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THE SEARCH BAR

How supply chains influence your shopping experience

| 44 minutes | Media Contact: University Communications

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Summary

From the products you buy to the food you eat; supply chains and logistics are an integral part of our everyday lives.

Summary 

Host Adam Sparkes sits down with Fred Lawrence, faculty member in logistics management, to get a better understanding of how supply chains impact our daily lives. Some of the questions they answer include: What affects the costs for consumers within a supply chain? How do tariffs and free trade agreements factor into things? How does data improve logistics within supply chains? How are AI and other emerging technologies set to revolutionize supply chains in the future?

 Chapters 

Transcript

Introduction

Fred: Amazon on all accounts has been a game changer, and they have models and machine learning and artificial intelligence that actually predicts what you're going to buy before you buy it. They will even move freight closer to you anticipating that you're going to order it. The other side of that is they're able to do it in a way that decreases their cost. So to kind of step back and say, we can better serve our customers to increase our revenue and do it in a way that decreases our costs, that's a beautiful thing from supply chain. 

Adam: From the products you buy, to the food you eat. Supply chain and logistics are an integral part of our everyday lives. Welcome to The Search Bar. I'm your host, Adam Sparkes, and on today's episode we're discussing the importance, impact and innovations of supply chains with Fred Lawrence, faculty member in logistics management at Central Michigan University. Let's do it. Let's talk about supply chains with Fred. That's the intro. Michael, cut it, keep it. We're going to talk a little bit about supply chains, which is something I understand a little bit about  

Fred: Yes 

What is a supply chain and why should we care?

Adam: And I figured we should probably level set and sort of explain what is a supply chain. Kind of give me that eighth-grade definition as you see it. 

Fred: Yeah, it's a great question. So for you or for listeners, a supply chain, really it's linking. So visualize an actual chain. So a supply chain is a network of organizations, companies, activities, information processes from the point of the earliest origin, so think raw materials all the way to the end of consumption. So think products or services that you're consuming at your house, it's all of those things linked together to get from the start to the finish. 

Adam: And why does this matter to us? I mean, I think for most of us who are, including myself in this, my principle role in a supply chain is as a consumer and a waste of my hard-earned money, why should I care about this? How does it affect me? 

Fred: That's a great question. So because you are a consumer. So consumers are really arguably the most important part of a supply chain. Nothing exists in terms of that chain if we don't have individuals consuming our goods and services. So things that you buy signal up the chain for all of these activities to occur. 

Adam: So that's kind of the basis for the whole system. Is that demand for the good? 

Fred: Correct. 

What affects the cost for consumers within a supply chain?

Adam: Where's the cost affected in here? I know we talk about supply and demand a lot. I know especially coming out of Covid and kind into the current zeitgeist, where we're talking about tariffs and stuff, and we'll get into that, what really affects costs? I think sometimes it's more complicated than we think, or maybe it's not. 

Fred: I don't think it's quite as complicated as people might think. I mean, when you have so many organizations and entities partnering together, really their job is to provide value in some way, and that value comes at a cost, whether it's moving goods or assembling goods or making goods or moving information. And as these activities happen, there's a cost to these things and this eventually trickles down to the end consumer. So we could say from a supply chain standpoint, if we run things less effectively or less efficiently, it's likely to increase the cost of these services and products. Eventually that's going to reach the consumer and at a point where things seem really expensive for consumers or where maybe the household income doesn't quite stretch as far as it used to be, people are sensitive to these things and they should be. 

Adam: I think the big thing right now when at least in how we as American consumers are engaging in supply chain has been a little bit, I don't want to say it's politicized because I think it's more than this political moment, right, like globalizations or free trade agreements have been around forever since World War I really. 

Fred: Yes.  

Why should we care about globalization? 

Adam: Explain a little bit how that sort of works, the idea of free trade and then policies that don't interfere with free trade, which is largely what these agreements are, right? They're kind of saying you might have laws that govern your land, but should they govern the goods that come in? Right? That's sort of what we're doing. 

Fred: Yeah, you're pretty spot on with that. So really this concept of globalization kind of ebbs and flows a little bit. So I guess the best place to start would be why do we care about globalization and to keep it pretty simple, it's because certain areas like we'll take the United States for example, we don't have access to maybe everything that we need in terms of maybe resources or access to specific goods or information or expertise. So it can be really helpful to us to be able to go globally and find and procure those things. So that's where this idea of free trade or tariffs or trade agreements start to plan. So in the nineties you had NAFTA, which is the North America Free Trade Agreement, which is now that the USMCA for all accounts and purposes, they're really pretty much the same thing. But what those do is those lower what are called tariffs on goods that come really into the United States or between these countries and free trade agreements exist really to essentially free up the trade between countries. Now, it's not uncommon for the relationship between countries to involve things like tariffs, which really it's just a tax on goods coming in and it exists to create revenue, but really what it can do is it can increase the cost of products and goods. So when countries have free trade agreements, what they're trying to do is facilitate working together between organizations and citizens and entities between these countries to facilitate the actual trade of products. 

