Manufacturing Supply Chain Woes
Jason Kim, Elsy Ocejo and Lora Cecere
Welcome to our Manufacturing Supply Chain Woes Show. I feel like this is a very, very fitting topic happening to just be falling on Halloween, talking about spooky disaster, crazy train wreck stories that have happened in the supply chain, in particular for those working in manufacturing. Our show sponsor, who’s been our sponsor for the entire year, is a team that’s a very close friend of mine. It’s a company called Rapid Ratings. I actually used their offering and their platform and their service at a previous company, and they do a lot of work in the manufacturing space as well. So I’m gonna have Eric do a quick one or two-minute intro. Eric, maybe if there’s a specific trend or highlight that you want to share, something that you’re noticing in manufacturing, thanks, Sarah, and RapidRating is happy to be a sponsor.
Yeah, you know we’ve seen a lot this year, especially private company suppliers in the manufacturing space. The cost of borrowing Capital has been more expensive, which really leads to liquidity and operational issues. So we’ve rolled out, we just tweaked our model for what we call Health marks, which really helps continuously monitor the longer tail of suppliers, probably the less critical, but it really does help inform and give a light indicator for those companies that you might be doing business with from a private company perspective. And so we’ve been really helping our clients hone in on those smaller companies and we’ve been always known for the critical suppliers but also now the kind of the longer tail as well. Awesome. Well, Eric, great to see you, and hopefully I’ll be seeing you in person on the conference circuit in Spring of next year. Thanks, Sarah.
All right, for those of you joining us live, feel free to drop us a note in the comments, tell us where in the world you are joining us from. We always get such a diverse, interesting group of people joining, so tell us where you’re joining us from and then a fun or interesting fact about yourself that most people don’t know. Drop that in the chat as well. If you have questions for our panelists throughout the hour, drop those in the chat. I will make sure we address and get to those as relevant throughout the conversation. So with that, I am going to have each of our panelists do a quick intro just so you get to know a little bit about them and their background, and then they’ve all got some really fun and interesting stories to share today. So, Lora, I’ll let you go first.
Well, thanks for having me. An interesting tidbit about me: I’m an old gal. I’ve been in the supply chain space for 45 years, which, you know, most people are retired, but I still take ballet. I take pointe, so my goal is to do a pirouette on pointe before they put me in the grave. And I’m a quilter. So today, I’m in Houston taking long-arm quilting classes. And I’m also a gardener, and I have three Sky Terriers. So if you watch the national dog show, root for Freddy Mercury. He’s the Sky Terrier, hopefully best of breed. Thank you, Lora.
And then you have done a lot in the industry. Maybe one or two quick highlights.
I’m followed by 345,000 people on LinkedIn. I’ve written 12 books. I’m releasing a new ebook this week. I do quantitative research using my LinkedIn group as a panel. And thank you for everyone who fills out my surveys. I also moderate a share group called the Network of Networks because we need to improve interoperability between networks. And I am working on how do we use signals in the market to drive outside-in processes because today’s processes are inside out, which increases the bullwhip and the latency of the data. Awesome. Thanks for being here, Lora.
Elsy, you’re up next.
Hi, Sarah. Thank you so much for having me. I’m Elsy O. I’m the VP of supply chain at Ellis Foods. We do custom and proprietary sauces, marinades, and seasonings. We’re located in Dallas, Texas, or in Carrollton, Texas. We are a domestic company, and we normally sell to QSRs and grocery stores. And this position normally oversees procurement, scheduling, project management, and customer experience, which is more of the end-to-end supply chain.
As for fun facts, I will say I have been dancing as well as Lora, but more on the modern dance. It’s very fun just to have not only a supply chain background but also the creativity with the dance. And right now, I’m located in Houston, Texas, and this is where my family lives. Another fun fact, I drive on the 45 almost every week. I love stopping at Buc-ee’s. I love the brisket sandwiches as well as the breakfast tacos. And yeah, if you have the chance to stop at a Buc-ee’s, either at the NIS or Madisonville, you may find me there. So very happy to be here, Sarah.
