there are a lot of things that brands need to do in order to get ready for these requirements. Can you just help introduce it to us, what it is and why it's so important?

Raphael Gutierrez (01:58):

Yes, definitely. It starts in Europe, right? The European Commission has passed some laws to try to protect more consumers, give more transparency over the products they are acquiring. They're buying on the materials, the origins of where the products come from, et cetera. So providing more details, more and more details to consumer to empower them when they're buying, acquiring products and basically bypassing that law. They're trying to have companies be compliant with the number of information they're supplying to the consumers regarding origin, materials, environmental impact, some supply chain elements regarding what's actually the travel that their pieces are doing, coming a lot from China, from places that they're not being fully transparent to the consumer. Lots of products, example who are designed in the country you're living into, but probably produced elsewhere. So sometimes you see the made in France or made in certain countries, but actually it's only the design who's being made in those places. So the clients and the end consumers need more transparency towards that. So now they're asking companies to provide more details around their products, and that goes through data and several layers of data.

Lauren Livak Gilbert (03:32):

And how will the consumers be able to view that information? Well say, Lauren, who's buying a product, be able to access this and view it in a way differently than I'm thinking GS one standards, right? That is information that maybe a consumer doesn't know about.

Raphael Gutierrez (03:51):

Yes, exactly. So there are two things, right in the way they're going to be acquiring those products and there are going to be certain details that need to be displayed to the consumer, but it's also a platform that is going to centralize all those products in Europe so that people can actually search for certain information regarding the products they want to acquire. So traceability, transparency on the origin, for example, of the materials of the products they're trying to buy. So they will be able to access that information in the platform that the European Commission is currently building.

Peter Crosby (04:31):

Yeah, I mean the whole thing is centered around ultimately getting to what they call a circular economy where consumers can use this information to make informed purchasing decisions and it can be have, I guess, a greener more ethical future by knowing the entire lifecycle of a product that they're considering buying from, what materials are used, how it's manufactured, and then ultimately recyclability so that hopefully we'll be reusing more and more materials. Am I sort of capturing the at least social value point behind it?

Raphael Gutierrez (05:16):

Totally. Peter, I think you're totally accurate on that one actually, I think I've read something about around 5 million tons of clothes are being thrown away every year, and that's a lot. I think it's around 12 kilos kilograms per person, which is huge. So that's a problem, right? Because everybody tries to be more ethical but don't have the power of being ethical if you don't know where your clothes are coming from. So become difficult because people are not getting richer. The prices of everything is getting higher. So it becomes difficult to know what exactly you can buy at an affordable price if you don't have the information. So people are trying to get the best and the cheapest clothes, but in the end, you want quality. Now people are already to buy maybe less volume of clothes, potentially better clothes if you have this information because sometimes it's not just about price. You have lots of companies who put lots of effort on marketing social media, and that's kind of a bit of smoke for the client because you cannot know exactly if that's only marketing or if that's really the value that is being sold and communicated over those platforms so that at least obliges companies to be totally frank, transparent around how they're producing, changing the way they produce, and also changing the way they manage the data behind to communicate all the data to the clients so that they can actually do the accurate choice when buying. Right.

Lauren Livak Gilbert (07:04):

And what does this mean for brands, right? I mean, as you're speaking, I'm thinking about the brands need to also have that visibility and then that needs to become public. And if that isn't a sustainable approach or it isn't a great story to tell, they need to kind of rethink how they're making an impact on the environment and the broader landscape. So how do you think brands are reacting to this should react to this change?

Raphael Gutierrez (07:33):

I think that's stressing them out a little because that obliges them to review it the way they work. To be honest, that's impacting their company. The way they are organized. It's change management because let's be frank, in the last 20 years, companies have been driven by IT divisions to actually provide the tools to do the work they have to do to have a new e-commerce platform to be able to sell online, have an ERP, so install lots of heavy systems to be able to market their products, but now it forces them to review exactly the way they're enriching their information, they're collecting information and giving more transparency on how they're producing their own products. That is translating through data. So by providing more information, more transparency internally, you add more work, you add more work, more roles, some stuff that you could, maybe some data you could overlook now are going to be scrutinized to be validated.