Adam: I'm going to make an assumptive statement, and please correct me as the expert here. And one of the reasons that these things have become so important, I think so much more talked about is so many of the products we consume are coming from so many different places to be assembled, right? 

Fred: Absolutely. 

Adam: Just anything electronic. The cameras that are recording this podcast, the microphones, definitely like an iPhone or a Samsung phone, that is-there's probably 12 countries products in that that's getting assembled in the case of an iPhone in China. Any disruption in that is probably going to have an effect on either availability or cost, correct? 

Fred: Absolutely. Yeah, you're spot on. So I mean, and that's one downside of global trade is that it can create disruption. We'd say it impacts the supply chain's resilience, which is really just its ability to be resilient to disruption. But I mean, what's the alternative? Only sourcing locally and not having access to maybe those things that we need from various countries around the world. So there’s tradeoffs.  

Adam: Yeah, I mean, it's hard. I think just because, and I say this just because I think not just here in the US but globally, we're seeing a little bit of protectionism when it comes to the way we're viewing global marketplaces. It's hard to step back and try to think about what, and I'm not necessarily advocating for or against protectionism in saying this, but it's hard to imagine what we wouldn't have if it weren't for the last 30 years of those free trade agreements in terms of the ability to manufacture and make cheaper. A lot of the technologies and the networks and the tools that we have that have created a more accessible universe for us to all live in. I mean, that's these big massive supply chains that work. 

Fred: Yeah, I agree. I mean, global trade's nothing new. 

Adam: Yeah. 

Fred: I think the biggest thing for individuals is just not to make any of this taboo and what we're talking about is if you're pro-globalization or anti-globalization, I think objectively there's pros and cons to both. I think right now you have individuals who are maybe a little bit more focused on protecting national interests and they start to think about labor and wages and individuals. But the other side of that is what impact does reducing globalization have on just general cost of goods and access to goods? And I could say and argue probably objectively that that also hurts individuals as well. So there's an argument for both sides.

What are the pros and cons of re-shoring and near-shoring?

Adam: Getting into that more. What could be the positive things about having a less globalized supply chain? If I'm, what are the benefits of local goods? We know, I think that we're all, again, particularly in this country, we're super used to Chinese manufacturing, I guess being cheaper. That's where most of our electronic goods come from. It's where most of our molded plastic goods come from. What does the world look like? What's the benefit if some of that shifted? 

Fred: Yeah, so really what we're talking about is a concept called reshoring or nearshoring, and essentially that's just think about a nation like the United States organizations maybe bringing back production or bringing back facilities to our shores. Now, it doesn't necessarily always work out that way. So say for example, we put additional tariffs on Chinese goods. Well, naturally there's going to be an incentive for organizations that maybe have facilities in China to then move those so that they're not hit with those tariffs. Naturally, those tariffs, that will be a cost. That cost likely is going to boost up the price or the cost of the goods to consumers. So naturally the incentive there is to move that facility or move those activities to an area that won't be hit by those tariffs. So in this situation, you could say to the United States or possibly to Canada or to Mexico based on the United States, Canada, Mexico agreement, that's going to be the incentive there. Now, what are the pros of this? It can create jobs. So that's the big one, labor. Now, depending on what your perspective is, labor costs in the US are likely to be more expensive than labor costs overseas, which individuals can make arguments as to whether or not that's a good or ethical most labor costs here are likely to be higher, and that's going to impact the cost of the product naturally. But also just having better access to those channel activities themselves can help facilitate moving goods faster. Having these facilities in the United States can have maybe a positive impact on sustainability or on emission standards because as a country, we might have a little bit more control over what's going on globally in regards to those activities. So again, pros and cons. You lose access to things you don't have, but you gain more control. 

Adam: And that's actually one of those things that, just talking to the environmental end of it too, that's a big part of a lot of these trade agreements too. I remember reading a thing about dolphin safe tuna. Do you know about this? 

Fred: Not really. I can imagine. 

Adam: This is probably six or seven years old now, but this was a US Mexico, I think, disagreement where world trade organization had to step in and say, you can't require these dolphin safe tuna label to go on this tuna because the accessibility to dolphin safe fishing in these Mexican waters doesn't exist. And it became an actual thing that was in the news, and only nerds have read it, I assume, but I thought it was pretty wild because part of it is that because of free trade agreements, were basically saying we have to, we're clearing the way for equitable access to giving you tuna fish. So you might have to jump a regulation or a requirement that's in a different market. 