Thank you, Elsy. I am a new Texas resident, new meaning in the last two years, and I had no idea what Buc-ee’s was until I moved to Austin. It’s kind of a staple and iconic chain here. So if you aren’t from Texas and don’t know what she’s talking about, do a quick Google search, and you will quickly find that Buc-ee’s is quite an icon here.
Lora, we also have some people in the audience that are saying they’ve taken some of your courses. We have Katie from Oakland, California. Katie, I am from Danville, so I know Oakland very well. She got through your course in August. Jason, wonderful to have you with us today. Would love to have you do an intro, and make sure to unmute yourself too.
Hi, my name is Jason Kim. Sarah, thank you for having me on the show. My first time on the show. Unfortunately, I missed a show last year I wanted to really be on, so I’m joining this time. I live out in Orange County, California. I am a supply chain and manufacturing executive, vice president of manufacturing and quality, all supply chain related. I think supply chain these days has just become… I want to say very difficult and challenging, but at the same time, those challenges help us to grow and help us to improve upon what we do every day, right? So we always say that between supply chain and manufacturing is that if you don’t hear from us, we’re doing a good job. You only hear from us when there’s a problem, right?
So my hobbies are woodworking, carpentry, and just kind of getting out because we’re all working remotely and working indoors all the time. I love to run. Running two miles a day is something that kind of centers me and gets me out and really seeing God’s beauty out there. So one of the things I love to do. Jason, are you a treadmill runner or it sounds like okay, both, both, yeah. Treadmill if it’s raining, treadmill if it’s not raining. I’m outdoors. It’s still better than doing it on a treadmill, right? So okay, awesome. Been in operations for over 20 years, love what I do, love making a difference in the world. And during the pandemic, it was very odd because during the pandemic, everybody was affected by all of the, I want to say, constraints, the delays, the shutdowns.
I was fortunate because when the, I guess, call them the Trump taxes came into effect, we started onshoring, and I developed a dual supply chain, both from Asia and also domestic. And so when the pandemic hit, I was very fortunate we were prepared for it because of that. So thank you, Donald Trump, for what you did. We’ve got some other Buc-ee’s fans in the audience. We have Sophia, who is joining us from Las Vegas. She said her mom always brings me a Buc-ee’s shirt when she comes back from Texas. We’ve got some people joining us from Chicago, from Tampa, from Mexico, from Dallas. So a really fun and diverse group. Again, drop a note about a random or interesting fact about yourself in the chat as well, so we can share some of those out throughout our conversation. Lora, I am going to start with you. I know you have some really, really fun, unique stories and learnings for us. So I’d like to have you start off by sharing when you were the most blind to the root issue of a problem.
I’m gonna take you back to Young Lora. I graduated from the Wharton School of Business, and I thought, you know, I’m really good at driving quality, and I was asked to run the warehouse. So I went from running manufacturing lines and really driving new products in manufacturing to running a warehouse. And I had never run a warehouse before, but I’m like, well, how hard can this be? I was asked to go there because I had done third-stage bargaining in manufacturing, and they were afraid that the plant was nonunion, that the warehouse was going to unionize.
So I tried to really build a lot of teamwork, and I created a program where I rewarded pick accuracy, and I also rewarded customer service accuracy for truck loading. Now, that sounds pretty benign, right, like a fun program. But what I didn’t realize was that many of my employees, who were senior men, and I’m 27 years old, couldn’t read. And they were working in the warehouse, and the lighting was really poor. Instead of reading the pick because, at that point in time, we didn’t have a lot of the scanning devices, they would do pattern recognition. So there was a very high error rate. And so I kept wondering why these well-intended people were making so many errors. It never occurred to me that they couldn’t read. So really being careful to think hard about why a problem is a problem and considering the human factor.
Jason or Elsy, any similar experiences or anything that you want to share?
I can go next. I think Elsy’s example is extremely critical for a supply chain technology implementation. You really need to understand the people. I think one example I can give goes back to when I was more in global logistics. There are very fun stories as well because there are a lot of things that you cannot control even though you can mitigate the risks. Sometimes if there’s a factor like a human factor or an animal factor into the mix, sometimes you cannot control that.
