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Spencer Shute, a principal consultant at procurement and supply chain consulting firm Proxima, where he leads supply chain projects across the U.S. He is a procurement professional with an analytical focus and has extensive experience in supply chain operations and sourcing in the retail and manufacturing industries. Shute 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 utilizes 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.
Additionally, Shute has experience in leading teams and initiatives in a variety of logistics categories, including transportation, packaging, and performance management, for companies such as Wayfair, Gates Corporation, and Staples.
David Maloney, Editorial Director, DC Velocity 00:01
Still no end in sight for the automotive strike. Who in our industry is investing in artificial intelligence? And what kind of tasks is artificial intelligence automating? 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 PERC, the Propane Education and Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
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: While negotiations are ongoing, the strike by the United Auto Workers is entering its second week, and may expand out to other plants. Of course, the longer this goes, the more it affects supply chains. To better understand what is going on now and what may happen next, we welcome back Spencer Shute, a principal consultant at Proxima, a company that provides procurement services to clients worldwide.
Welcome back, Spencer, it's good to have you with us again on Logistics Matters.
Spencer Shute, Consultant, Proxima 01:32
Hi David. Happy to be back.
David Maloney, Editorial Director, DC Velocity 01:35
And of course, as we mentioned, the United Auto Workers here in the US have now been on strike for about a week. What's the current status of where things stand with the strike?
Spencer Shute, Consultant, Proxima 01:44
So yeah, a lot of the current status is basically the status quo of what's been happening over the last week. There's not been a lot of movement in the negotiations, as both parties still remain to be quite far apart in terms of what they hope to achieve with the negotiations, and as of today, they've announced at noon today there's likely going to be an expansion of the strikes, given that, how far apart they are right now.
David Maloney, Editorial Director, DC Velocity 02:09
How long do you think this will last, and what kind of impact is it going to have on consumers?
Spencer Shute, Consultant, Proxima 02:15
How long this is going to last is still the big question I think everybody has in mind. The last strike in 2019 lasted about 40 days, and the way this one's going, it could last longer, however, [UAW president Shawn] Fain has said that he is is going to look at changing the way the strikes happen and keeping it a little bit more unpredictable, where they may expand or change who is striking and when. So, that may incentivize the auto manufacturers to end the strike sooner and to come to better terms, but ultimately, how long this is going to last is still the big question.
David Maloney, Editorial Director, DC Velocity 02:53
Of course, this does affect our supply chains, especially when you look at part providers and other suppliers. What kind of effects will this have directly on supply chains and indirectly on other supply chains that may be affected by it?
Spencer Shute, Consultant, Proxima 03:08
Yeah, so there's some potential [to] have significant impacts across the automotive supply chains, particularly those providers that provide OEM — original equipment materials — for the these automated factories, because a lot of those products are made specifically for the vehicles being produced, or, and/or often are branded for each of those brands, so they have the potential to have quite a bit of impact. Some of your more generic parts providers, they may have the opportunities to look at other manufacturers and seeing where they can use their products. But ultimately, the longer this strike goes on, the more impacts to the supply chain, because there's going to be a surplus of certain materials if the suppliers continue to produce those products, which is then going to impact their ability and cash flows to pay their workers, which may create layoffs or situations where they have to reduce their production schedules or their staffing needs to accommodate the lower inventory and lower ordering.
David Maloney, Editorial Director, DC Velocity 04:09
And of course, in trying to find other buyers for some of those parts, cars are very specific these days. Will that actually work, or can they sell this to aftermarket or replacement-part dealers? Is that a viable strategy?
Spencer Shute, Consultant, Proxima 04:25
Depending on what their products are, [in] most cases, OEMs, they have the opportunity to take a look at aftermarket. However, with a lot of these being new builds, the aftermarket needs aren't as high right away. The demand isn't there for replacement parts. If they're more of a generic part producer, they have the opportunity to go to other markets in some cases, but it'll also be limited based upon whether it's specifically for newer-build vehicles or an older-build vehicles that require more replacements at this time. So, in most cases, it's not going to be as simple as just going and finding a new customer base for a lot of these suppliers.
David Maloney, Editorial Director, DC Velocity 05:07
And of course, as we've seen with incidents in the past, the supply chain ripples tend to go very broad. It's not just segmented to the automotive industry, but when you have suppliers and many other people involved in the manufacturing of it, this can go much farther than just beyond the auto industry itself. What kind of effects will it have on other supply chains?
