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Transcript
Spencer Shute is a principal consultant at Proxima. He has extensive experience in supply chain operations and sourcing in the retail and manufacturing industries and has implemented procurement and supply chain best practices throughout multiple organizations, driving process efficiencies, rate transparency and cost savings.
Shute has previously managed a North American logistics supply chain, negotiating all contracts, developing partnerships between carriers, auditing all freight payment practices/monthly accruals and implementing network optimization projects. He consistently uses analytics to drive business decisions, including mode selection, consolidation, and management of freight term conversion projects. He has also led supply chain procurement teams, focusing on data transparency, supplier relationships, and effectively managing supply chain spend.
Shute has experience leading teams and initiatives in a variety of logistics categories, ranging from transportation to packaging to performance management at companies such as Wayfair, Gates Corporation, and Staples. He currently leads supply chain projects across the U.S. for Proxima, a procurement and supply chain consulting firm with over 25 years of delivery and sustainability experience.
David Maloney, Editorial Director, DC Velocity 00:01
Artificial intelligence is here to stay. The logistics behind Mother's Day. And business challenges for the second half of the year. Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Rite-Hite. Are you considering automation at or around the loading dock? Loading dock design, equipment, and controls application for these projects can be complex, but Rite-Hite can help your automation project become a success. Visit with a Rite-Hite industry expert to schedule a customized customer experience at our new world headquarters in Milwaukee, Wisconsin. Go to ritehite.com to find out more.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham, will be along to provide their insights into the top stories of this week. But to begin today: We see talk of artificial intelligence just about everywhere these days. These new technologies hold the promise of making life better in a number of ways. But how can artificial intelligence be applied to the logistics industry? To find out, here's Ben with today's guest.
Ben.
Ben Ames, Senior News Editor, DC Velocity 01:25
Thanks, Dave. One of the big buzzwords in logistics technology today is "artificial intelligence," and AI gets applied to tasks all across our sector — everything from route planning for last-mile delivery, robotic picking arms, demand planning, inventory levels, WMS software. And of course, it's in our daily lives outside of work, too. Many people have heard of the popular chatbot called ChatGPT, or if you have a smartphone, it's the voice interface on that smartphone. But how do you really apply AI to the challenges that truly matter for your own logistics business? Here to bring us up to speed on that question we have our podcast guest this week, and he is Spencer Shute. Spencer is the principal consultant at Proxima. They're part of Bain & Company, a supply chain and procurement consulting firm. Welcome Spencer.
Spencer Shute, Consultant, Proxima 02:21
Great to be here.
Ben Ames, Senior News Editor, DC Velocity 02:22
Our listeners on this podcast, of course, are supply chain and logistics managers, so maybe we can start off just by talking about how AI helps specifically with that sector — what sort of opportunities or benefits are supply chain companies gaining by implementing AI?
Spencer Shute, Consultant, Proxima 02:39
Yeah, so at the moment, there's a lot of different things happening in the marketplace. And people are really trying to understand how it can be a part of it. What we're seeing the biggest trends in right now is using AI for data analytics and being able to crunch data much faster, real-time, than what was historically done, and also being able to forecast more of, like, bottlenecks or disruptions, things like that, that have been harder to analyze in the past. And so using that AI software to help unlock abilities to be more reactive, or even proactive, in the overall supply chain.
Ben Ames, Senior News Editor, DC Velocity 03:21
Yeah, those bottlenecks are always lurking right around the corner, it seems, nowadays. So that sounds great, critically important, of course, but AI, at the same time, can be pretty complex to understand. How can business leaders conduct an honest assessment of their understanding of AI and decide whether it's time to invest in the technology?
Spencer Shute, Consultant, Proxima 03:42
So, I think when you start to look at the honest assessment piece of it, the piece where a lot of logistics managers or supply chain managers need to start is to understand, what are they trying to solve today? Are they looking for a networkwide platform? Are they trying to solve, you know, outbound, inbound? What is the problem they're trying to solve? And if you can properly assess that, you can then start to look at the different options that AI has, and be able to really start to understand what that integration process would look like. When you're looking at that, not only do you want to look at your current problem today, but what's your forecast of, like, where you're going to grow, what do you want to control going forward, and how does that play into the whole AI platform? Those are some of the high-level things that people need to be looking at, to really start to make that judgment.