There was an instance where we had a factory, and we were building boats in Mexico, and we did the seven-point inspection. Those boats were going to be sent to a dealer in Australia where the import rules and regulations were very stringent. We also needed to fill out specific paperwork for that. Regardless of that, the container goes into customs in Australia, and it got a revision. The container was opened, and inside the container, there were not only boats but also a dead cat.
Imagine we had already done the seven-point inspection, but still, there was a dead cat in the container, which caused a lot of havoc because the stench was so bad that it penetrated the entire boat and the fabric of the boat. So those boats were not able to be used. We needed to total them and totally replace them for the dealer. So that’s a factor that I will say was a very scary story because even though we did that, the root cause was those containers were loaded in the yard, in an open space, and sometimes in Mexico, you have stray dogs and cats. Even though we did the seven-point inspection was done.
There was a moment, probably where the operator was in the back of that container, and the cat entered, and then the doors were closed. So things like that, you start doing the root cause, as I said, and really understanding why the cat was there. Right from there on, and really understanding that the guard really needed to not let even cats and dogs inside the facility, but really making sure that nothing was inside after that seven-point inspection. That was really critical.
Well, I also think it goes to the fact that you can’t plan for everything, right? You work in our industry, crap happens, and you need to be able to react and overcome and have critical thinking skills. In both of Lora and Elsy’s your examples, you couldn’t have necessarily known and planned for those things. But what matters is how you react and how you handle it.
Jason, you had quite an experience during COVID, so would like to have you talk about how your supply chain was affected during that time period.
I think everybody was affected, right? In one way or another. I mean, we were all affected. One of the biggest challenges that we had during that time period was that we were trying to do a new product introduction, and it was a significant launch, and it was actually happening in China. We had a team of people in Asia who were supposed to go. We had manufacturing engineers, quality engineers, folks from a supply chain perspective, supply chain side of things for the materials inspection. We had an entire team getting ready to go.
But the random shutdowns that the factories would do or the cities would do if there was any sign of an outbreak, we couldn’t get our entire team there. So we ended up doing last-minute getting, and you could get a lot of handsets or mobile phones in China, thank goodness. Because we had the small group that we had there, plus some folks at the factory, we had them actually armed with smartphones and videoing and streaming the videos as they were doing these builds.
Now, we couldn’t do it all the time, but we were doing it at certain times during the day where we could observe and provide feedback real-time. So we had to overcome the Chinese government and the policies of shutting everything down, and we couldn’t get all the people there. So we did it all by video. We kept our observation logs, and the folks on the ground who were there were able to document everything. Then we had follow-ups to correct the issues. But it’s the things that you can’t plan for, right? It’s Murphy’s Law: if something can go wrong at the worst time, it will go wrong. With the rolling shutdowns that were happening during that time period, we had to come up with some really inventive ways to do it. And this was probably the best. Well, we actually got a dozen mobile phones and we started streaming using mobile phones. So we still got the objective met, but it was painful doing the launch in China during that time period.
Jason, how did it impact the team post-COVID, having to make all these changes?
I think post-COVID, what we learned was that there are two things. One is that you have to have redundancy in your supply chain. You can’t just count on your main supply. You have to have redundancy because we were affected by incoming materials at that time as well, both here and in Asia. The other thing is that you have to be prepared for the worst-case scenario. That means you have to have not only people on the ground, you have to have contractors, you have to be able to quickly adapt.
One of the things that we had to put in place is a parallel supply chain and not just count on everything coming from your single source. You have to make sure you’re not single-sourcing anything anymore and that you’ve got to have multiple. What we were comfortable with is getting everything out of China. Now we have a domestic supply chain as well. It’s a bit more expensive, but it gives us the resiliency that we need.
Lora, do you have a single-sourcing story that you’d be willing to share? I know it’s something that a lot of manufacturers have struggled with, especially when it comes to electronic components like chips or things where there are very few global sources for things.