Fred: But then how many consumers really want to consume dolphin in their tuna? So I mean, there is that side of it as well. 

Adam: Can you taste the difference for,  

Fred: I don't want to find out. 

What makes an efficient supply chain?

Adam: I just don't, but I think those are easier to understand or to talk about because a raw food or even a singly processed food sort of a commodity, it's not this big assembled product. I guess talk to me a little bit about those types of things, the complicated products that have to get produced that are in these huge supply chains, what makes them efficient? What makes a good supply chain for something like a laptop or like a phone? 

Fred: So we would say it can come down to how we manage our processes, our activities, our relationships, how we reduce waste. So in supply chain management, we're really keenly focused on efficiency and effectiveness. And that's a theme that really kind of iterates throughout all things we do in supply chain. So we're focused on performing activities correctly the first time with no additional error or waste. So when we buy things, we want to buy the right amount of things. We don't want to buy excess. When we move things. We want to utilize our assets to the fullest capability. We don't want extra, and that's kind of what we're talking about with supply chain. Minimize the excess. We don't want to move excess because ultimately these things are things that are not of value to the end consumer. You might've heard the term lean. That's something that resonates with many different supply chains. Now, to be fair, different products, different supply chains themselves vary, but generally speaking, we want to focus on the efficiency in minimizing the excess. Things like inventory and the movement of inventory, keeping that to a level where it exactly meets the requirements of what consumers want when they want it. However, that concept itself can be very problematic when things don't go. 

How does Amazon consistently deliver products so quickly, and what makes their supply chain unique?

Adam: Is there an element of prediction that has to exist in there for one of the-who does this well? Is there a company? Is there a product that does this really well? 

Fred: This is going to be a shocker to your viewers, but Amazon does this incredibly well. 

Adam: It might not be there were a lot of jokes about people getting run over by the Amazon robots. I mean, 

Fred: Well, the uprising hasn't happened yet. The Amazon robots have been very, very helpful in terms of efficiency and effectiveness. But Amazon does this remarkably well, and this kind of leads to a conversation of how do these organizations use data and how do they use technology? And these are kind of the new and more cutting edge things in supply chain recently and in the future that are exciting that are going to make supply chains run faster and more efficiently and more effectively 

Adam: In Amazon. I mean, I think Amazon, I think about it doesn't surprise me at all because I mean, think about all the things that Amazon was the first on, right?  

Fred: Oh yeah.

Adam: Two-day shipping? Remember when anybody could get two-day shipping with Amazon Prime? And I think that's wavered a little bit. I noticed that especially this time of year, we live in a rural area up here, so maybe we don't count. 

Fred: That doesn't count. 

Adam: It doesn't when you can get same-day shipping in a metro area, but that was at the time, if you wanted two-day shipping, you're paying $48 bucks for a one-pound package.  

Fred: Groundbreaking, right? It's groundbreaking, but it really speaks more to, again, circling back to one of the very first points we made was the consumer and what's the standard for the consumer? How does the industry and the market operate? What does the environment look like? And Amazon, on all accounts has been a game changer, and it's had a ripple effect through really any major organization that does retail and small as well. The standards have changed. So for competitors, how do we keep up? 

Adam: What have people had to do? I mean, I guess obviously there's faster shipping, but I think you're absolutely right too, because I can remember the first Christmas where I'm like, I could buy almost everything I want on Amazon right now. 

Fred: Yes. 

Adam: The pressure for me to show up in store felt really low. And it's not that long ago. When you think about it, this may be 10 years ago, if that maybe eight or nine years ago, what have people had to do? What's been the big change that you've seen? And not just in the shipping, but in the overall way that these retailers have had to fulfill orders? 

Fred: Well, naturally we've had to shift more towards electronic retailing. It comes down to convenience is really what it is. And Amazon has really driven that, especially from a consumer product standpoint to keep up. It's really how do we utilize the new tools and the new efficiencies that are available to us? A truck can only drive as fast as a truck drives, product can only move as fast as product moves. At the end of the day, if you buy cups or clothing or towels or food or tangible items, they still get to your door with about the same relative speed as they did before. So what Amazon's done is they've been able to use data or integrate their use of data to better predict and forecast and anticipate where this demand's going to occur to make that distance decrease. So what I'm talking about is product getting from one of their locations to your front door. And they've done this remarkably well, in really impressive and crazy ways. They use what's called anticipatory shipping. And essentially what it is, is they have access to just great amounts of data, and they have models and machine learning and artificial intelligence that actually predicts what you're going to buy before you buy it. And when that happens, we'll say for a lack of better terms, when that ding goes off, that signal happens. They will even move freight closer to you anticipating that you're going to order it, and then instead of two days, it's same day. 