(08:52):

So probably when you produce a product or you acquire a product like let's say a T-shirt from certain manufacturers, you're going to have to pay attention to where are you producing those, maybe certain laws regarding child labor, things like that, that you need to be paying attention that potentially you weren't really paying attention to and everything was driven in the past by making more margin economically, et cetera. Now you're going to have a new currency that is going to be ethical currency. So that is going to give away on just the economy currency. So potentially you cannot just look at producing cheap products. You now need to build some ethical products if you want to make sure that the client buys the product. So of course that's changing not only the way the technology is being structured and the technologies you need to provide that data transparency, but also the process and the roles from the product acquisition or creation or conception app to how you are publishing that product to your end customer on those different touch points. So that is definitely a big change, and that's going to be an opportunity to review the process in which the products are being communicated and sent out to the client.

Peter Crosby (10:24):

Can we go down another level? Because in my head I've got the, or maybe my heart, I've got the, wow, this sounds amazing, that kind of transparency. The world needs to really work on more sustainable choices and we want to incentivize that behavior and enable that behavior. And then there's the cold dead part of me that's like, wow, that sounds expensive. So for people to comply with, et cetera. So I'd love it if you dig into maybe the next level of detail as you talk to your early adopter clients of all this, you've got the three-legged stool you were talking about of people, process, technology. Can you go to the next level of detail on how you're seeing organizations think about complying with this across those legs of the studio?

Raphael Gutierrez (11:16):

Yeah, definitely. I think you're right. Every change, everybody sees that as a cost of operation. Like, oh, I have to comply to that. So it's got to be additional cost to it. I see that more as an opportunity to reduce certain things that are inefficient and that I think companies are not looking at or not measuring. So it's not that it's costing more, it's actually the opportunity to maybe optimize the way they're maybe processing the data. So let's give an example. Maybe I have a retail manufacturer that distributing his clothes through different retailers today. His cost of return is very high. It has probably one of the biggest percentage of returns in the market, and this is due to sending the wrong data. So even though we're not even thinking about being ethical or being transparent to consumers, they're already incapable of sending the proper data to their customer.

(12:27):

And this is casting them already a lot of money. So if you see that new law being on the ethical side of things, they will have to review the process, review how they're collecting the data, how they're collecting the data when they are actually manufacturing the product up to when they're publishing it to their different customer touch points. So that's an opportunity for them to reduce their returns. That is already costing them a lot of money, a lot of fines, but just reviewing the list of data that they need to focus on is really the focus of the data They need to communicate that it's going to be changing, but actually even five years ago, they would had to review that process to make sure they avoid and they prevent that cost of returns from happening. So it's about making companies more conscious on actually how they're impacting today.

(13:23):

They're just not measuring it today. That's the problem, right? So I think companies, the cost of data of not looking at data today is huge. I had seen a report of Matt say that it's costing billions of dollars to companies for not really managing data properly and not just product data, but also financial data, master data in general. So actually the first step I would think of is a good excuse to review your process and including different stakeholders from different divisions being from the purchasing departments. That starts usually the collection of products and then working also with the product marketing and then with the marketing people that are in charge of communicating and revamping the data to make it more customer or consumer focused. And then all the different merchandises who need to supply that information to different platforms to work together around how should we describe our products, what is that we need absolutely to communicate.

(14:36):

So the required data that we need absolutely to communicate to consumers to be more transparent and how can we present that in a look and feel that seems more branded towards what are the values we want to communicate. So I think it's a good exercise to better understand between different divisions. What is the purpose of each role within a company towards product data, like making product marketing aware of what the purchasing department is doing and what are the difficulties of the purchasing department when creating a product in the systems today? Are the systems adapted? Maybe not. Maybe they're also looking at too much data to create a product. If I'm a purchasing department member, if I'm a buyer, I'd like to focus on putting more time in negotiating the price of my products and not so much on enriching lots of data and letting that to maybe more the product marketing and the marketing people to collect more data to describe that to the consumers. So it's also reviewing a little bit of the roles and responsibilities of each role to pace that effort.

Peter Crosby (15:57):

Yeah, it feels a little bit like these requirements might bust some silos that we've been having in the product cycle at companies where the supply chain folks are really going to need to be probably much more transparent. It's not that they've been intentionally not transparent, but those data requirements that will now need to flow from the original parts and supplier manufacturers all the way through to the merchandiser so that data can be transmitted where it's needed. It sounds like that might unite the product lifecycle and perhaps even speed it up. Do you see that as part of the opportunity here?

