Diane Rand is Associate Editor and has several years of magazine editing and production experience. She previously worked as a production editor for Logistics Management and Supply Chain Management Review. She joined the editorial staff in 2015. She is responsible for managing digital, editorial, and production projects for DC Velocity and its sister magazine, Supply Chain Quarterly.
This story first appeared in the Quarter 2/2023 edition of CSCMP’s Supply Chain Quarterly, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media’s DC Velocity.
The pandemic served to make supply chain management a household name. Consumers were suddenly aware of what a supply chain could do and what it could not do during a time of global disruption. For MIT Professor Yossi Sheffi, this felt like a perfect opportunity to educate the masses on a field he’s been studying for many decades.
In Sheffi’s newest book, The Magic Conveyor Belt, he explains “what supply chains are, how they operate, and how the integration of advanced technology with people and processes will be the hallmark of future supply chain management.”
Sheffi has long been on the cutting edge of supply chain trends. In 1987, for example, long before the boom in logistics software, Sheffi co-founded Princeton Transportation Consulting Group, which developed decision-support systems for the motor carrier industry. He went on to found three other technology companies before 2000, the last being Logistics.com, an online resource for logistics software, services, and information that was acquired by Manhattan Associates in 2003. Sheffi also co-founded one of the first nonasset-based third-party logistics service companies in the United States in 1988.
His research interests, however, have not been confined to supply chain technology. In books like The Resilient Enterprise, Logistics Clusters, The Power of Resilience, and Balancing Green: When to Embrace Sustainability in a Business (and When Not To), he has explored topics such as supply chain resiliency, industrial clusters (in the context of logistics and supply chain management), and sustainability as well as technology and digital transformation. In all of these endeavors, Sheffi has striven to make his work accessible to the general business audience.
Now, with his newest book, he seems to be taking a moment to step back and marvel once again at how complex yet efficient the modern supply chain is (and then share that appreciation with the reader).
When Sheffi is not busy writing books and teaching classes at the Massachusetts Institute of Technology (MIT), he serves as director of the university’s Center for Transportation and Logistics. He is also a sought-after speaker at supply chain industry events. For instance, this fall, Sheffi will be a keynote speaker at the Council of Supply Chain Management Professionals’ (CSCMP) Edge Conference in Kissimmee, Florida.
He recently spoke with Diane Rand about his new book and why technology will be the key to the future of supply chains.
Q: Can you explain the title of your new book? What exactly is “the magic conveyor belt”?
A: The idea for the book came to me during the pandemic, when people started learning more about supply chain management. All of a sudden, everybody I met would ask, “You work in supply chain? How long have you worked in the industry?” I would tell them, “For about 40-plus years!”
I would go on to explain to someone who doesn’t understand what’s going on [within a supply chain] that [a supply chain] seems like magic. Because the idea that somebody can collect material somewhere in the bowels of China and go to multiple suppliers, build the product, and send it over the seven seas through different regulatory and customs regimes is magical. In fact, I tell people that if they really understood what’s going on [in supply chains], and how complex the process is, they would never be disappointed when they don’t find something on the shelf or if Amazon doesn’t have it in stock. Instead, they would be amazed when the product they want to buy is there on the shelf.
Once you understand what it takes to develop a product, procure the material, and do all the planning that happens even before a product is made, [you realize that] it’s a big, complex network. So that’s why we titled the book “The Magical Conveyor Belt.” The conveyor brings product from anywhere to everywhere magically.
Q: Your book has four main sections, but let’s talk about the chapter on technology, specifically artificial intelligence (AI). Why do you believe that AI will play a crucial role in the future of supply chain management?
A: First of all, I believe that AI is going to change society and change business, which includes supply chain management. I think generative AI, like ChatGPT, will play a crucial role in the future. While it is very hard to predict exactly how this technology will influence and change supply chains, I believe it can be a transformative technology like the internet. When the internet started, who could have predicted that we would have Google Maps or an endless number of apps to do everything?
What I do know is that there are always side consequences when technology is applied and adopted within supply chains. In the second part of my book, I give a historical overview of what happened in various industrial revolutions. When Ford started the assembly line to build cars, the number of workers at Ford went from a few hundred to about 150,000 during the height of the Model T production. People are often afraid that technology will take over jobs. But in fact, more jobs were created. Beyond the Ford assembly line, people now had cars and started traveling more, which led to the opening of motels and restaurants along highways to accommodate travelers. The whole hospitality industry flourished with millions of new jobs.
I have a quote in the book from the CEO of jd.com, who said a few years back, “I have 80,000 people working in warehouses; I’d like to cut it by half.” Well, five years later, he has three times as many people, because when technology gets more efficient, people do more of it. It’s the basic supply and demand model that drives supply chains and technological advances.
But technology can also bring about societal changes. Let’s look at what might happen when a technology like 3D printing comes to the forefront of our supply chains, for example. I don’t think we’ll start printing new toasters at home, but we’ll be able to print some products locally.
If we’re able to 3D-print products in the back of a Walmart or UPS store, this will have vast implications for our supply chains. First, we’ll have to bring raw material to the locations, but stores will no longer need to display thousands of products because we’ll be able to make them on demand. Having this capability requires a totally different mindset. This is just one example of how AI can impact the future of our supply chains and why I feel it is such a foundational technology.
Q: What are some problems that you feel AI will help supply chain managers solve in the future?