Adam: That's that next day or the same day stop. 

Fred: Yes. And so what does this do for the consumer delights them? The biggest downside of ere retailing is that you don't get the instant gratification of walking out of the store with the product that's going away, and that's going away by being able to leverage data in these really, really refined models. The other side of that too, and this is why I love supply chain, the other side of that is they're able to do it in a way that decreases their cost. To me, that's just mind-blowing. It's so cool. So the way I look at it is when we perform activities in supply chain, it's our job to do these activities to the best of our abilities. Why? Because it lowers our cost. So from an organizational standpoint, when our costs are lower, our profit margins are better, or if need be, we can pass that savings on to consumers to become more competitive. If price elasticity is a big issue for us. So in supply chain, as we leverage these new tools, we can actually better utilize our assets. We can picture an Amazon truck, like a semi moving to a distribution center. We can better utilize those trucks by using forecasting, anticipatory shipping to decrease those costs. And if we do it right with great accuracy and get that product there, we can then actually decrease the time to get it to your front door, which should have a positive effect on revenue. So to kind of step back and say, we can better serve our customers to increase our revenue and do it in a way that decreases our costs. It's a beautiful thing from supply chain that we try to accomplish, and it's very, very difficult to do that. 

How does marketing impact supply chain?

Adam: And it seems like Amazon knows when I want something too, because if I'm not buying it, they're pushing the ad in front of me too, which is like, I know that's outside of the supply chain, but you're talking about that. I mean, alright, I guess where does that marketing piece fits in, right? 

Fred: Yeah. So I'd say marketing's critical. And to put it another way, I'm going to really sound like a supply chain diehard, marketing makes a lot of promises and we fulfill those promises, so we have to understand that. But from that standpoint, when marketing's doing those promotional things, they're using data as well. They have access to a lot of the same tools that we do, and they're just really trying to build need or need recognition in consumers.  

Adam: They are like, you need more dog food this week? Yes, come on. They know the time has come. 

Fred: Yep. Absolutely. Absolutely. So we used to do things like that at Meijer where it's like, okay, let's measure what mPerks worked well or what promotions or tie-ins worked really well, and if this product's not moving, let's just kind of ping them with this and get this inventory moving. 

Adam: Sort of like when I open my Meijer app up and it tells me the things I buy the most immediately, naturally, and sometimes you're like, oh, I will need grapes by the middle of this week. I have three teenagers. So it's like grapes, Cheezits. It's got me figured out 

Fred: It's not rocket science. It's just behavior 

Adam: And if they know that they have those things in stock and they can reliably stock them in the right amounts, then that is going to reduce the cost. 

Fred: Exactly. 

How big does a company have to be to take advantage of data and improve logistics within supply chain?

Adam: And this is something that's not just happening. I mean, obviously you mentioned working at Meyer, which is smaller than Amazon, is this something even local business can take advantage of? How big do you have to be to take advantage of some of the technology that's in these bigger supply chain groups like Amazon?  

Fred: Yeah, it's a great question. So the answer is you can be any size, but it may not be the right solution for you. So for example, I don't think it comes to a surprise that big companies like Amazon, Walmart, Home Depot, a lot of these organizations do this stuff. So like AI modeling, machine learning, they'll just kind of build it in-house to specifically fit their needs. Then it becomes more proprietary and they can work with it in really more unique ways. There are out of the box solutions to do this. So there are organizations that do provide these things. I would say if you're maybe a smaller organization. 

Adam: Define smaller. I'm just curious.  

Fred: Good question. I would say, okay, to put it this way, as far as size, the use of it needs to necessitate what you're getting. So for example, a smaller organization, certainly a smaller brick and mortar, mom and pop would never need this because the cost of utilizing this would be far beyond the additional revenue that they would ever create from this. I would say it's hard to maybe be specific with the size of the organization that needs it. I would really say it's more about the type of work that they're doing and the type of processes that they have. So for example, if you're a smaller, more regional grocery store, it's unlikely that you're going to be using advanced forecasting models anyways, whether there's AI involved or not, it's unlikely that you're going to have access to that much data to be able to run those things. Realistically, what's going to be sufficient for you is to understand how you buy and sell things or how you've bought and sold things for years. And to just kind of in a more like analog form, refresh that and redo that understanding that you just may not be able to compete with some of these other organizations. 