Raphael Gutierrez (16:49):

Definitely. I think that's super important. And honestly, when you talk about product cycle to most of my clients, they're not fully aware of what this looks like. They're not fully aware of. For me, it's like a map you should have every client should have of their own company. It's like a geographic map that when you look at it, you know how to go from point A to point Z and what are the different destinations in between those two points. So it's gives transparency to your organization and awareness around what are the stakes and the problems and the challenges of each role. But yes, I think everybody or every client needs to be more aware of their own product cycle. Where does it start? What impacts this product cycle? What are the roles necessary at each stage of this journey and what are of course the tools that can support efficiency or maybe help them do that more efficiently?

(17:52):

And what are the skills that each role need to develop to make it a smooth journey? That's definitely something that is way more important to be aware of that than trying to acquire a platform or tool. If you don't know that prior, you're going to probably do a bad choice. And honestly, in the last 20 years, I think lots of companies have been acquiring products and tools to be more efficient without really knowing that entire journey. And today when I talk to them, they're like, oh yeah, that might be cool to review the journey before we subset maybe an ERP or a new e-commerce platform. And that's funny because whenever we, from a PXM product experience management standpoint, whenever we implement a payment tool for example, it obliges everybody to review that because PIN is so much central that you need to know where are going to be looking at for the source of data and where do we push that data to.

(18:58):

So it obliges you at some point to review a bit of that entire end-to-end journey. And that's the perfect excuse in general that I use to do that. And sometimes and often too often still we have IT departments who ask us to add that to the architecture and after a few years we're like, okay, it's added, but it seems that you're not using it efficiently. So that again, is a good excuse to review the end-to-end process map and prolife cycle journey to make sure that people are using and leveraging the tools efficiently. So in that context, that becomes necessary.

Lauren Livak Gilbert (19:40):

I also think it's going to bring in even more functions than previously because you need to figure out where this data is to figure out where you're ordering your raw materials from, supply chain, the plants, they all need to be involved in this conversation where they may not have been engaged before. So I think to Peter's point, I think it'll be even more helpful to break down those silos because you are going to have to go even deeper into functions like supply chain, r and d, even procurement to understand where you're purchasing this and then where those products or where those raw materials are sourced from to create the products, which just kind of opens up even more opportunities to explain to those functions why it's important, why e-commerce is important and why the data matters.

Raphael Gutierrez (20:29):

No, exactly. I think you're totally right. And also we're looking at, for example, the B2B manufacturing and distribution industry where they're still relying a lot on people to recommend certain parts. It obliges al bit the industry to be detailing the components. For example, of a battery, I know batteries is one of the first type of products that are going to be covered in this DPP digital product passport. So you need to know how it structured your battery because maybe sometimes you need some replacement parts, maybe sometimes you need this battery to fit in a certain model. So it obliges a little little bit that to be, how to say that, to be described somewhere in certain platforms so that actually it forces the client also to be looking at this information on maybe a website and find it quicker from their mobile phone. So we have lots of B2B clients right now that are trying since a few years to have more platforms where actually their own B2B customers can go and find some certain replacement parts. And if you don't have this information, then it becomes hard. So they still need to rely on the vendor in the shop to help them make a purchase. So that's going to of course, accelerate normally conversion, facilitate also the life of customers even in the B2B industry, I believe.

Peter Crosby (22:11):

So Raf, can you help me out? I want to understand Lauren was talking about raw materials, and I'm thinking about the, we already have a complicated data transfer process between brands and retailers as you very well know, how do I understand the requirements of all my retailers and then how do I make sure that I'm compliant when it goes over, et cetera? And that's very complicated and we're still building those connections as you very well know. And when I think about it from the other side, so if now we're talking about going all the way back to the raw material vendors, is that information that exists at the buyers of those raw materials at the manufacturers? Do they already have the information within their four walls or is this a new set of information that their raw material suppliers will have to supply? And if so, what are the pipes for communicating that? Is that paper sheets, is it spreadsheet? I'd love to know the state of play in terms of where that data might actually live today and how hard is it going to be to do it at scale?