Ben Ames, Senior News Editor, DC Velocity 04:35
Sounds smart. So, if a logistics manager does decide to take the leap and invest in AI, what can he or she expect? How can AI help companies understand those supply chain disruptions are bottlenecks or challenges that we mentioned?
Spencer Shute, Consultant, Proxima 04:53
I think you expect a lot of talk around the different technology, different platforms, cloud computing. So, there's gonna be a lot of that speak that supply chain managers will have to get up to speed with to make sure they fully understand how it operates, and how to integrate their systems into the AI platforms. The really big key piece is understanding how data flows, and making sure that your data is being read correctly, that your data is accurate, so that when you apply it into these AI systems that help with that, you know how to validate and verify that what you're getting back from them is actually implementable and that it's actionable in terms of being able to execute against what the AI platform has predicted.
Ben Ames, Senior News Editor, DC Velocity 05:38
Gotcha. It sounds like what we're talking about is one of those oldest rules and all of IT, sort of a garbage in, garbage out situation, so it really depends on the data that's coming from your specific company.
Spencer Shute, Consultant, Proxima 05:50
Exactly. That's exactly what it is. Now, one of the benefits to AI today — and we're still working on an exploring [what] companies are doing — is because there's so much access to the AI platforms — and you mentioned like chatting up and things like that — that one of the benefits is that it can, like, go out and search a lot of this information and get information for you and be able to connect it in real time. But there's still got to be that validation aspect of it, and making sure that what you're connecting to and what you're getting back actually applies to your network and how you're running your supply chain.
Ben Ames, Senior News Editor, DC Velocity 06:24
Now, of course, though, you know, not every logistics company is like a[n] enterprise-scale 3PL or, you know, large trucking fleet or something. There are small — a lot of small companies in our sector, actually. So, how would it affect companies if they chose not to explore AI technology now?
Spencer Shute, Consultant, Proxima 06:45
Well, to choose not to today, I think, because the technology is so new, they won't necessarily be behind the eight ball, as you say, in terms of being left out or not being enough. There are other options and platforms out there. You know, we're talking about digital twinning, we're talking about cloning, and you know, the metaverse. There's a lot of different things happening from a digital perspective that companies can go out and explore, but I think that those that choose not to go after technology, really need to understand what their objectives are and how they're managing it, and are they managing it as effectively as they can? Do they actually have robust processes in place to make sure that they're staying ahead of their competition?
Ben Ames, Senior News Editor, DC Velocity 07:30
I just want to circle back, because I may have made a sort of assumption in my last question there, because I implied that maybe smaller companies would find it more difficult or expensive to adopt AI than bigger ones. Is that a fair assumption that I made?
Spencer Shute, Consultant, Proxima 07:42
It can be. I think the one thing that we need to look at is, understand — that kind of goes back to my point a little bit before — is understanding what you're trying to solve. You know, there may be smaller applications out there that a smaller business, or with less revenue, things like that, would be able to apply and be able to acquire without getting the full-blown process, or, you know, application that maybe has a lot more bells and whistles that they're not even going to use today. So, being able to, like, really understand what modulars are available, and different players out there, is going to be key for them to be able to get into the space.
Ben Ames, Senior News Editor, DC Velocity 08:21
Thank you. And, finally, how about timing? AI, by the measure of any comparable technology, is still a pretty new one. So, you know, is it too soon to adopt it here in 2023? Or should they sort of treat it like, you know, some people wait till the new and improved cellphone model comes out before they buy one.
