Innovation and disruption are constants in the supply chain game.

In this episode, hosts Scott W. Luton and Kevin L. Jackson, alongside special guests Greg Buzek from IHL Group and Vignesh Balasubramanian from Microsoft, dive deep into the pivotal role of generative AI in revolutionizing supply chain management. Understand the significant inefficiencies in current transportation logistics, with over 50% of trucks less than half full, and how AI can turn this challenge into a substantial efficiency gain.

Our experts share real-world applications from Microsoft, highlighting AI’s role in enhancing planning and forecasting capabilities, adapting to changing data, and optimizing logistics to cut costs and improve delivery times. Vignesh’s personal anecdotes from the COVID-19 pandemic illustrate the importance of preparedness and strategic adaptation in the face of geopolitical and weather-related disruptions.

Looking toward the future, we discuss strategies like nearshoring, the lasting impact of supply chain disruptions on inflation and consumer experiences, and the critical importance of maintaining clean and ready data for AI optimization. Gain valuable insights, practical strategies, and a compelling call to action to embrace AI-driven innovations to stay competitive in today’s volatile market.

Narrator [00:00:04]:

Welcome to Supply Chain Now, the voice of global supply chain. Supply Chain Now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today’s critical issues, the challenges and opportunities. Stay tuned to hear from those making global business happen right here on Supply Chain Now.

Scott W. Luton [00:00:32]:

Hey, hey. Good morning, good afternoon, good evening, wherever you may be. Scott Luton here with you on Supply Chain Now. We’ve got a great show teed up today. We’re going to be diving into an interesting discussion with a couple of business leaders focused on the topic of supply chain innovation. Now we’re going to be exploring some of the supply chain disruptions that we’ve all seen last year or so. They keep on coming. It’s nature of the business.

Scott W. Luton [00:00:53]:

We’re going to be talking about how those factor into important items such as overall cost of supply chains out there. We’re going to be also be discussing some of the ways that AI, of course, artificial intelligence is driving real powerful innovation as well as what they expect in the months ahead in sectors such as the manufacturing sector and retail. Should be an excellent show here today. And of course, if you enjoy today’s show, be sure to share it with a friend or your network. They’ll be glad you did. Okay. Want to get to work? And welcome in our featured guests here today, starting with Greg Buzek, President of the IHL Group. And he’s joined by Vignesh Balasubramanian, Senior Product Marketing Manager, Dynamics 365 with Microsoft.

Greg Buzek [00:01:38]:

Hey.

Scott W. Luton [00:01:38]:

Hey, Greg. How you doing?

Greg Buzek [00:01:40]:

Terrific. How are you, Scott?

Scott W. Luton [00:01:42]:

Wonderful. Great to see you. And Vignesh, how are you doing, sir?

Vignesh Balasubramanian [00:01:45]:

Doing well. Thanks for having me over.

Scott W. Luton [00:01:47]:

We are so glad you’re both here. Really enjoyed our pre show conversations. Got a lot to share with the audience here today. But I want to start with a fun warm up question. Vignesh and Greg. Folks, I don’t have to tell you, summer is here in the United States, and travel season, well, it’s cranking up.

Vignesh Balasubramanian [00:02:03]:

Now.

Scott W. Luton [00:02:03]:

Get this, CNN reports that us airlines are expected to carry some 271 million passengers around the world from June 1 to August 31. That’s a 6.3% increase from last summer. And it’s supposed to be a new all time record.

Vignesh Balasubramanian [00:02:20]:

Wow.

Scott W. Luton [00:02:21]:

Maybe I’m in the wrong business. I should have opened a airline business. Maybe. But, Greg, we’re going to help folks out, right? All those travelers, some of them, some portion of them are going to find themselves in Nashville for a day or maybe a week. Who knows? So for folks that come up in your neck, of the woods. What’s one don’t miss restaurant you’d recommend to folks, Greg?

Greg Buzek [00:02:41]:

Well, I’m not the greatest foodie, but in Nashville, I love to go to Pucketts. Pockets is a local place. It’s not on the main Dragon Broadway. It’s a couple blocks off. But if you want some good southern cooking, great ribs, great barbecue, burgers, you name it. That’s pockets, just off the main dragon in Broadway.

Scott W. Luton [00:03:03]:

Yes, yes, yes, yes, yes. I’ll meet you there in an hour. Craig. We’ll see. Big Nash. Now, you’re kind of. You’re on the west coast. You’re out there in the Seattle area, a beautiful, beautiful part of the world.

Scott W. Luton [00:03:14]:

So what about you? What would you recommend as the one don’t miss restaurant when folks come out there your way?

Vignesh Balasubramanian [00:03:20]:

I love turkish cuisine, and I love asian cuisine. So for me, I would recommend this boutique restaurant called Hamdi. It’s a new restaurant in Seattle. It’s more turkish cuisine for people who like turkish cuisine. And then if you’re into dumplings, definitely check out supreme dumplings. There are a couple of them out here in Seattle. So those are my go to.

Scott W. Luton [00:03:41]:

Love that vignesh. And I love asian cuisine as well.

Vignesh Balasubramanian [00:03:45]:

I need.

Scott W. Luton [00:03:45]:

We need to get together and have enjoy some turkish cuisine. We’ll see if we can’t make that happen, folks. If you’re coming to Atlanta, you know, home of, depending on what day it is, one of the world’s busiest, if not the world’s busiest airport, I would just add the optimist club is a wonderful place to eat, local place to eat. All right. We got a lot to get into. Vignesh and Greg, a lot to get into here. And I want to start with this. We’re big fans.