Raphael Gutierrez (23:33):

Yeah, I think it's a very good question because it's going to change several layers of that chain. So from manufacturers and producers who currently, you know that they're very lean in producing and sending the profit data, they send sometimes PDFs, sometimes raw Excel files with no structure. So it becomes very hard for retailers or distributors to structure that in their own way to map that data, to their own data to provide the data. Sometimes they have to go to some other competitor website to scrap the data from their own manufacturers. I've seen some crazy scenarios happening. So you're totally right. It obliges the origin or producer to be more transparent on the products they're producing because I think sometimes also it's a bit on purpose that they're hiding, not hiding, but not providing certain information. As you said, it has a cost

(24:35):

And manufacturers try to be lean in cost. So that's going to oblig to them to provide that level of information. And I think the idea is to avoid, to have to cut the corners when producing a product, produce a better quality product, not a cheap product to make profit on the consumer. So it's kind of a circle that is supposed to benefit the consumer, but also manufacturers have to be in that circle. They have to embrace that circle, right? So yes, you're right, they're going to need to communicate more data, more structured data, so more potentially more tools for them that they will need to implement. I believe that this is going to start with the Excel file. You can start with it and structure the data with the proper cons. And I think there is a coaching also to be done from the retailers and the distributors to coach them on what they need to actually sell their own products.

(25:44):

So it's kind of a partnership for me. It's kind of a manufacturer's program or something like that that distributors and retailers also have to support to receive the proper data because they are faced to direct consumers. So I think it's a partnership between both. And yes, you're totally right. They will need certain tools to make it happen. But as I said, say to even my clients, you don't need always a system to stop. You can do it like a semi-automated process with manual tools that we all know, starting with an Excel file structured with the correct requirements, correct data listing, all that. And maybe the next phase is going to be implementing the tool to make it more efficient. So first part would be aware of your surroundings, of your roles, of your process, and then do it like a baby with no tools. And then when you have more knowledge to be using, maybe those tools, you don't give a laptop to a 5-year-old kid, but you learn how to react, et cetera, so that whenever he's ready to get it, he can embrace the technology, be good at using it

Peter Crosby (27:03):

Well, he better be ready by 2027 because you have to be in compliance for a lot of these industries. It is going to need to be a pretty smart 2-year-old baby, I think pretty quickly.

Raphael Gutierrez (27:20):

No, you're right. I think regulations are doing things to make it happen fast. They want to protect also the society, which I believe is good. This is what we need. I don't think all the companies will be able to be compliant under those three years, maybe could happen in a longer run, but at least they need to show that they're embracing that, that they're doing whatever is necessary to make it happen. And yeah, it's something where they're going to need some support for sure.

Lauren Livak Gilbert (28:01):

So Raphael, I think we talked a bit about this, like the strategy for brands to think about the added cost, the update and the changes they need to know the visibility of the data. Are there any other recommendations that you might have for brands that are, I'm going to use the word scrambling potentially to make sure that they're meeting these requirements by 20 25, 20 26, 20 27, depending on category. Are there any other things that you would suggest that they should start doing now in order to get themselves ready?

Raphael Gutierrez (28:33):

Yes, and I think it's the same advice that I would tell any company that is replatforming. And honestly right now there are lots of companies replatforming because they've been using the same tools since 10 to 20 years. It's really have changed. First the organization. They need to adapt to have an organization that adapts to what they're trying to build. So that comes with people first. Let's make sure we have the right people organizing the right way and talking to each other in the correct way. Meaning that for a lot of these new clients I have or existing customers in a long time, I'm asking them to create kind of a product experience board that is basically a centralized team coming from one member from the purchasing department, one from it, one from more the marketing division. And altogether they have to structure the data that is needed first to comply to a market when describing a product, what is that a consumer wants to see, a brand and value image?

(29:43):

And then how do you collect all this data to be compliant with your region where you're selling the product? And that can happen even though you are not in the same division or department, you can just have to lose three to four people subject matter experts to be talking to each other on monthly basis and to putting that structure of data that they need and to review that process flow that entire product cycle. So I think by creating that organization, you are centralizing also that data management to a place where you cover all the angles and blind spots of that data that is necessary for the consumer. So that's the first thing is review the organization and build that product experience board. That's one. Once you do that, you have better understanding also on the process because some are going to be more concerned about how do we acquire or build those new products.

(30:51):

Some other are going to be more on the downstream of that. How do we publish that to the clients, new seasons, new collections, new products? So how do we communicate that to the clients? So they're going to put the pressure on the upstream teams that are more the purchasing department, et cetera, to provide the right data, but the minimal data they need to then add the layer that is more consumer layer. And then each market is going to have to have that more regulation and compliance aspect that is more regional. So if you cover all that, then you're more aware and once you're more aware of your requirements, you can go and look at IT teams to say, Hey, is there a tool actually that can support what we have to do? Because basically with the map we have, we see lots of challenges when creating the product in the ERP for example, we are being blocked or we don't have the proper fields or the system doesn't support, we need something else.