Spencer Shute, Consultant, Proxima 08:41
So, yeah, it's gonna be a little bit of a mixed bag in terms of the early adopters and those that choose to wait depending on how the technology goes. They ultimately, those to have a little bit more of an agile supply chain now will likely adopt sooner, because they'll be able to go through and do the growing pains pretty quickly. Whereas those that maybe have a fairly static or, you know, very complex supply chains are going to wait a little bit more until the technology is more developed and they see how other companies actually implement it. But in terms of timing, I think, you know, starting to explore what your options are today, it's not too late to start exploring, but that doesn't mean you have to implement right away.
Ben Ames, Senior News Editor, DC Velocity 09:26
Got it. Really interesting stuff. Spencer, we really appreciate your taking the time to join us here on the show today.
Spencer Shute, Consultant, Proxima 09:31
Happy to stay close to the space as everything continues to move, and as technology does, it's always advancing, so it's always interesting to see what players do and how they implement it.
Ben Ames, Senior News Editor, DC Velocity 09:42
Awesome. Well, we'll be sure to visit with you again and get caught up on this. Our guest today has been Spencer Shute from Proxima which is part of Bain and Company. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 09:54
Thank you, Spencer and Ben. Now let's take a look at some of the other supply chain news from the week. Week. Victoria, Mother's Day is this Sunday. And you wrote a story this week about how logistics companies have geared up to help moms everywhere to celebrate. Can you share more?
Victoria Kickham, Senior Editor, DC Velocity 10:11
Absolutely, Dave. Happy to. The logistics industry, as you say, has been preparing for Mother's Day this weekend, when more than $3 billion worth of flowers are expected to be delivered to moms nationwide. That figure comes from a company called Statista.com, and it's in line with other big numbers on anticipated spending for the holiday. Consumers expect to spend nearly $36 billion for Mother's Day overall this year, and that's according to the National Retail Federation, and that figure's about $4 billion more than they spent last year. Much of that will be spent on the flowers that enter the United States from Latin America via Miami International Airport. Flower imports into Miami account for about 90% of all flowers entering the country by air — that's according to the airport — and much of that volume occurs between Valentine's Day and Mother's Day. So, it's a busy time in general, but with an especially heavy burden on the cold-chain network, which is a vital element in transporting all of those beautiful blooms.
David Maloney, Editorial Director, DC Velocity 11:08
Well, that is certainly a lot of flowers. Victoria, is this considered the peak time for the flower industry?
Victoria Kickham, Senior Editor, DC Velocity 11:14
Well, it seems to be yes. Logistics and transportation company C.H. Robinson said this week that many of those flowers will pass through its 50,000-square-foot temperature-controlled warehouse at Miami Airport, and company leaders there said that truckload demand for florals can increase more than 3,000% during those peak-season months, so that's a big swing in demand that you see between Valentine's Day and now. I mentioned the cold chain earlier; flowers needed to be kept at about 35 degrees Fahrenheit at every stop on their journey to ensure freshness, so we're talking about the need for both temperature-controlled warehouses and trucks. And to your point, Dave, that's a lot of flowers to handle, and it reflects an increase in overall trade through the Miami region in general. Logistics companies have been expanding there recently to accommodate growing demand for transportation of perishables like flowers, but also for things like food and pharmaceuticals. One example: FedEx Express completed a $72.2 million expansion project at its Miami airport location two years ago, and that project nearly doubled its main sort facility and added the largest cold-chain facility to the FedEx network. So a lot going down going on down there in Florida.
David Maloney, Editorial Director, DC Velocity 12:23
Yeah, it certainly seems that way. And let me take this opportunity to wish youm Victoria — you're a mom — so Happy Mother's Day.
Victoria Kickham, Senior Editor, DC Velocity 12:30
Thank you very much.
David Maloney, Editorial Director, DC Velocity 12:31
Thanks, Victoria. And I guess to moms everywhere, including my own, we hope you have a great day. And now Ben, you wrote a story this week about some of the business challenges that logistics providers foresee for the second half of 2023. Can you share what these challenges are?