Scott W. Luton [00:04:09]:

We can’t get enough context in this fast moving world we’re living in. That’s where I want to start. So, Greg, tell us briefly about the IHL group and some of your background, if you would.

Greg Buzek [00:04:18]:

Sure. Yeah. So we’re an analyst firm in the retail and hospitality industries. We get a little deeper than many analyst firms, where many go through the forest level for their forecast. We get down to the tree level with what we do in terms of forecast. A lot of store where store meets e commerce and supply chain, as well as AI. So that’s our background. Prior to that, I worked at sensormatic and NCR Corporation as a product manager.

Greg Buzek [00:04:44]:

Okay. Started in 1996.

Scott W. Luton [00:04:47]:

Man. So you’ve been at it for a week or two, Greg?

Greg Buzek [00:04:50]:

Just a bit. I’ve had. I’ll be on my 31st NRF show coming this year.

Scott W. Luton [00:04:55]:

Oh, that, that’s the place to be in the retail universe when the big show is taking place. Look forward to maybe getting some of your key takeaways from the big show coming up next few months. Vignesh, everyone knows Microsoft, of course, and we’ve had an ongoing series here. We’ve been interviewing a ton of wonderful leaders like you and Greg. But tell us about what you do at Microsoft. Maybe a little bit of your background.

Vignesh Balasubramanian [00:05:16]:

Yeah, absolutely. So my name is Vignesh Balasbrman, and I am a product marketer at Microsoft, and I lead the supply chain portfolio and now expanding into the ERP portfolio here at Microsoft. Prior to Microsoft, I was a supply chain practitioner. I was working as a supply chain manager and an SNLP manager for manufacturing companies here in the Seattle area. And so super excited to be here talking about supply chain. This is one of those, I mean, timing wise, was the best time to be in supply chain, to be honest. So excited to have chat with leaders such as you and Greg.

Scott W. Luton [00:05:57]:

I’m with you, Vignesh. It is a fascinating time. And also, I appreciate your background prior to what you’re doing now as a practitioner, because we’re going to draw on that, especially your manufacturing and supply chain expertise. So stay tuned. Okay, so, Greg and Vignesh, we’ve level set a bit about your background. What you do now, I want to get into, and we’ll start with you, Greg. You know, there’s no shortage of disruptions. There’s some bigger ones and some smaller ones, and we know that there’s also no end to disruptions.

Scott W. Luton [00:06:26]:

That’s kind of what goes with the global supply chain management territory. But we want to pick a few out, and we’ll get you to kind of weigh in on these. And then we’re going to talk about how they’re factoring into some, some common business topics. Let’s start with geopolitical disruptions. Greg, what do you see going on there?

Greg Buzek [00:06:43]:

Yeah. So first of all, I just want to thank the people that are in the supply chain, working in the supply chain. You guys are the forgotten first responders of the retail industry. They’re keeping everything going on. We are about five years into what I believe is a seven year disruption with regards to the supply chain. We had optimized things to the level of being sort of like low end NASCAR where things were tweaked and we had everything just in time and everything was going on, and then we had Covid happen and that was like, there’s a bomb on, you know, on turn three there. So we’ve got to reroute through the concession stand. And now we have things like Russia invades Ukraine and now that’s like a riot at the concession stand.

Greg Buzek [00:07:25]:

So we’ve got to figure out another way. So it’s like constantly going through all that stuff. I mean, we had crazy things where people were getting on airplanes carrying auto parts to keep auto lines going here in Tennessee for GM. So were about five years through that and were still seeing these geopolitical things and these disruptions. So weve had two major elections happen in the last two days and our major trading partners, we certainly have disruption thats affecting the Suez Canal right now and adding cost to the supply chain side of things. And then related to that, we’ve got everything related to the US election coming up as well. So there’s all these things happening with regards to geopolitical issues that are putting pressure on the supply chain as we plan for back to school and then going into the holidays this year.

Scott W. Luton [00:08:13]:

Yeah, well said, Greg. And a couple quick things before I get Vignesh to weigh in as well. I love your comment about how supply chain is the forgotten first responders, the people that make up this global industry that keep us all moving forward. We can’t give them enough credit and recognition. So great call out there. And on a much lighter note, that NASCAR reference is gold. We all need to find our, we need to find our Richard Petty’s or our Dell Earnhardt’s in NASCAR to help guide our supply chain. So we’ll be revisiting that for sure.

Scott W. Luton [00:08:43]:

Big Nash, when it comes to those geopolitical disruptions that Greg mentioned, some of those your thoughts there?

Vignesh Balasubramanian [00:08:50]:

Yeah, absolutely. I mean, I 100% agree with Greg. I mean, kudos to all the folks who work on the supply chain. I mean, they’re the ones who make the magic happen, right. It’s almost become like a new normal, I would say these geopolitical disruptions, I remember my first experience dealing with geopolitical disruptions back, I would say four or five years ago when the tariffs were first reintroduced for goods coming from China. And at that time, I was working as a supply chain manager in manufacturing where a lot of power parts and finished goods used to come from different parts of China. And all of a sudden, I remember we had to just scramble things to kind of, you know, disassemble the finished goods, bring them as sub assemblies through different countries. We moved the suppliers from China to Vietnam, create sub assemblies there brought goods in as finished instead of finished.

Scott W. Luton [00:09:45]:

Good.