(31:56):

It could be a pin, it could be a p lm. Honestly, lots of organizations don't have the tools they need, but because they don't have clarity on their product cycle. So that's the first stage each in your organization structuring your organization, mapping that map, that product cycle map, and then highlighting the pain points they're having so that they can look for the proper tools to be more efficient. So that would be my recipe for success. And honestly, that's not super innovative new thing that I'm creating or I've created yesterday that's old. It's like fashion. The new trends are just old things that you take over and you put in a new format. For me, it's exactly the same. It's like this old people process technology mantra that is existing for the 50 last 50 years. But we need to put that at the forefront and really start with people process and not the technology. I think that's the most important.

Peter Crosby (33:04):

Yeah, I mean certainly when I think of the DSI community, it includes a wide range of people that are and where they are on their project experience management journey. And I think, so for those listeners who already have a lot of this in place, because they've been through this process for the information that's required today, and they at least understand where they're at, what the digital product passport seems to do is just add another ring of people and companies and information and data types that are going to be required to flow through what they've already created. And then for those that are early in their journey, they just have to incorporate and just, I don't mean to say it like it's, oh, just do that, but they will need to incorporate the requirements of the digital product passport into the people process technology that they're designing with you or with anyone else as they put it into place. Right,

Raphael Gutierrez (34:07):

Exactly. I would say that it's not going to change. What companies have to do is just going to force them to do it quicker. So bigger companies, for example, bigger companies have the problem of having legacy systems, lots of legacy systems that have created certain bad processes that they don't want to invest in reviewing, making better for their employees. They don't want to invest in that, right? It's going to force them to actually invest in that. They could have done it five years ago, 10 years ago, but they're going to do that now because they're forced by the law. So it's not the bad thing. It's just going to be putting some dollars towards your internal operations and organization that is going to then impact your end consumers in a good way. Even you're going to review the way you value your own products, the way you communicate on your own products.

(35:01):

So probably marketing teams will have to adapt and it's going to improve their work. I do believe that it's going to, for the companies that are less ethical, it's going to force them to be more ethical. So probably they will be selling more and getting more clients that are looking for that. So that's one thing for the smaller ones is just prevention and helping them continue to structure their company in the right way so that they don't end up like those big companies who have been having lots of legacy systems and building their company because of the legacy systems. So it's just forcing them to be more aware of their processes so that actually they invest in the right tools that they need to accelerate the production of this information to their own end consumers. Yeah.

Peter Crosby (35:50):

Well certainly listeners, you can already tell that Raphael is a great thinker and is super articulate on where this industry and going and what it's doing. So I highly recommend that you follow him on LinkedIn. There's a lot of great, very useful content coming across his channel. And then of course, more information@valtech.com if you want to know more about some of the ways in which they've been able to help their clients on this journey. And Raphael, thank you so much for joining us. We really, really appreciate it. It's interesting new world that's happening very fast and we appreciate that you've getting our listeners up to speed.

Raphael Gutierrez (36:40):

Yeah, thank you very much Lauren, Peter for having me today actually where I'm doing this year. Lots of events, inviting lots of clients to talk about data governance and certain tactics to actually prevent that digital passport, sorry, prevent, anticipate the digital only we could. No prevention. No prevention on that. No anticipation of this. And actually this is something I've been discussing with clients in five years. Five years ago they were looking at me with big eyes saying that please don't invest any penny of my money in data governance, just in building the right technology. So today I'm pleased that since two years now, they are really trying to do the right thing in terms of organization to make it happen. So I think that with those type of laws, it just forces the right tactics for companies to provide a better space for their employees to do their work in an efficient way and to consumers to be buying better products. So I'm super happy and you'll be seeing, as you said on my LinkedIn, a few talks around that in the luxury industry a lot in the next few months. So thank you again a lot for your questions and for bringing that topic to the forefront.

Peter Crosby (38:02):

Thanks again to Raphael for joining us. The DPP is definitely in its early stages, but moving fast. So the DSI will be there as best practices are revealed. Stay in touch with it all by becoming a member at digitalshelfinstitute.org. Thanks for being part of our community.