Adam: Not to bring a dark cloud over the conversation, but is that kind of maybe the sad part of some of this massive efficiency? Right. I mean, I think any of us who are of a certain age, you remember more businesses in your town that were owned by people in your town, and that definitely I think is less the case. And part of it is, and I'm not going to lay this entirely at the feet of corporate oligarchy or whatever like that. I'm not going to be that profound. But I mean, part of it is us as consumers, we have demanded a level of service that some of those businesses were never going to keep up with, at least in the volume that they used to exist. 

The Internet of Things

Fred: Exactly. Look, nostalgia is a powerful drug and it's very easy to sit around and think about the good old days and how things used to be, but at the end of the day, consumers demand what they demand. So a classic example is how do you consume entertainment? How do you consume media? Do you go to a video store and rent physical videos anymore? 

Adam: I only watch VHS, Fred. 

Fred: Right? Exactly. Exactly. But that's the bigger point here. I get nostalgic thinking about going to the video store as a kid and renting videos with my dad, but let's be honest, I consume my media by just using streaming services because that now exists, in retailing and supply chain is really no different. We have access to technology. We would say from an organizational standpoint, it's the Internet of things. So typically it's just abbreviated IOT, but essentially it's organizations have access to all this data from literally from things. Your cell phone, your smartwatch, my dehumidifier at my house connects to my WiFi. 

Adam: It's so cool.  

Fred: All of these things, it's ridiculous. But all of these things give access to data, and that data is used to predict behavior. And all of these things can then be modeled and used to predict something that's relevant to our supply chain or how we do business. So consumers are looking for efficiency, whether they care about the state of small business or not, it comes down to how they behave and largely consumers value efficiency. 

Adam: Do you think there's a component, the thing that always struck me at a college roommate that worked at Circuit City, remember Circuit City? Yeah, 

Fred: Of course. 

Adam: Another victim to the giant, basically to online retail electronics. I worked at Media Play when I was, remember Media Play? 

Fred: I don't remember Media Play, forgive me, 

Adam: It was Best Buy actually bought it and then shut it was, but it was books, movies, music. It was all in one place.  

Fred: Oh, it's perfect.  

What is cross-shopping?

Adam: It was kind of a Best Buy competitor, but Circuit City was definitely the bigger of them. In fact, I think Circuit City may have bought Media Play at one point, and then Best Buy bought it from them, and they all ended up going under. 

Fred: Yes. 

Adam: But Circuit City, I had a college roommate that was working in there in the very early aughts, 2000 and 2003. I'm an undergrad, and he at the time is making 40 grand a year working part-time at Circuit City. And the reason is commission sales. So this is back when electronic stores used to have commission sales, and I always think about him and how insane it was because we're all working for eight bucks an hour and he's just making money because at the time, this is Circuit City in Ann Arbor, and you got kids who have, let's just call them more well-to-do parents than mine were moving in buying those early versions of LCD TVs and stuff, but he was right on the cusp of a thing called cnet.com. And CNET is just, you've probably may be familiar with it, but it's a website where you can get reviews on electronics. And a lot of what was happening to him is even in ‘03, people were starting to come into the store and they didn't need an expert to sit them down in the audio room and sell them a bunch of stuff. And I suspect that that has sort of been a huge thing with almost all retail, where the value of me walking into even Best Buy now and having a TV sales guy who knows all the TVs and can pitch me, it's almost pointless because I'm going to know what TV I want the second I get there. And in fact, if Fred tells me too much about the TV that's similar to the one I want, I might just be annoyed with them. You know what I mean? 

Fred: It's worse than that. Yeah, it's actually worse than that. It's worse than that. Yeah. This is called cross shopping is the term we use. 

Adam: What is that? 

Fred: Cross shopping. Cross shopping. So this almost put Best Buy out of business, and it's essentially, again, all of this supply chain stuff fundamentally comes back to the consumer because they pull everything through the chain. We must have the consumer. And so it comes back to what they value now with Circuit City or with Best Buy, part of their value historically is we're going to have this giant building and it's full of inventory, which cost us a fortune, but we're going to have these display areas and we're going to pay individuals to be knowledgeable on these things to kind of sell these to you, but to provide you with information. And this labor increases our cost. This cost has to at some point, be passed on to the consumer. Otherwise, we literally cannot operate as a business if we don't cover our costs. When we sell things, what are we doing? So the cross shopping is a term that we use, and it's essentially, to give you an example, it would be going into a store like Best Buy, looking at a product, going on your phone, finding it online for less, and then buying it 

Adam: While you're standing in Best Buy. 

Fred: Exactly.  

Adam: I've probably done that.  