Vignesh Balasubramanian [00:09:46]:

We used to bring them a sub assemblies that the tariffs would be left. So we tweaked a lot in terms of the sourcing strategy so that we could still keep our prices low, still hit the business objectives that our company had, which was our margin expansion. And it was fascinating. I mean, there’s a lot of work going into it. But then that kind of set the precedent of the need for having more of a playbook when something like this happens in the future, and almost five years, six years since the tales are introduced, and I go back and talk to my peers from my old company, and now they have, like, a. Everything that description like this happens. What do you do? How do you go about it? I think you’ll touch some of this later in the interview around nearshoring and insuring this kind of even place into as these geopolitical disruptions happen. How do you combat that with stuff like near shoring? How do you combat that with moving supply chains more locally and things like that? How do you create redundancy in your supply chain? Honestly, unintuitive.

Vignesh Balasubramanian [00:10:45]:

Because a decade ago, it was like, we’re doing things because it was impacted by globalization. You’re kind of driving efficiency. Now you’re putting yourself in the reverse and taking efficiencies out and creating what if that happened?

Scott W. Luton [00:10:59]:

Right? Yeah. I love your comments there. And going back to that playbook notion, we have far less excuses for not having a lot more playbooks these days. The ability to leverage technology to go run all sorts of simulations and scenarios so that we can be better prepared. It’s a great call out there, I think. Greg and Vignesh, before we move on to the next disruption, I think we’ve got the host of digital transformers, the one and only Kevin L. Jackson. We’re going to swoosh them in, I believe.

Scott W. Luton [00:11:28]:

Let’s check it out. Hey. Hey, Kevin.

Vignesh Balasubramanian [00:11:31]:

Hello. Hello.

Kevin L. Jackson [00:11:31]:

Right now, I’m dealing with this.

Scott W. Luton [00:11:37]:

Welcome, welcome. And I’m glad that you and your group of NASA engineers figured out how to bridge the tech gap and you’re here with us. Okay, so, Kevin, Greg, and Vignesh, we’re going to keep on driving on disruptions. We covered geopolitical. Let’s go to all the weather disruptions. Greg, what are your thoughts there?

Greg Buzek [00:11:58]:

Right, yeah. So the things that get all the press is related to thunderstorms, hurricanes, those sort of things. But we have massive disruptions due to drought that is occurring right now, the Panama Canal. Most people don’t know that that is actually freshwater in the Panama Canal. And there’s been a drought there and more recently a drought in Canada with our trading partners up there as well, which is affecting not only the distribution of products, but also energy, as they do not have an excess of energy that they’ve had previously that we can get into the United States. So that has implications in the supply chain, but also all the stuff related to AI and the supply chain as we get these increases in power that are necessary.

Scott W. Luton [00:12:41]:

Excellent point, Greg. And two quick points on the Panama Canal I’ve seen where the US Army Corps of Engineers, I think, have invested tons of money to try to address water related issues. And I keep hearing rumors, hubbub around a second canal being explored down there. And that’s not necessarily new. There’s been thoughts and ideas for over the years, but we’ll see if that comes to fruition as well, huh?

Greg Buzek [00:13:07]:

Yeah. And the piece I left out is this 50% of the trends of the traffic has been stopped, so it’s slowed to 50% of the throughput they normally can have. So you think of what we had with COVID with the ports and the shutdown there. It’s very complex to get anything from China over to the east coast of the United States going in that direction because of the delays.

Scott W. Luton [00:13:30]:

Wow. Folks, if you never have ventured over to YouTube to see how the Panama canal works, check it out. It is fascinating. Vignesh, weigh in on weather disruptions.

Vignesh Balasubramanian [00:13:40]:

Yeah, I mean, weather disruptions are pretty, have been pretty massive. They’ve been increasing and being more prevalent, I would say more recently, more in the news. I personally have been impacted in my previous company when we wanted to chips and PCB boards from countries in Asia. And if there’s a tsunami or an earthquake there, that really impacts the flow of that. And then that kind of puts the. Takes the lines down, which is quite impactful, if you think about it, because if you shut down the production line, it takes a lot of time to kind of pick that back up, and it’s a lot of money. So how do you kind of get ahead of some of that? So, I mean, the weather forecasting, it’s become more scientific, the ways to predict it. And I would almost say there’s certain things that you cannot get ahead.

Vignesh Balasubramanian [00:14:28]:

But weather is one of those things where you can still think about it as only you get reactive. You won’t be completely proactive in dealing with it, but you’ll be better prepared, in essence now than what you were a few years ago, recently I remember like when I was working at Microsoft in, during the COVID we were impacted by the shipping delays because of forest fires in the west coast. Like, I mean, other roads were shut down as beings of this universe. I mean, we could also see how we can float on some of this climate impact. I would say. I don’t want to get into controversial topics, but I mean, the ways that veg, we can slow down the impact of weather, we cannot completely eliminate it, but a role that each of us can play in slowly overcoming some of that. So that’s my take on Edward.

Scott W. Luton [00:15:13]:

Well said. And we can all, we can all do more for sure. Hey, really quick, you mentioned chips. And Kevin, I’m coming to you next. A lot of folks may not know that making computer chips takes a ton of water. And a couple years ago, Taiwan, which of course the center of the universe when it comes to that, was experiencing a very unique drought. That was one more factor that hit the chip supply. So great, great comments there, Vignesh.

Scott W. Luton [00:15:36]:

Kevin, your comments.