A: We are starting to compile a lot more data. With more sensors embedded in moving trucks and in packaging, the availability of that data will continue to grow. The more accurate the data is, and the more of it we have, the main contribution [of AI] will be the analysis of this data, being able to look at the cause [of what’s happening]. One of the things that the new AI can do is not only analyze numbers, but also look across the internet at demand patterns, based on text, videos, or weather patterns, and connect a lot of these dots and come up with forecasts.
Let’s say there are reports of congestion at the Mexican border today. A truck carrying product XYZ is now going to be eight hours late. We made this delay estimate based on the road congestion and by collecting a lot of data. AI can estimate how long the delay will last. It will give us better visibility and provide better forecasts as more data is collected over time.
Q: In the midst of the explosion of automation and AI in the supply chain setting, what role do humans continue to play?
A: We need people to oversee the automation and AI, to make sure what it’s doing is making sense. For example, right now, a lot of nonsense is being generated by ChatGPT. Even as the AI evolves, I believe it will be important to continue to have supervision over generative AI. In fact, one of the important jobs in the new economy will be to monitor automated, AI-infused systems. This is a tough and boring job, and companies will need to develop the means to keep the monitors alert and able to intervene when needed.
There’s another issue that’s also very important: The more we’re digitizing the world, the more we are subjected to cyberattacks. We need to know how to do things manually just in case the technology is compromised. For example, more robots and machines are helping doctors in the operating room. But if all of a sudden a robot quit working, you’d need a doctor to step in and finish the surgery. We will always need humans, no matter how advanced the technology becomes.
And continuing with the medical example—an AI system can help detect cancer at an early stage. No machine, however, can replace the doctor and nurse who bring the message to the patient with compassion and nuance, and go through the treatment options.
Q: You say in the book that there are six areas where humans surpass computers. What are those areas?
A: Since people live in the physical and social worlds, they have a much better ability to detect changes or discrepancies between what’s normal and what’s an abnormal situation. The second area is that people have a moral code, which machines don’t necessarily have. The third is that people are much better at adapting to changes in situations and coordinating processes when disruptions occur.
The fourth area, I would say, is creative drive. Take the fashion industry, which seeks out novelty—new material, new design services. People are better than AI at seeking competitive advantage. The fifth area is that people have empathy—a machine cannot replace the smile of the cashier in the local supermarket. And the last area where people surpass AI is assessing risk tolerance. Computers can generate actionable steps based on probability of risk, but they can’t factor in those social and moral considerations that can impact my decision to take a high-risk/high-reward option or a safer option.
Q: What are some ways that companies can start thinking about how they’ll integrate humans and technology to improve how they manage their supply chains?
A: You see this already happening today. If you think about Amazon warehouses, their robots do the same thing that Ford did 100 years ago. In Ford’s assembly line, instead of people going to the car, they brought the car to the people. The assembly line was moving, and the people were static. It’s the same thing that has happened with the Amazon robots. Instead of somebody going in and collecting stuff around the warehouse, the workers are stationary. Today, however, the Amazon robots are much more complex than the Ford assembly line. They are all fueled by AI, and that’s how they avoid running into each other.
As technology continues to advance, we’ll have to teach people how to do some work differently. By and large, there’ll be a lot of instances where AI and other technology will automate some of the tasks that are part of the job, rather than entirely replace the work.
Take ChatGPT, for example. I’m sure writers are worried about the future of their jobs. Yet I’m of the opinion that rather than worry about the technology, we just have to teach people how to use it best. I started experimenting with ChatGPT, prompting it when I want to write something. And it writes a starter idea. Sometimes it’s stupid, and I just ignore it. But sometimes, it gives me something to start with. I can change it and add to it, which makes it much easier than starting with a blank page. ChatGPT, to me, is augmenting my work. It makes it easier to write a short email, a blog, whatever, and I’m becoming more efficient with this technology the more I use it. It’s augmenting my main job so I can do more in my limited time.
My students always ask me how they can keep up to date [on new technologies], and I always tell them to “never stop learning.” Take online courses, go to conferences, read journals, always keep learning because otherwise, you will be passed over.
Q: What skills will supply chain managers need in order to work effectively in this new environment?
A: The most important thing is to acquire critical thinking skills and to keep an open mind. It’s critical to make sure you are exposed to many different viewpoints so you can debate ideas and learn how to solve difficult problems with empathy and understanding. In supply chain management, you have to be able to sell, debate with people, relate to others, and make connections with your contemporaries.
Specifically, I tell my students to get comfortable with being uncomfortable. You may feel uncomfortable when somebody expresses an opinion or a point of view that you don’t agree with. Don’t get insulted. Think to yourself, maybe they know something that you don’t and question why they have this point of view. Learning how to talk about our differences in a civilized and respectful way will get you far in all areas of your life. In the next few years, more people are going to be more anxious, so the ability to relate will be at a premium.
Q: How are you and MIT preparing your students for this new reality?
A: Our program has changed direction dramatically over the last 25 years. When we started, it was focused heavily on mathematics. Yes, we still teach new technologies and mathematics and computers, but now we invest more time in teaching our students communication skills—being able to express yourself in writing, giving more attention to what you might call “soft skills.”
I still remember about 15 years ago, a senior executive told me, “Your students are very, very smart. But they’ll end up graduating MIT and working for a Harvard graduate who’s half as smart and gets paid twice as much.” He advised me to put more emphasis on soft skills because that’s how students will learn how to work better in teams. I think his advice is still valid today.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."