Fred: Who hasn't done that? Let's be honest. Who hasn't done that? I know I have, because as a consumer, price is important to me. Especially in higher-margin goods like electronics. It is. So that's got to be so frustrating for Best Buy because you're paying individuals to provide something that is of value, information, right? Confidence to decrease cognitive dissonance and regret. To teach individuals how to use this product and to weigh out their choices to buy the right product. And then you go to do that and they don't buy from you. So they've taken all this cost, but you're not actually closing on that and getting value. And then I believe Best Buy went as far to do price matching with online retailers. And so they had to then lose that margin, and they still had that cost, and they were selling things at a loss. It almost put them out of business. They had to change. 

Adam: They strike me as a company that really somehow came out of the nose dive. That was online retail. I mean, even we have an ABC Warehouse that's in town still. And that one always shocked me because that was the quintessential TV salesman in a corduroy jacket electronic store, and they've kept them open somehow. 

Fred: Yeah. Well, I mean, growing up as kids, we didn't buy a lot of TVs growing up, but when we did, it was a big deal. We absolutely were going to the store to get this because we needed to make the right decision for the amount of money we're spending on this. But consumers just don't shop that way anymore. They just don't. They can buy all sorts of things online and feel confident in ways that they didn't in the past. 

Adam: People are informed in a much different way. I mean, I feel like there's some industries though that you were talking about, the automotive industry where, I mean, obviously the assembly line is probably the most, it's probably the most famous supply chain, I guess, in terms of the way it operates.  

Fred: Yes. Definitely.  

Why would a company drop prices once they've gone up?

Adam: And this is speculative, I have no expertise, but it feels like a lot of these things because cars aren't it, I mean, I think automobiles have been the big one, homes that's been going on for 30 years in the US, but the other one since Covid was groceries. I just don't see them going back down. I think despite all of the politics and the arguments and everyone wanting to be an amateur economist, it strikes me that if I'm one of these companies and I'm still putting the volume out, why am I going to sell milk or corn or a car for less? Why? 

Fred: Exactly. So part of it is why organizations need to be incentivized to do things that's maybe not completely fair. Organizations, it is possible to do things for the good of society. But generally speaking, organizations are metric-driven. The people that operate within them are metric-driven. I worry about the price of food and things like that, knowing not going back down because the margins, when we say margins, think markup, it's razor thin. So when you work with a Supercenter or when you look at organizations that have a large, we'd say product mix. So example, a Supercenter like Walmart sells food, but it also sells pharmaceutical items, clothing, electronics. We'd say it's a large mix. 

Adam: Yeah. Frigging everything, right? 

Fred: Yeah. The food's not making 'em a ton of money.  

Adam: No, it's getting people in the door. 

Fred: Exactly. It's getting people in the door. These are essentials that individuals want to buy. You need them in your, you need to bring them in, right? Food is still largely bought in person, whether that's coming curbside and picking it up. I mean, there is at-home delivery, but you need to get people in. So we can't blow the price of food up too much, but we do need to have some sort of a margin and some food sold at a loss. Some food are loss leaders for that reason. Consumers demand them, and they're incredibly price-sensitive to it. But for organizations like Supercenters, it's not uncommon to have those margins be really, really small. And then the margins on other products like TVs be much higher. And those subsidize, those small margins on food because like you said, we have to get people in here. So I do have real fear for the price of food not coming back down for that reason. It is possible that things change, policies change, cost in the channel, growing the food, acquiring the food, those things go down. Maybe energy prices come down and the cost of transportation comes down, labor's not going to go down, but it is possible these things come down and it kind of pulls back, but then it kind of gets to the point where, well do retailers do that? So I don't have an answer, I don't know, but that's where my mind goes. 

Adam: Yeah, that one always kind of gets me, was like, with the exception of the middle of COVID when gas was like $1.80, because no one was on the road. I remember gas going up when it started to get into that $2.75-$2.80 range and 2015, 2016, 2017 in that range. And people complaining about it. I'm like, well, it's never going down now, man. 

Fred: Yeah, it doesn't seem like it. 

Do prices eventually become fixed with a "hard deck"?

Adam: Yeah, I don't think any of us are going to be getting $1.50 a gallon gas anytime soon unless we end up shut down for anything too. And I guess that's a question. I don't know if this is a supply chain question you can ask, but do prices eventually be kind of fixed? There's just sort of a ceiling, not a ceiling, but a basement, like a hard deck that they won't go below? Sort of. 

Fred: It's hard. I mean, because we're talking about if we're being broad, we're talking about the sale of everything. So it varies by industry realistically, but no, things fluctuate. It really comes back to the industry and the elasticity to price, which all that means is how sensitive are consumers to changes in price. There are some things where consumers just won't pay more. They just refuse to. So I think organizations want to find out they wish knew exactly what that was, and they would charge the most that they possibly could. But it's just not always information we're privy to. But at the end of the day, when energy prices are high, when gas prices are high, it has a trickle effect on everything. I worked in transportation and logistics for years, and when those transportation costs are high, that cost, it does get passed on. There's no way around it. When we're using things like plastic packaging, which really comes from all plastics come from oil. When those oil prices are high, we see that cost going to the price of the product and all these things contribute. So I think people really feel it at the pump clearly, but they're feeling it in other ways as well. With the prices that they're paying at the store. 