Well, I have lots of single-sourcing stories, and they typically end up with a lot of shortages. I worked with a company that made toys that single-sourced 11 items and didn’t really understand in-transit inventory. They couldn’t actually make their new product launch because people look at variable costs, they don’t really look at in-transit, they don’t look at variability, and they don’t look at instantaneous rates. I can tell you a lot of stories of failure, but single-sourcing is a single thread to failure. So, we have someone else. Elsy had the same experience with a cat, and it cost them over $50,000.
I also want to share Sophia’s random fact. She started her first job as a volunteer babysitting chimpanzees and giving speeches about them. She ended up falling in love with them, became friends with their owner, and has continued to watch them over the years.
So, Elsy, you have probably some of the most unique disaster stories, I think, that we’ve had on the show. We started with the cat, and now I’d like to have you share the boat fire disaster.
Yes. Well, I think that’s a common, not common, but if you’re normally in global logistics, you everyone has a story where either a vessel caught on fire or something with the vessel happened, containers tipped over and were lost in the ocean. There are a lot of stories like that. I was even speaking with my dad, who was also in the global logistics project management realm, and he will also tell me these stories that I didn’t even understand until you live it, right?
My story was exactly during global logistics at the same company. We had a yacht on a huge steamboat, and it caught on fire in Greece. We couldn’t do anything about it other than replace it again. Of course, a boat that big is not like a month’s deal. It was six months to build it. It’s like building a house. So there’s no other option sometimes. To your point, Sarah, is how resilient your supply chain is whenever you encounter these things that are out of your control.
Jason, what about a freight or logistics train wreck or nightmare story that really stands out in your mind that you could share?
Is there anyone that stands out? Anytime you get parts in late or they’re delayed or they get lost, it’s a nightmare because you’ve got an entire factory waiting on these parts or supplies. It’s a nightmare, and it happens all the time. What we try to do to minimize it is put a certain amount on a boat. It takes a long time and then hold some back and then air them if we need to. Our supply chain, what we’ve learned over time, is that you can’t make up mistakes. What you can do is put in about two weeks’ worth of supply at the supplier that you can air in if you need to.
So, I’m smiling because I’m in the process of coordinating a campaign around five-cent missing parts that have shut down manufacturing lines. So, to your point, we can easily assume and think that, “Oh, this is just a dollar part or this is just 10 cents.” This order is only $5,000. But that could be the item that actually shuts down a production line or causes a production line to have to completely pivot, which can cost hundreds of thousands of dollars.
“So Lora, you have a story that involves a ‘knit all’ attitude. So, would like to have you share this and how it got in the way. So, back to I was running manufacturing plants, and I was asked to go run a distribution center. We ran 15 palletizers, and we had just really consolidated two warehouses. People had designed for the volume of freight but not really looked at the instantaneous rate. So, I had to ship 220 trucks out of 18 doors, but my problem was that during the day shift, the tonnage was much higher, and I was in Atlanta, sitting right on those interstates. So, the ver ability of getting trucks in and out was tough. So, coming from manufacturing, I really wanted to reduce inventory, and I wanted to run all of the materials right off the palletizer onto the trucks. So, I created this program where I could turn those trucks, move it right off the paltier onto the trucks. Well, the problem is that, you know, we had a problem with the pallet manufacturer, and the pallets weren’t of very high quality, which shut down three of the palletizers. So, I had 220 trucks that circled my building, and the police came in Atlanta, and they gave me all the tickets for all the truckers. Right? And I learned a lot about buffer strategies and instantaneous rates and what can go wrong will go wrong and had to go to the magistrate in Atlanta and pay a huge fine and do a mopa. Because, you know, I thought I knew the answer. That’s a lot of trucks, by the way, up and down the streets of Atlanta. I was gonna say that’s a lot of trucks, and I’m afraid to ask what your fines totaled. Yeah, about $20,000, right? And I got a pretty good lecture from, you know, the judge. Most important takeaway: what have you remembered from that experience and implemented in future roles? Well, humility, right? You know, just because you are good at a job and you think you know the answer, maybe you should sit and think that people that are cautioning you that that might not be a good answer, you should sit back and think about it and maybe test it before you go full throttle and learn hard lessons. So we have some questions coming in from the audience that I want to make sure we address. So, Jason, I’m going to put this one to you first. It’s from Juan. Hello, Juan. Can you please comment: where do you see today the challenges around data visibility in the supply chain to be able to make real-time decisions? Where do I see the challenges in data visibility in the supply chain? Yep. I would say my biggest