Kevin L. Jackson [00:15:38]:

Yeah, one of the things, as you said, you can’t change the weather. You can only talk about it. But we are learning a lot more about its effects on our everyday life. And I think the word is getting out there that man does indeed have an effect. While weather change is normal. I mean, the earth has gone through a lot of changes in its climate. We now know how to deal with it so it won’t be an existential threat through our society.

Scott W. Luton [00:16:15]:

Excellent point, Kevin. Okay, Greg, this third disruption before we get into kind of how they’re, how it’s factoring into our businesses on some very specific topics. Let’s talk about choice in supplying country. A lot of shifts going on there. Your thoughts, Greg?

Greg Buzek [00:16:29]:

Yeah, yeah, absolutely. And you know, it’s funny. Every supplying country has positives and negatives, that kind of impact thing. Mexico is now our largest supplier to the United States here. But now you’ve got the illegal immigration piece of it, but also the drug trade coming through that by inspections, you’re slowing down the supply chain in there. Certainly the geopolitical issues with China and then we’ve got issues with over in Vietnam growing as well as Korea. So there are issues that each one of these countries deal with, these trading partners. Europe is certainly our second biggest trading partner now.

Greg Buzek [00:17:08]:

And that is driving things there with what’s going on in Ukraine, but also different costs related to tariffs and things related to vehicles and other products. So individual products, what’s going on? If it’s cheeses or wine, it’s down in France, autos coming from Germany, there’s all these unique factors that politically have impact, but there’s also weather concerns, wars, all of it. And every one of our trading partners seems to have some issues that they’re dealing with that are impacting trade.

Scott W. Luton [00:17:38]:

Well said, Greg. I’m curious you brought up cheese. It’s national Cheese Day in the States and it dates back to the historical founding of Roquefort cheese. Some neat stories there. But kidding aside, Greg, how can we take more friction out of the trade coming across the Mexico US border? Big opportunity there, and we’re going to touch on why that is here in the second half of today’s conversation. Big Nash, talk about some of those factors that, those supplying country shifts that Greg is referring to.

Vignesh Balasubramanian [00:18:09]:

I think Greg summarizes briefly, I think pretty much every industry has been impacted because of geopolitical interventions and things that’s happening globally. I think putting in perspective of any manufacturing company or any retail company, as they think about their supply chain networks, it kind of comes down to how they want to meet their customers demand. I think the sourcing strategies, it’s a good time to kind of go back and reuse the sourcing strategy that you might have created decades ago to really see where you can find that redundancy, where you can find the ability to create a new sourcing strategy, create new suppliers, bring some in sourcing into, overcome some of these challenges. But yeah, I mean, they’re getting more and more rampant as you speak. So it’s not going to end. I mean, it’s almost kind of become like a new normal. It’s not a good thing normally, but I mean, it is evident that these are going to stay here. These are not probably going to go away.

Vignesh Balasubramanian [00:19:06]:

So it’s not a short term fix that we’re looking for. We’re looking for things that’s going to really help us create solutions in the long term.

Scott W. Luton [00:19:14]:

Well said. Vignesh. As we continue to kind of set the table with what’s next. Kevin, we’re kind of running through all these disruptions. We wrapped on kind of the supply and country shifts as we’re seeing folks take production, different parts of world change up, find new suppliers for a variety of reasons. Your thoughts are.

Kevin L. Jackson [00:19:33]:

Kevin yeah, the intersection of geopolitical geopolitics and get it out of my mouth soon. And supply chain is not favorable to the western world. I mean, China is the largest exporter when it comes to technology intensive products, especially rare earths. And you don’t realize the things like that go into your smartphone as a raw material imported from China. And if China cuts it off, then it cut off your, your cell phone. That’s your smartphone. It’s like cutting off your left arm or maybe your right arm, too. So we really need to address these geopolitical issues as they intersect with the supply chain.

Scott W. Luton [00:20:36]:

Yeah, good stuff there, Kevin. Excellent point. So, Greg, this we’re going to go, if you could speak to two factors in terms of how these disruptions are impacting businesses, both overall costs as well as if you go ahead and address the costs, in particular of warehousing. Your thoughts here, Greg?

Greg Buzek [00:20:53]:

Yeah, yeah, it’s funny, this has been a thing where it’s almost like whack a mole when it comes to the increased cost of things for inflation. So originally it was the port and it was everything from the raw materials coming from China during COVID and then it became the trucking and the warehousing. And we had a tremendous lack of warehousing in the right places. So we built up the warehousing. Well, it’s no longer the warehousing now. What’s driving those increased costs is either we’re having to traverse around countries or around the Horn of Africa in Europe, or wait, and the Panama Canal, or dealing with disruptions due to labor on some of the other ports here in the United States. But now the biggest thing that we’re seeing is the availability of shipping containers not being in the right place at the right time. And that’s starting to drive up cost of cost per container.

Greg Buzek [00:21:47]:

So there’s different things now. We had been as high as, I think, 22, $23,000 as a cost per container during October of 21st, during the COVID time to get something from Shanghai to LA. And that dropped as low, I believe, as $1,800, which was not sustainable for the ports and the shippers there. And now I think it’s back up to about $3,200, $3,300 there. So these disruptions, so to speak, have saved a lot of logistics people from going out of business with the increased cost per container. But it does put pressure on the inflation number. And so that’s the thing we’ve got to keep in mind is although we continue to see goods inflation drop in favor of things like insurance, which I just found out, this is a strange one for you, Scott.