What emerging technologies could revolutionize supply chains in the future?

Adam: What are the big technological changes we're going to see that are going to push or pull away supply chains operate? We were talking about labor shortages and automotive industry, driver shortages, I know are a thing basically everywhere. Are we going to see, what is it? Is it, is it drones? Is it unmanned vehicles? AI? What's the biggest thing in the next 10 years? 

Fred: Yeah, AI is going to be the big one. The big one. We've touched on that.  

Adam: It's already the big one, right? 

Fred: Yeah. Yeah, it is. It it's the most accessible. I'd say it's the most realistic. Drones, yes. At some point, drones will get more popular. So drones are interesting. Amazon's actually experimenting with drones. It's called Amazon Prime Air. They've only piloted it in a couple cities, and essentially it's using drones to get product to you. They're constraints with this though, so the amount of weight that it can carry is a big constraint. So I don't know what that weight cap is, but these drones can- 

Adam: It can't be much.  

Fred: It can't be much. And the big thing is the cost of the tech is restrictive. The battery life, so that battery life constraints the distance. So that becomes an issue where I think, don't quote me on this, but I believe right now the battery life is only about 30 minutes. So that acts as a big constraint to how much they can use things like drones to deliver. But you think about it in maybe more specific uses, being able to fly in critical items for emergencies, that's really cool. And that's definitely part of the supply chain. We don't think about it as much, it's not retail, but it's definitely things that we- 

Adam: Think about the hurricane in the Carolinas this year or something like that. Being able to get blood or penicillin or-

Fred: Absolutely. 

Adam: I don't know how much blood you could put on a drone. I pick something that you need in emergency. 

Fred: No, but realistically, right. Small things that you might need is critical. But other things that we're seeing, I mean, automation's the big one. So right now we're seeing a lot of automation, and there's a lot of reasons for this, but I would say from a cost standpoint, over time, the return on investment in automation, in supply chain usage is typically pretty quick and pretty profound. So for example, it's not uncommon to see warehouses become fully automated. That's what we did at Meijer. We are building warehouses that are fully automated. It allows us to make the warehouses taller so that the geographic footprint smaller, which if you think about it, it just means less land that we need, which is actually very beneficial. It allows us to operate more efficiently and faster than human labor. And again, I'm not trying to knock on human labor, but  

Adam: you're not driving high-low through there.  

Fred: Correct. Which there are efficiencies tied to that. You don't have to worry about things like injury, things like theft and loss go down. And with facilities like that, the ROI or the return on it, it's sometimes less than five years. And then from that standpoint, those labor costs are largely reduced, and that's a boon to the entire supply chain. Now, the downside is you do lose human labor. So there are perspectives that people are probably concerned about that, and I think there's validity to that. But from a strictly operational cost standpoint, that's a huge efficiency. Recently what we've seen are port strikes on the East Coast, and maybe you've heard of some of those. The labor union for the ports on the east coast went on strike. And basically labor unions are there to advocate for labor. This is nothing new. But one of the biggest bargaining points they were trying to make was increased wages, which is again, nothing new when labor unions are competing and striking, but also limiting automation. And that's one, I think when people heard about this on the news, if they did, they maybe didn't understand that piece. I know for me, working in supply chain, my knee-jerk reaction can always be, well, why would we not have automation? Well, because it decreases jobs at the end of the day. And so there are ports in China that are fully automated and it just decreases the cost. So we see a little bit of that back and forth, especially with labor unions kind of fighting against that to protect jobs. But I think automation's here, it's not going anywhere, and it's only going to become more advanced. As far as drivers go, we've been suffering from a driver shortage for a very long time.  

Adam: Oh yeah. 

Fred: And the biggest, oh gosh, it's going to sound cliche. The biggest driver of the driver shortage, forgive me, is those are tough jobs. Those are very, very challenging jobs, and they're highly regulated, which in my opinion, I think is a good thing. It's for the safety of the general public, but drivers work long hours, they're away from home, generally speaking, can be a very unhealthy lifestyle because you're on the road a lot. You might not have access to healthy food, like you would want. You're constantly on the go. And just the requirements from a legal standpoint, a regulatory standpoint, and for the organizations that hire drivers, those requirements are very stringent. They're very, very tight. It makes it a difficult industry to get into, and maybe one that doesn't always appeal to individuals. So we have a driver shortage. So organizations are looking into autonomous drivers to combat that. I don't think that technology's close.  