Ben Ames, Senior News Editor, DC Velocity 12:48
Yeah, challenges is right. We live in tumultuous times. Of course, the U.S. lifted its emergency declaration for the pandemic this week, so that suggests that we may have some sort of return to normalcy. But of course, it was just in time for both consumers and companies to have their hands full dealing with those high inflation rates, high interest rates that we're all coping with. So, this week, we got some more detail on exactly what's keeping supply chain professionals awake at night as they look into the second half of 2023 — that's right around the corner. Here's the quick answer: The top three things that were troubling them, looking at that forecast, is the chance of a U.S. recession; geopolitical risks; and rising operating costs. The information comes from a survey by Container xChange. They're a German company that provide an online container logistics platform. They surveyed 1,200 people in April, so it's quite a broad survey here, and they were in supply chain positions such as freight forwarding companies, container leasing companies, shipping lines. So, for me, those top three choices weren't very surprising. Those are common headaches nowadays. But what caught my attention a little bit more was list of things that actually came after those top three options that are concerning supply chain professionals looking at the second half of the year. So, the things after those top three were labor strikes; declining freight rates; contract negotiations — well, [that]'s also a labor thing; port operation disruptions; and finally, the pandemic. So, speaking as a reporter, those labor strikes, especially at ports, is something that we've been writing about a lot in recent weeks, so I was surprised that there wasn't more concern about it. And just, can you imagine if somebody told you years ago, a year ago that fears of a pandemic would come in last on a list of eight things that stressed out supply chain professionals?
David Maloney, Editorial Director, DC Velocity 14:47
Yeah, Ben, I'm surprised at those results also. Did the report explain why the top choices were so concerning?
Ben Ames, Senior News Editor, DC Velocity 14:55
Well, yeah. About the economics: a U.S. recession would, of course, hit just about everybody in the business world, globally as well as domestically. Christian Roeloffs, who's the CEO of Container xChange — that's the company that did the survey — said that interest hikes by central banks due to sticky inflation has put the balance sheets of many lenders under pressure, essentially forcing them to mark down their assets or sell them off at a loss to cover short-term liquidity needs. So, that kind of stuff makes people nervous, of course, especially their company accounts. But to my eye, the report also talked about geopolitical tensions that could have an equally big impact. Specifically, the report cited, of course, both Russia's invasion of Ukraine, but also rising tensions between China and Taiwan. So, on that second front, global trade could be impacted because many countries are dependent on investments that have been made over recent decades by China. They've poured a lot of money into infrastructure projects, like, you know, bridges and roads, terminals and ports throughout, particularly, South America and Africa. And for Taiwan, of course, they're the world's biggest manufacturer of semiconductors. So, you know, if there's tension, or, you know, God forbid, war between them, that, you know, there are a lot of implications that could really ensue. As Roeloffs said, it could potentially lead to a fractionalization of trade blocs. Potentially [in] a world where trade becomes less efficient, trade becomes restricted to certain blocs. So, in a world where we all rely, of course, on international flows of goods, that one got my attention.
David Maloney, Editorial Director, DC Velocity 16:41
Yeah, it certainly will be an interesting period that we'll see in international trade.
Ben Ames, Senior News Editor, DC Velocity 16:42
Yeah, we'll keep an eye on it.
David Maloney, Editorial Director, DC Velocity 16:43
Thanks, Ben. We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, our thanks to Spencer Shute of Proxima for being our guest. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded each Friday.
Speaking of subscribing, check out our sister podcast series; it's called Supply Chain in the Fast Lane, and it's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. Subscribe wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by Rite-Hite. Facilities turn to automation for a multitude of reasons: short staff, increase in demand, repetitive or even dangerous jobs for humans. Whatever the reason, Rite-Hite is here to help as your partner of choice for loading-dock design, equipment, and controls applications for any automation you are looking to bring to your operations. Learn more at www.ritehite.com. That's R-I-T-E-H-I-T-E dot com.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. And to moms everywhere, we hope you have a great weekend.
Articles and resources mentioned in this episode:
- Proxima
- Logistics companies gear up for Mothers' Day
- Second half of 2023 holds challenges for freight forwarding industry
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
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