Scott W. Luton [00:22:37]:

Okay.

Greg Buzek [00:22:37]:

Housing insurance is not in the CPI. Really? Anybody, anybody’s housing insurance go up this year? Car insurance go up. It’s not in the CPI. Renters insurance is in the CPI. So what we’re experiencing as consumers for inflation is much higher than what the government’s reporting. And unfortunately, we’ve got these pressures now occurring in the supply chain again that are preventing us from going lower in that inflation bay.

Scott W. Luton [00:23:07]:

No shortage of cost impacts from these disruptions. Overall costs, some of the logistics costs, some of the inflationary, even the indirect costs that. Greg, that you wrapped your response on. Greg, anything else before we move on from the warehousing, anything else you want to add from how all these disruptions are impacting the warehousing component of global supply chains?

Greg Buzek [00:23:33]:

Yeah. So you’ve got the warehousing stuff and the level of automation and opportunity there is pretty significant there. And also the locations of those warehouses. The big drive has been, how do I get more warehouses closer to the population centers, whether I need to use my store as a warehouse or whether or not I have something that’s out in the exurbs, so to speak, of a major metro area, so that things can be delivered much faster in a much more cost effective manner there. But that automation and also the optimization, and that’s where the AI really starts to come into play, is everything around the supply chain that AI can improve because we’ve got a lot of trucks that are half empty or quarter or completely empty on the road right now. So the more we can concentrate that and then get better load optimization, the better we’ll be.

Scott W. Luton [00:24:25]:

Well said, Greg. All right, so you touched on overall costs and those warehousing logistics costs, as well as a couple of inflation observations there. We’re going to come back to you more on any consumer angles of how all these disruptions are planned. And by the way, I’m getting my insurance person on the phone. And Greg, hopefully you can negotiate for me. We’re going to find out about those rising.

Greg Buzek [00:24:45]:

I’m not sure I can help you.

Scott W. Luton [00:24:48]:

We’ll see. Big Nash, we covered a lot of ground there. Gregg’s analysis. I’m come to you and Kevin next. But Vignesh, when you think about all these disruptions that we have walked through here and how they are factoring into, gosh, a much more expensive way of doing business and a greater importance of finding smarter ways of doing business. Your thoughts there? Vignesh?

Vignesh Balasubramanian [00:25:11]:

Yeah, it is a vicious cycle, isn’t it? I mean, there is a supply chain disruption that is causing shortages of raw materials, empty shelves that are getting the prices to go up. There’s a demand supply imbalance that create some kind of challenges for every company, which at the end of the day, as the cost of goods increase because these disruptions, I mean, they get added on, they get passed along to the consumers like you and me from these different brands and manufacturing companies. Right. So end of the day, we kind of end up facing the brunt of having to deal with rising prices and inflation. When I was talking to some of the clients very recently about how theyre thinking about this top of mind for pretty much every person out there, how do we combat these rising prices? Because everybody wants to deliver the best customer experience out there. They really want to keep their customers happy. End of the day, whether its manufacturing retail doesnt matter. It comes down to a lot of companies adopting queue rationalization.

Vignesh Balasubramanian [00:26:14]:

I’ve seen a lot of companies decide, okay, instead of selling thousands queues, which is difficult to monitor and manage, I’m going to take care of a fewer skus, fewer things, fewer offerings, but I’m going to do it the best way possible. So there are a lot of changes that companies are trying to adopt and experiment to see how they can still deliver that great desired customer experience without really driving your sales down, without really showing that they’re increasing prices and things like that. So I think that is one aspect of it. You also hear, I mean, in the news media, stuff like the rising prices, the size of packaging has reduced, the quantity of items in a package is much lesser than what it used to be before. So some of that is also like they reduce the quantity of printable packaged goods in a packet to kind of keep the prices same, which is again, not the best service for the customer. But those are some creative ways companies are going about it. I think it kind of comes down to how we provide the best solution from a technology perspective. I think they’re going to touch upon that in a little bit in terms of the way AI is going to change the game for the way we can use some other tools and technologies out there to help with it, to really help these brands out.

Vignesh Balasubramanian [00:27:28]:

I mean, giving them messaging customers brand from the scanners.

Scott W. Luton [00:27:33]:

Yes, Big Nash and I would just add, Kevin, I’m coming to you. I would just add one more thing that I bet the CPI doesn’t take into account, Greg, and that’s the rising cost of protecting brand loyalty to some of the things that Vignesh talked about. Right. Kevin, your thoughts on how all these disruptions are impacting how we do business?

Kevin L. Jackson [00:27:53]:

Yeah, really wanted to key on that insurance issue because there is a cost to protecting our sea lanes. I happen to be at a navy conference this week, and because of issues and attacks in pirates the Navy is actually spending a lot, has been spending a lot more money on protecting these ships and pipers and containers. And one of the problems is that they can’t be everywhere all the time. So the insurance on the tankers and the shipping of these containers has actually gone up. And that’s right. It’s going right into the cost of all the products and all the supplies that we need. And one thing that the US Navy is looking at is the deployment of what they call the ghost fleet. And these are autonomous trips that can be used to protect the tankers and the container ships.

Kevin L. Jackson [00:29:06]:

And what are they using? Advanced technology, artificial intelligence satellite in order to reduce the cost, they shipping all of our supply. And that’s something that people don’t think about, hey, you know, who’s going to protect who you got to call if somebody attacks your tank, right?