Adam: It’s not there yet. 

Fred: No, and I think my own opinion on this, so please don't quote me, but I think the infrastructure in our country needs to really advance quite a bit. It's one thing to feel autonomous drivers and maybe more metropolitan areas, but when you start to get to the places like Northern Michigan, I think it becomes exceedingly more difficult. 

Adam: Yeah. I remember a few years ago when it was becoming really hot, I think I was on the bandwagon of like, oh, man, eventually you'll just lease a car will be from a fleet and it'll just pick you up in the morning. That felt very real, especially when you saw them drive. But to your point, and again, I don't mean this to be cynical, but we also live in a country that can't seem to muster a high-speed rail, 

Fred: Right? 

Adam: So it feels weird that, like you said, that we'd have an infrastructure that would appropriately and safely allow these things to spread really widely. 

Fred: I just don't see it right away. But keep in mind, and I'll put the tinfoil hat on, things change quickly. You have to stop. It is easy to become normalized with how life is right now, but you have to look in the past, if we rewound 10 years and we looked at how we operate right now, I'm sure there's a number of things where we go, wow, I didn't really see that happening. And so stuff can change quickly, and it does. So it's hard for me to predict exactly what will happen, but I'll say that the technologies that help us to be the most efficient and effective as possible, that become more accessible will happen. 

What jobs are out there for the next generation of supply chain graduates?

Adam: Is there anything else that's coming that you're excited about? Is it something you think we might see in the next year or two that we could, it's either going to be in terms of how we're getting stuff or how we're engaging with it. What's this close or is there anything that's this close? 

Fred: Anything super profound? 

Adam: Well, not necessarily profound. I mean, what are you geeking out about it? 

Fred: Oh, I geek out about data. Yeah, so I mean, I hate to go back to- 

Adam: No, go ahead. 

Fred: -to the pond there. But it's the artificial intelligence. It's the predictive modeling, it’s finding ways to increase the accuracy of how we predict demand is going to help us to operate more efficiently than we ever have. So that to me is very exciting. And I don't think that we've even reached the peak of what we can do with that. That's what I get excited about, because at the end of the day, it's somebody who worked in supply chain and now teaches supply chain management, product still has to move. Until we can Star Trek beam things to other people, we still have to move product. And so information's going to really help us do that effectively. That's the stuff that gets me excited. 

Adam: I think it's okay to geek out about that because you are teaching young people about that. Let's talk about that for just a quick second. I think it's, it's worth acknowledging, we’re at a university. We work at a university here, and what is the career outlooks? What kind of jobs do you see young people getting who are getting into this as part of their College of Business Administration experience? 

Fred: Oh, it's vast. Yeah, it's vast. So I mean, by its definition, supply chain covers a lot. So we see students working in operations. So when we think operations, think production and assembly, it's a little bit more expansive than that. But generally speaking, demand management, supply management, forecasting, distribution, transportation, supply management, inventory management, all of these things. We see a lot of students going into customer relationship management, which sometimes students that come into logistics management or supply chain management, don't think about, but essentially managing customers and their expectations and then measuring how well we perform things like on time in full damage, perfect order, managing these things. Then going back and when these things don't work out well, fixing those problems, we see our students going into just many, many different career paths. It's a great time to pick this major and to work in supply chain, generally speaking. And we're at a point now where I think we're upwards of 95% placement, maybe even higher than that with our graduates. 

Adam: Yeah.  

Fred: There’s a lot of opportunity. 

Adam: In a lot of ways, it feels like a penultimate service economy job. And I use that term with quotes because I think it can be negative for some people when you hear it. But like you're saying, the consumer is the most powerful part and all of these things, all this money's getting put into it. Why not be the expert on how it flows? Right? 

Fred: Oh, but it's so much more than that. While things can feel at times transactional, it's analytical, it's strategic. So if you have an analytical mind, you like solving problems, maybe you like doing puzzles, it's probably a great field for you. 

Adam: Yeah, you heard it here first. If you got an 800-piece or a thousand-piece jigsaw puzzle for Christmas this year, come to Central Michigan University College of Business Administration. Frank's got a class for you. There you go.  

Fred: Fred.  

Adam: Fred, sorry, microphone went with me, my phone. 

Fred: We can just keep Frank. 

Adam: Fred, thanks for coming in today, man. It was great to meet you. 

Fred: Yeah, thank you. 

Adam: I know a little bit more about supply chain management now, so hopefully we'll do this again sometime and I can learn a little bit more. 

Fred: Absolutely.  

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The views and opinions expressed in these episodes are strictly those of the host and guest speaker.