challenges, and I can only speak from my perspective, is that we all do this, I want to say, rolling six-month forecast, and based upon the rolling six-month forecast, we make adjustments in what we are planning to release or what we have released to suppliers, right? And so, the inventory levels are all determined based upon how accurate your forecast is and what you’re actually triggering. So when you have these changes in your forecast because right now, there’s still, you know, we’re in that down side of the market right now to where we should be adjusting our supply because we’re going to have over Supply if you continue to grow it, right? Because inventory is just everywhere right now. So, adjusting for the inventory or, let’s say, adjusting for the orders and getting that response when you’re taking down inventory or orders and getting that visibility. Has a supplier been successful in pushing it out and canceling it, you know, getting that visibility response from the changes? I think is my biggest challenge is what I see, especially in today’s market. When we had a, you know, everybody was in a shortage before, and they started buying, you know, a bunch of material, you know, double buying and whatnot, and now we’re in a surplus, right? And so, really for me, it’s as we make changes, am I getting the visibility that I need in the supply chain, right? And what will my inventory look like in six weeks from now, eight weeks from now, right? Elsy, what about you? Biggest data visibility challenge you’re experiencing right now? Yeah, I think it all depends, like what are what is the low-hanging fruit and what you really want to address? I’m currently partnering with the VP of R&D as we’re an innovation company. So, for us, I think the data visibility comes as to not only the trends of the market but also how are we going to utilize our current inventory and then add on to new raw materials, right? How is that mixed because we’re always making new products, new formulas, testing, making something new for a customer that we don’t even know how well it’s going to do, right? So it’s having data without a forecast but really understanding how it’s going to behave depending on the season. So that data visibility is not necessarily there; we want it, right? And most likely an AI software company may help us with that, which are several ones as to creating formulas, etc. But it’s very important not only to have the data visibility but also what to do with it because do we also need to question ourselves: do we have the people that will be able to really analyze that data as visibility and really act upon it? So that’s kind of the situation we’re in. What about you? You have a unique perspective because you work with a lot of different companies and write content and have an analyst background. What do you see are the biggest data visibility challenges right now? October of 2023, the largest pain point is inbound shipment ETA visibility. Eighty percent of the data surrounding the supply chain is not used, and people talk about real-time, but really what we need is data at the speed of business, and particularly around lead times, you know, most of our planning systems have fixed lead times, and we lack a planning Master data layer that helps to update the planning optimization based upon actual lead time. So, we’re running blind. But the other thing that I find incredibly powerful is the use of NoSQL for real-time Perpetual inventory. People don’t realize how long it takes to roll up the inventory on a batch job. So I work with a retailer that takes eight hours to roll up 42 instances of Manhattan, and you might think, well, you know, they’re all Manhattan; that wouldn’t be, you know, that big of an issue, but all the instances are very different, and if you think about ATP and allocation and interoperability and the need for knowing where inventory is at the time you need to make a decision. I think the use of NoSQL for real-time inventory is very, very powerful and underutilized. I also believe we’re not ready for generative AI. I think we’re ready for Nara AI as an engine, and I think the graph offers tremendous promise. Lora, have you seen any companies effectively use AI in the manufacturing space? Yes, I have, for preventative maintenance. If we think about repair and MRO, the combination of Nara AI with 3D printing to be able to look at sensing when equipment’s going to break and then being more responsive and changing the business model is a great opportunity that I’ve seen two companies actually seize upon. Interesting because there’s a lot of hype and talk, but I don’t know a lot of companies personally that are effectively using AI and saying, “Yes, this is awesome; it’s had a significant impact on our business,” at least yet. Well, we’ve got to really look at the combination of Technologies. We need to embrace the Web 2.0 Technologies of the graph, structured data, rules-based ontologies, and being able to look at how do we use streaming data well, and it requires us to rethink processes. So, for example, the company, which I can’t name, was an HVAC company that actually changed the equipment so that the equipment always generated a signal to say the status of the equipment and then the AI was to look at what was the pattern of breakage and then to alert customers about the potential. The other company that I see using AI is Sleep Number because their goal is not to sell beds; it’s to improve sleep. So what they’re doing is building learning engines around how consumers use their beds and how to improve sleep and pushing back information to consumers about how can they sleep better.