Spencer Shute, Consultant, Proxima 05:28
Exactly. I mean, this could have a ripple effect across many supply chains, primarily because, you think about the vehicles being a primary driver within the U.S. and accounting for about 3% of our total GDP, and when you look at that, when this starts to slow down parts of the supply chain and what others other manufacturers have, what it does is it potentially creates imbalances in inventory flows, which then creates an issue with the transporting of these products. It creates issues with the raw material providers who are trying to staff and produce enough raw material for the demands of the products that ultimately get finished. So, this has the potential, especially the longer this strike goes on, to really start impacting other aspects of the economy, and we've seen estimates that if a full strike is in place, every 10 days could cost the economy about $5 billion.
David Maloney, Editorial Director, DC Velocity 06:28
You brought up transportation, and of course, the transportation industry has been in a bit of a freight recession of late. What effect could this have, then, on the transportation of those parts that are not being put into automobiles, as well as finished automobiles and other areas that might be affected?
Spencer Shute, Consultant, Proxima 06:44
So, if we start to see a reduction in movement of these parts from a production standpoint because the orders are down by the manufacturers, ultimately, it's going to drive even more capacity into the market, and the market, as you said, has been turning down and there's been excess capacity. Even as we're starting to head into peak season and people are, shippers are getting their products in place for peak season, we're still seeing a downturn in the market, and that could potentially further if the strike continues on.
David Maloney, Editorial Director, DC Velocity 07:18
Are there supply chain benefits to the other automakers, the competitors of these three large major automakers, those who are not a union shop, the nonunion companies such as Tesla and Toyota and some others? Are there competitive advantages for them in having the strike from a supply chain standpoint?
Spencer Shute, Consultant, Proxima 07:37
Tesla has a unique situation where their supply chains are a little bit different. They don't require a lot of the same parts that a lot of your combustion engines do, so that's going to be a completely different supply chain in terms of the supplier base and whatnot. Now, the other manufacturers, like you mentioned, like Toyota, potentially BMW, who don't have union shops, they could potentially benefit to some regard in this only if their suppliers are, have crossover and are already making a lot of like the Toyota or BMW parts, because there may be additional capacity for them to get more products sooner. But a lot of the manufacturers have branded products for these auto manufacturers, the Big Three, and so it's not as simple as just converting lines over or stopping production on one line. Oftentimes, a lot of these products are made at specific facilities, and so it could take time, but ultimately, there is some potential benefit for additional capacity to come online for these manufacturers.
David Maloney, Editorial Director, DC Velocity 08:44
As we mentioned at the beginning of our discussion, they're looking at maybe having random strikes popping up, or we may not even be aware of where these are going to be. How is that going to affect supply chains when you don't really have time to plan?
Spencer Shute, Consultant, Proxima 08:57
And that's, I think, the biggest negotiating tool that they're trying to use, is kind of that random, unpredictable type of striking, where it's not a uniform strike across the board and where they could potentially escalate the strikes. What we've seen so far is they're primarily striking at the three facilities that do finished assemblies, so they're not striking at the facilities yet that do a lot of the manufacturing and the actual, like putting the engines and things like that together. So, as this goes on, it will likely start to impact the other parts of the supply chain, where orders are starting to be stopped for suppliers and where manufacturing actually has to come to a complete halt. Whereas the manufacturers, the auto manufacturers, were able to predict a little bit this advance and start getting a lot more inventory on hand, so there wasn't going to be in this initial impact to the total supply chain, but, like I said, with the unpredictability that they've already stated they're gonna have, there's potential that it could impact it pretty quickly.
David Maloney, Editorial Director, DC Velocity 09:59
All right, so we may have a number of disruptions coming that have not been prepared for, and this may drag on for some time yet.
Spencer Shute, Consultant, Proxima 10:08
Correct.
David Maloney, Editorial Director, DC Velocity 10:10
We've been talking to Spencer Shute, principal consultant with Proxima. Thank you, Spencer, for joining us and updating us on what's going on with the strike.
Spencer Shute, Consultant, Proxima 10:18
Yeah, thanks for your time.
David Maloney, Editorial Director, DC Velocity 10:20
Now, let's take a look at some of the other supply chain news from the week. Ben, you wrote a couple of stories on artificial intelligence this week, and the growth of developments within supply chain companies. What kind of tasks are they looking to make more efficient with artificial intelligence?
Ben Ames, Senior News Editor, DC Velocity 10:36
Yeah, you can't follow much business news lately without hearing about artificial intelligence, specifically, generative AI. There are variations like ChatGPT and like Bard, and indeed, many companies see potential there, and they're experimenting with ways to apply them to supply chain tasks. Nobody knows for sure — it's early days — exactly how, but we did see some research that at least shows the first few steps. This came from an executive coaching firm called Vistage. They had found that six out of 10 CEOs of U.S. manufacturing firms are at least applying AI at their companies. Exactly how they're doing it, the most common way was for customer engagement tasks. That means things like sales and marketing. That was followed by business operations, talent management and hiring, and a handful of them were applying it to financial reporting.