Scott W. Luton [00:29:28]:

You’re talking about some big, bold, different costs. Kevin, excellent points there. Before we get into AI, anything else from that consumer angle? Greg right. The impact.

Greg Buzek [00:29:37]:

Well, one of the things that major thing from the consumer angle is, man, if I had the chart to put up, I could show you the percentage of people buy income strata that are Amazon prime members. Yes, Amazon prime members, it’s 94% of those with household incomes over $150,000 are Amazon prime members. It’s over 80% of all households. So how those people react when they experience an out of stock at the store? Those people shop because they expect to get the item now. They go to physical stores because they expect it now. It’s usually like a kid has a report cover that’s needed and they got to run to the store to get it. There’s a vicious cycle that is happening for retailers because retailers, when somebody comes into the store, and particularly prime members, they spend 50% more on impulse items than the shoppers that don’t have prime that shop those stores. And you get into this vicious cycle when you don’t have what they expect you to have, they visit less, and thus you’re not getting that impulse item shopper as well.

Greg Buzek [00:30:42]:

And that just drives them more and more to the online experience rather than shopping in the stores. And so the out of stocks and overstocks, that piece in particular is a huge issue when it comes to things at the store level worldwide. It’s a $1.2 trillion problem worldwide overstocks and out of stocks is 1.77 trillion in our last report. We’ll be doing that again this summer and putting that out. But we’ve been tracking that for like 15 years. From the consumer’s perspective, what is an out of stock? An out of stock is not just, I came into the store and there was no inventory in the store. It could have been there, but it was locked up or there was nobody to help. We look at all the reasons why a consumer comes in and leaves without buying something other than the price didn’t match what they wanted to pay, all those other reasons we put together, and it’s just a massive number.

Greg Buzek [00:31:37]:

At one point, it was bigger than the entire retail economy of Australia.

Scott W. Luton [00:31:40]:

Wow. Wow. Big, big consequential numbers you’re sharing. And as Amanda says, as an Amazon prime member, I can confirm Craig’s commentary and all the statistics. Good stuff.

Vignesh Balasubramanian [00:31:52]:

And by the way, add to what Greg said, I have made an observation at NRF a few years ago where a lot of customers came to us to say, hey, we want to deliver similar type of service like what Amazon does, because everybody is looking for, everybody’s so used to getting their product now in like 2 hours. How do me as a brand offer a similar kind of service like what Amazon does to the customers? Right? I mean, that’s a huge infrastructure because it requires a load of id infrastructure to kind of give you that real time inventory data, provide that order management system and things like that. But there is a customer need for like, the brands are hurting because they’re like, hey, we need to do what giants like Amazon are doing and how do we get there? How do we keep our customers loyal to us? By offering a similar kind of experience.

Scott W. Luton [00:32:42]:

That an Amazon does.

Vignesh Balasubramanian [00:32:43]:

I think that is pretty real in terms of how the brands are thinking about it.

Scott W. Luton [00:32:48]:

Excellent point to somewhat you’ve said here in your last response, Vignesh. We’re going to offer up near the end of today’s episode some resources that will help folks act on the opportunities to do business better and to lean into this innovative technology, which we’re also going to touch on in just a second. But for the sake of time, Kevin, Greg and Vignesh got to switch gears because I want to talk about near shoring major trends been going on over the last couple of years. One powerful example, I think Greg, or one of you all mentioned earlier, the Mexico market is rocking and rolling. Mexico replaced China in 2023 as a top ranked exporter to the US. In fact, according to Mexico’s Ministry of economy, foreign direct investment in the country was up 30% in 2023 over 2022. So Greg, the question, though, in the broader sense of nearshoring, because us companies aren’t the only ones taking advantage of near shoring. It’s going on around the world.

Scott W. Luton [00:33:43]:

Right. Your thoughts on this opportunity and its impact?

Greg Buzek [00:33:46]:

Yeah. So it’s whack a mole as we put tariffs and restrictions on China, but we don’t have them on Mexico. So what do the chinese manufacturers do? They just move the parts to Mexico to be final assembled and then they can get through all these geopolitical aspects of. It is like a whack a mole type of situation. That being said, it is huge when it comes to Mexico as a trading partner for us. It has great ramifications for the country there. And like I said, it comes with issues and being able to smooth that out with having official certifications or whatever. Fast lanes, sort of like a TSA pre, a way of getting through for trade would have huge ramifications because, like I said, guys were flying on airplanes because that’s easier to do than driving a truck over the border for some parts to keep lines going.

Greg Buzek [00:34:44]:

And that’s just not sustainable by any stretch there. So near shoring’s a big part of it.

Scott W. Luton [00:34:51]:

That’s right. And anytime I hear someone say whack a mole, it takes me back to my Friday nights at showbiz pizza as a kid. A kid were $5 in tokens. That was a good night. And I remember that, that one game there, Greg, it’s not like global supply chain these days.

Greg Buzek [00:35:04]:

Yeah, and as we mentioned earlier with the geopolitical piece of it, Mexico just had an election. They just elected their first female president here this week. India just confirmed Modi for the third term here this morning. So another major trading partner as well. So all of those things are playing out. And, you know, we’ve got the US election here. So all of those things can have a factor in this as well in the relationships that create these near shoring opportunities.

Scott W. Luton [00:35:32]:

Excellent point. And while not near shoring, a lot of folks are looking at the indian manufacturing sector as a potential counterbalance as they shift their production in other places. In fact, the indian government is making big investments in their manufacturing sector. Great call outs there, Greg Vignesh, near shoring.