That’s a really, really interesting example, especially as somebody who struggles with sleep, and it’s a constant challenge. I would absolutely be interested in hearing research and feedback, which, of course, will help me think of their brand when I’m ready to buy and make a purchase in that space. So, very smart marketing tactic. Yeah, you should ask them about how they improve sleep. Don’t just go buy a bed; you know, look at how they’re using data and the use of data around different sleep maladies and whether it’s the position of the bed or the type of the mattress, etc. But redefining the customer experience, I think, is a great opportunity.
We have Jason Allison joining us, and he’s saying that direct labor and the availability of it has been a big concern in his industry, which is something I’ve heard a lot throughout the year, that manufacturing companies are still having a really hard time filling jobs.
Elsy, you have a Bayliner boat story that I’d like to have you share. Okay, no, thank you, Sarah. By the way, Lora, sorry. It’s amazing that you told that story about AI, specifically on the maintenance part. I think it’s very important to have your perspective there and how it’s evolving. So, thank you for sharing that.
For the Bayliner story, it’s a very unique story, and I was kind of hesitant to really share it because it touches a very delicate subject. It happened several times while I was working at a specific company that when we shipped boats to dealers from Mexico to the United States, when the dealers received the boats, they were indumented people inside the boats and coming out of them because they were covered with plastic. We didn’t know where and at what point the people were entering the boats, so it became a really huge deal. We were CTPAT certified, but there was a person or an organization that was feeding information about where our boats were going. So, the first thing that we thought of was really investigating our customs broker. It’s a very delicate subject because, sometimes, you cannot control how your cargo could be tampered with, but if you can start doing the root cause as to where the information is flowing and who has your information, then you can start tackling that specifically and really addressing what needs to be done.
Our main concern was, of course, the families because how they entered the boats was very risky. We discovered that, in specific points, the load was stopping, for instance, satellite, and in those instances, there was a van on the back of the trailer with boats, and the people would come out of this van, run, and then, in the middle of the trailer, moving the entire families would go inside a boat, cut it with a knife, and basically go inside the boat with water and a bucket and also just duct tape to cover what they cut on the boat. Eventually, what ended up happening with all that investigation, we needed to change customs brokers, and we really needed to change our whole logistics. That basically solved it by itself. But we were very conscious of how the information flowed from customs brokers to dealers and paperwork as well because it had specific information about where our boats were going.
Yeah, now, Elsy, I think this is something that may be more common but not talked about because it can be a very sensitive subject. Correct. So, Jason, you have some opinions and thoughts about onshoring, which is starting to happen more and more. So, we’d love for you to talk about this topic a little bit and maybe share a story or example. And then, Lora, would love to get your perspective on this as well.
The entire onshoring activities, at least from my perspective, began for me prior to 2017 when the taxes or the tariffs went into place, Section 301. It became a pretty big obstacle for us. People in Europe already see it. I mean, they’ve got what’s called the VAT, and typically, it’s like a 20% to 25% on any goods coming into the EU, and they’ve already been hit with that challenge. But in the US, it wasn’t really until 2017, and we had these tariffs for anything coming out of China. So, from that perspective, we started, or I started, on that journey a while ago and started to create what we call in-region manufacturing. That’s when we started building things in Mexico and shipping them out of Mexico to our customers around the world.