David Maloney, Editorial Director, DC Velocity 11:36
Okay, that's very interesting, but it sounds like those are all over the map and very different applications.
Ben Ames, Senior News Editor, DC Velocity 11:43
Yeah, you're right, I didn't see a clear pattern there either. In fact, those conclusions weren't all that different from another report that we saw. This one came from the business group our listeners may have heard of called the Conference Board. The Conference Board report had similar numbers.They said very close to six and 10 workers themselves are using generative AI on the job. However, only a quarter of the respondents said that their organization has a policy related to the use of generative AI. Another quarter said that such a policy is under development. So, you know, there's a lot of experimenting going on right now, not a lot of control or rules on it. In the second report, as for the specific types of work, as we're discussing, they found that the workers used it mostly for drafting written content, and the second way was brainstorming ideas, and also conducting background research. So, those things were a little bit more closely related. But for me, the report also had an interesting twist here. They asked those workers about the quality of the results, and they found that about a third said that the quality of generative AI is about equal to a novice worker; something like half said that the quality is equal to an experienced worker; and just 10% said that generative AI produces results that are equal to an expert worker.
David Maloney, Editorial Director, DC Velocity 13:14
Right, and although, of course this technology is still in its infancy, so I imagine we'll see significant improvement as artificial intelligence progresses.
Ben Ames, Senior News Editor, DC Velocity 13:24
I think so, and we're experimenting with it a little bit on the magazine as well ourselves, so we'll continue to report from the frontlines.
David Maloney, Editorial Director, DC Velocity 13:31
Thanks, Ben. And Victoria, sticking to the theme of artificial intelligence, you also wrote a story about some research on the kinds of companies making investments in artificial intelligence. Can you share what you found?
Victoria Kickham, Senior Editor, DC Velocity 13:44
Sure, absolutely. So, as Ben said, all the momentum we see around artificial intelligence continues to grow, and this week another survey — this is a pretty big one — of businesses from around the world, put some numbers behind it. They show that most companies plan to increase their AI investments over the next 12 months. This survey was done by a San Francisco-based web-search solutions provider called Lucidworks. And they surveyed more than 6,000 employees involved in AI-technology decision making, and they found that the vast majority — more than 90% — said their companies plan to increase those investments. The survey pulled professionals from a wide range of industries, as I said, but it included responses from a slice of the supply chain. There were about 400 in manufacturing and business-to-business companies. The responses from that group were in line with the overall results. 93% said they expect their companies to grow their investments in AI over the next year. One thing that I looked up, just because they use the term "generative AI," which Ben mentioned as well, in the survey, and this is technology that can produce content: images, video, music, software code, product designs. ChatGPT is an example of a generative AI system. Essentially, this is what most companies mean when they say they're investing in AI tools for business today, and it's different from a term called regenerative AI, which our listeners may have heard of, and that's an emerging field that focuses on developing AI tools that can learn and adapt to new situations. There's tons of research and development occurring in both spaces, but when it comes to applications most companies are focused on tools that are generating content via AI. At any rate, more than 40% of the respondents in this survey said they had a positive view of AI, but they have concerns as well, and they echo some of the things Ben mentioned earlier. Security is the biggest, but others include the accuracy of AI-generated outputs; transparency and understanding how AI-based decisions are made; job displacement; and ensuring responsiveness in terms of timeliness and tone.
David Maloney, Editorial Director, DC Velocity 15:58
But it seems that most companies are moving ahead despite some of those concerns, right? And what are they using AI for?
Victoria Kickham, Senior Editor, DC Velocity 16:06
Yes, that's right. Despite the concerns, companies are pushing ahead with investments, so that seems proof that they want to figure out just how AI can benefit their businesses. And what are they using it for? This, again, echoes some of the things that Ben had mentioned. Most are applying these tools in three main areas: for improving customer experience; automating processes to become more efficient; and for overall business operations. I think many of us have probably experienced this in some way. I'm thinking of those online chat options where you can try and get answers to problems or issues with a product or service and the responses are then automatically generated from the system. In my experience, those automated responses are sometimes helpful, sometimes not, but I guess that's what all this investment is about: finding the best way to use all of these new tools.
David Maloney, Editorial Director, DC Velocity 16:56
Great, and we'll keep watching, and hopefully it will make us all more productive in the end. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 17:03
You're welcome.
David Maloney, Editorial Director, DC Velocity 17:05
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And also 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 on Fridays.
And speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane. It's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. Check it out wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by PERC, the Propane Education and Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- Nearly 6 in 10 manufacturing CEOS are adopting AI for business tasks
- Survey: Many workers are already using generative AI tools, but employers are slot to set policies
- Manufacturing & B2B ready for AI overhaul
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
- Listen to Supply Chain Quarterly's Top 10 Supply Chain Threats podcast
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