Kevin L. Jackson [00:35:49]:

Your thoughts?

Vignesh Balasubramanian [00:35:50]:

Glass half fluid perspective. Completely agree with everything, Greg and Kevin, from a geopolitics standpoint. But I mean, if you think about some of the positives that maybe nearshoring can bring, obviously, cost aside, it is one of those opportunities where companies now have an ability to deal with shorter lead times, I guess. I mean, things are closer to your production, closer to your distribution, closer to your customer, which kind of brings other advantages, like, you know, I mean, you can carry less inventory in general. So although you’ll be compensating for setting up new sourcing and a more expensive sourcing strategy in the long term, it helps you save on inventory carrying cost. It helps you save on transportation, logistics cost. Also provide a more sustainable opportunity where, you know, carbon footprint is less when it comes to having your supplies closer to where you’re manufacturing, having your distribution center closer to your customer. So those are some benefits in addition to the added cost, which are some of the drawbacks of nissuring.

Vignesh Balasubramanian [00:36:55]:

But that’s the glass up full approach. So I think my perspective would be, as we think about the next decade of creating resilience for your company, you kind of think about your supply chain strategy in terms of what your true business objectives are. How do you take these into account? How do you design your supply chain or redesign your supply chain in terms of what your KPI should be or what your business should should be?

Scott W. Luton [00:37:18]:

Excellent points. Big opportunities to design supply chain in ways that we have hadn’t dreamed of in previous decades. Kevin, your thoughts near shoring?

Kevin L. Jackson [00:37:27]:

Yeah, the thing that comes to my mind is right shoring. I mean, you know, everything has to be in moderation. All near showing is not right. You know, you have to look at the cost benefit. Do that analysis which changes constantly, not just rely on distance as a predictor of risk. It’s important to maintain your connections, your supply chain in multiple regions, because we all are operating in a global environment. If you want to or not.

Scott W. Luton [00:38:12]:

That’s right. It is not simple 6th grade algebra when it comes to global supply chain. Great, great point there, Kevin. Oh, I wish it was, because my math skills sometimes are challenged. Greg, Big Nesh and Kevin, but there’s good news. There’s good news, right? Modern technology, as we’ve referenced numerous times, artificial intelligence, of course, it’s. While that’s been around for a long time, this has become the golden age, right? You got Vignesh and Microsoft Team doing big things, helping companies leverage these innovative technologies. That’s where we’ll go next.

Scott W. Luton [00:38:44]:

So, Greg, we can’t have these conversations without mentioning AI. I want to get you to weigh in specifically on how you see AI currently, as well as continuing to impact planning, trucking, overall supply chain optimization, as well as that general merchandise category that we were talking about earlier.

Greg Buzek [00:39:03]:

Yeah, I like to look at it as a metaphor of getting from New York City to LaGuardia Airport. There are a few companies that have done the hard work that have cleaned their data. They have massive amounts of data. They’re ready to go and they’re through the tunnel and they’re getting ready to go through the toll booth to get on the highway, and they’re taking advantage of, fully taking advantage of AI going through. But the vast majority of retailers are kind of stuck between 8th and 9th and bumper to bumper traffic, still trying to get their data in order so that they can take advantage of things. The supply chain side of it. The benefits so far are massively in the, what we would call the traditional AI and machine learning side of things where it’s, you’ve got to have that data clean tagged and have an abundant amount of data there to train. So it’s train and iterate.

Greg Buzek [00:39:54]:

Train and iterate, etcetera. The real gold comes when you put generative AI on top of that data and you’re able to take advantage of that and do things. Walmart has already saved 3% in negotiations of store fixtures by having a generative AI tool negotiate the price with a live negotiator on the other end. Those are just some of the things. But you think of the truck utilization, I believe it’s like over 50% of the trucks are less than half full on the road at any one time. And as a result of that, we’re taking up a lot of space on our highways. Is anybody trying to drive for the holidays? We’ll find. And we just all assume that those trucks are full when we’re going.

Vignesh Balasubramanian [00:40:34]:

Yeah.

Greg Buzek [00:40:35]:

Oh, that’s going to an Amazon, that’s going to whatever. And to come to realize that no chance that it’s only about 25% full there. So AI in that utilization, the transportation, the planning, the transportation, the timing of which your deliveries are happening, all those things are really, really complex for a human being to do, but AI can be used in that process. The challenge with AI in those processes is you need some sort of uniformity there. And our challenges have been to date that we’ve kind of got all these disruptions again, there’s a bomb on turn three. All these disruptions, and it can pivot much faster, it can recognize much faster, but whether or not it can provide the full on solution all the time, we’re not there yet, but we’re getting a lot closer with AI.

Scott W. Luton [00:41:26]:

That’s right. It was empty miles. I love that you called that out. Massive opportunity.

Greg Buzek [00:41:30]:

Ihl we projected that retail worldwide has a $9.2 trillion opportunity with AI. The vast majority of that early on will be the traditional AI ML. And then as we will see starting later this year. And further, is the generative AI taking advantages. So the generative AI in the knowledge worker side, the SG and a side of the income statement is where the great value will be as well as the marketing and the personalization for increased sales. Tapestry is seeing a three to 5% increase in sales through personalization of the AI. Those are some pockets where generative AI is already returning, but that value is going to be more in the 24 28 timeframe. And then this elusive AGI, artificial general intelligence is down the line.