With automation and AI, and I know we hear a lot about AI and we’re not seeing a lot in direct production, I can tell you that I have actually used AI in production, and it’s actually improved our processes and efficiencies in their processes. It was very effective, and there’s a company out there actually making that system. So, we implemented it during the launch in China when we had the camera systems and whatnot. That’s how we got through all of this. I want to say, needing a lot of people, but not necessarily putting people, but having systems do it.
What I see happening in the US with additional automation, with vision systems, and then the robotics to be able to assemble products relatively easily, you have to design the product for automation. But if you do so and you design an automated process with the vision systems, we really should be able to see the advantages of that coming in what we call Industry 4.0. I see slow movement in that direction; a lot of companies are looking at it. Still a long way to go, though. There are even companies making machines or equipment that’s modular. There’s a company out in Israel making a modular microfactory system where you can combine different units together and put different articulating arms on them. It could be twisting, it could be pulling, it could be placing, pick and placing type things. There’s a lot of that activity going on, and I see that accelerating. There’s going to be some component of it where companies are going to do it themselves, and there’s going to be others where they have it outsourced, and then there are these modular platforms. It’s really how, I want to say, the electronics industry changed between the ’80s and the ’90s, went from through-hole technology to SMT, and that really changed the efficiency of how, I want to say, how efficient and how economical the manufacturing of electronic devices worked. So as technology advances, I think we’re going to see the benefit of it, and I see 2024 being some pretty big investments in that area, especially with vision systems and the articulating devices. The robotics industry is actually making headway in those areas, even in cooking and foods and whatnot. They’re making headways in those areas. So, I see that happening and growing over time and being a significant portion of what enables onshoring to compete in the world economy.
Lora, your thoughts and perspective on onshoring shifts, particularly in the second half of this year?
Well, I think onshoring is happening, but unfortunately, I don’t think there’s enough network design behind it. I really wish that all companies would find out the people and their organizations that do network design and invite them to the boardroom so that people can understand the supply chain is a complex nonlinear system. Most decisions, unfortunately, today are still made on Excel spreadsheets, and in an Excel spreadsheet, you really cannot show the nonlinear nature of the supply chain. Even if I reshore and I design for reed supply chains, I’ve still got to be outside in. I’ll tell you a story. I worked with a company that made auto glass, and during the pandemic, they shut down all their factories globally because of COVID, and China was actually very aggressive about automotive manufacturing at that point in time. They lost a lot of market share because they weren’t dealing with regional demand signals. So we’ve got to be sure that we not only focus on how we design supply but that we can adapt the flows based on regional demands. Encourage everybody to find out where those network design folks are in your teams, invite them to the boardroom, help people to understand the nonlinear relationship between supply chain source, make, and deliver, and improve planning. Don’t just assume that we can integrate the supply chain; we’ve really got to drive interoperability.
Elsy, continuing the onshoring conversation, your thoughts or predictions for 2024? What do you see happening next year?
I think if we think about the biggest risk there is, it’s the Israel-Gaza conflict and how that will affect the supply chains. How can we really mitigate the risk towards that? We have already been exposed to COVID, but how will that translate into something that could be bigger or something that may stay? I think that’s how it will be evolving. I think there’s going to be more conversations as to how that will affect the global supply chain as the issue evolves. I think that’s my main worry, and I think that’s how—I don’t know how technology will help us with that. I think Lora has made a great point as to AI and how it’s evolving quite fast. Which areas are they going to be really applicable besides maintenance? We still don’t know; there are many questions. I think it’s very exciting because we don’t know how it will evolve, but I think everyone will be really eager to test what’s out there and to test it and to really embrace it.
I’ve got a perspective here. If I can just jump in, I wish people were more innovative on testing. Only 7% of supply chain leaders are innovators. But one of my concerns is with the water levels falling in the Panama Canal and our inability to get tankers through the Panama Canal and the Suez Canal next to the Red Sea and the backup if you remember what happened with the Ever Given. It’s really easy to block up the Suez Canal. So imagine the supply chain world where we can’t get freight through the Suez Canal or the Panama Canal. We need to be thinking about sourcing strategies with those kinds of scenarios, look at the supply because we don’t have enough airplanes to fly things. Exactly, that’s how near-shoring, to some extent, will become very critical and to put it fast. Right, Lora, to some extent, yeah, as long as we’ve got capacity and suppliers in those areas that meet our standards. But one of the things that I think people will do is they will near-shore but they won’t think about supplier development and how to drive quality conformance and quality design. I encourage people to think about how they can be good supply or trading partners. Things like 1-800 numbers to allow people to call to be clear on what are the quality standards and even the ship-to information. I was talking to a trucking society that talked about how 40% of the bills of lading don’t have clear information about where to deliver to. So, thinking about how we can be better trading partners as well.
What are you seeing in regards to shifts in new markets or economies? For example, companies pulling out of China and trying other countries or other markets. I know that’s something that’s come up in previous shows, and I’m curious if any of you have a perspective or thought on that.
Well, I think it’s hard to generalize. In apparel, we’ve got a lot of shifting into other Asian countries. We’ve got a lot of progression down into Mexico, particularly in automotive. But where we’re weak right now in this freight recession is the ability for logistics to catch up with sourcing shifts. So I would encourage people to really rethink their logistics contracts. If you’ve got net 60 or net 90 for logistics, look at what’s happening in the freight recession and look at the ability to move things, not just manufacture them.
Elsy, your thoughts or predictions for 2024? What do you see happening next year?
I think what I’m really looking for is an innovation on Hispanic flavors and how that will be present in restaurants and grocery stores. We’re seeing that trend growing, and it’s an upcoming trend. What will that mean for the food industry is going to be quite interesting, and that’s what I’m really looking forward to.
One of the risks I think we have on provenance is money laundering. I was speaking to someone on a plane the other day who specialized in this. Evidently, as bad as actually created money for what he did on 9/11 through money laundering and honey shops. In Afghanistan, there’s a lot of consumption of dates and sweetening with honey, and so the honey shops actually served as the money laundering machine for what happened on 9/11. Similarly, with what’s happening in Hezbollah, beef is the money laundering machine. Imagine if you’re an unknowing manufacturer, and part of your supply chain is part of those money laundering machines that’s happening with the terrorists. So provenance and being able to look at the legacy of what’s happening in the supply chain is really growing in importance.”
Closing thought from each of you, I’m going to give you the option to share a prediction or something that you are most excited about as it comes to supply chain and manufacturing for next year. Prediction or something you’re excited about? We’ll start with you, Jason.
I think for me, I’m seeing a new normal starting to stabilize. Markets are starting to stabilize, and I think we’re going to be hopefully starting to see the beginning of a little bit of growth and coming out of these almost economic doldrums right now. And I see that starting in 2024.
I think what I’m really looking for is an innovation on Hispanic flavors and how that will be present in restaurants and grocery stores. We’re seeing that trend growing, and it’s an upcoming trend. What will that mean for the food industry is going to be quite interesting, and that’s what I’m really looking forward to.
Shop at BU, right? You know, I’m in Houston this week; we should have dinner. What I’m really excited about is the research project I’m doing with Georgia Tech. Most of the focus of supply chain is on efficient supply chain and lowest cost, which really minimizes the opportunity for value. So what I’m working with Georgia Tech on is looking at 15 years of company data and the choices companies made that drove value, not just metrics at a cost. I’m hoping, Sarah, that’s going to be a new book. So I’m hoping in 2024 I can sign new books around what drives value in value chains and have some great research behind it. That’ll be book number 13, 14 because I’m releasing an eBook this week. Yep, as if you don’t have enough going on. Book 14, all right. Thank you for those who are able to join us live. For those who are listening afterward, we encourage you to reach out and connect with Elsy, Jason, and Lora on LinkedIn. All are incredible thought leaders and doing really important work in the space. This is a monthly show. Our next panel will take place on Tuesday, November 21st. Hope to see you all next month.