Greg Buzek [00:42:21]:

It’s 26 and beyond where we may start seeing some benefits from that types of technology in there. But overall it is just absolutely huge.

Scott W. Luton [00:42:30]:

Man, $9.2 trillion opportunity. I dont buy a lot of insurance, Greg. An hour never gives us enough time. We need a six hour show about these topics. But Vignesh, if you would weigh in on the power of AI and how its already being used and how its going to be used in the future.

Vignesh Balasubramanian [00:42:46]:

AI is absolutely changing the game for pretty much every business, I think, unless you’re sitting under the rock. Europe kind of heard the explosions happening with generative AI technology all around and all the different business functions, supply chain finance, human resources and so on. Just to make it real, I wanted to share a personal example of the benefits of something like the generative AI technology in planning. I was a supply chain manager and I used to do SNLP planning for about two years. And back then, even in like five, six years ago, we still had AI pod forecasting and demand forecasting and so on. The biggest challenge you had in any organization was when you use AI in the past to create forecasts or create some plans, the leadership needs to trust it. I mean, you are, as a planner, you’re always held accountable. You’re always in the corner office trying to say why you created such a plan.

Vignesh Balasubramanian [00:43:44]:

Why do we have part, which is why do we have empty shelves? It kind of comes back to the planning that you did, and you can’t just go and stand on corner office saying, hey, I use this technology which had AI in it to do this. What has evolved since then is because of COVID and things like that, the historical data, the basis on which some of the forecasting was done has completely changed. We don’t have a lot of information available in the history that can dictate what the future demand is going to look like. So we are one forced to look at what AI can do in terms of bringing those external signals to help us plan better so that we have a more well rounded approach. The second thing, the key advantage of Genai, it has evolved technology from being a black box to really explaining how that planning is made. So now I don’t have to sit at the corner office trying to say I use this technology. I can actually give an explanation of this is what happened. These are the correlations of all the different data points because of which I made this decision.

Vignesh Balasubramanian [00:44:44]:

So what happens is you as a supply chain practitioner are more confident in terms of how you’re going about your business, and then you learn from it, you find in the model and so on. So some of the bad practices, like, you know, I don’t trust the systems I’m going to use. Manual forecasting, which is going to cause a whole bunch of other issues, goes out of the window because Jennai is now adding this element of, I know exactly how this is getting created. These are the reasons why is living end to end, and I’m more confident now in their forecast. And then you get better alignment, you get better efficiency in your processes and so on. So this is just one example, right? I mean, we have this kind of stuff happening for procurement agents and things like that. I mean, when I think about buyers and procurement quotes, they look at thousands and thousands of PO lines every day. And what Genei is able to do is almost like, you know, automate some of these PO changes, really look at what the downstream impact of late Po is going to be.

Vignesh Balasubramanian [00:45:41]:

Whereas if you do not use technology, you will have to manually go and dial up your team. You have all production floor production managers. They know, hey, this Po, is that what’s going to happen? But now with Nai, some of those are served to you when you open your dashboard saying, hey, these things are late, it’s going to have this impact on these five production lines. It has just massively taken your 6 hours or 8 hours of work compressed into an insight that you can act on in five minutes and then just, you know, taking action. So that’s the advancement that has happened today. So, I mean, you have to take advantage of it. I mean, if you don’t take advantage of it, we’ll be much behind in the. But we had our competitors.

Scott W. Luton [00:46:19]:

You’ll lose ground. You’ll lose ground, folks. That’s why you got to connect with Vignesh. Kevin, come to you where folks are planning better, that we’re understanding better as teams, we’re gaining that confidence, that alignment, those efficiencies, all things Vignesh pointed to. Your thoughts, Kevin?

Kevin L. Jackson [00:46:37]:

Yeah, we think of Microsoft as an information technology company or software company, but they are also a logistics company. They ship between 60 and 70 million units to 122 countries every year, and they have to manage over 250 suppliers. And one of the applications they use to do that is a dynamic transportation management system. And pre Covid, they were operating independently, but since then, they have connected these seven independent transportation systems using artificial intelligence. And the ability to coordinate quickly and efficiently has dramatically reduced their cost and improve deliveries. So AI is doing a lot in a lot of places.

Scott W. Luton [00:47:38]:

That’s right, folks. Go to your team and say, hey, all that manual work that takes you 8 hours to do, how would you like that to be done? Not only done, but done better so you can get to other things in five minutes, folks, reach out to Vignesh and the team. All right, we’re gonna have a fast and furious finish, Greg, Vignesh, and Kevin, because we wanna make sure folks know how to connect with you. We’ve got these resources we mentioned. We’re gonna do that. So I wanna get one bold, fearless prediction, or at least a general commentary of what’s next in supply chains and very specific areas. And Greg, for you, weigh in on what’s to come in the retail supply chain space.

Greg Buzek [00:48:16]:

My bold prediction is we still probably have two to three years of disruption that we’ve got to work our way through before we see the full on benefits that these AI tools will generate. So it’s not going to be a panacea where it’s going to solve everything right away. We are still dealing with these disruptions. I think they will smooth out, though, and we will get back to where we were before in terms of low end NASCAR, but now with a much more resilient supply chain when we’re done.

Scott W. Luton [00:48:44]:

Well said, Greg. And folks, just because it takes a little time and it’s not, it’s not a magic wand approach, make sure you get your car to the track so you’re at least in the race to keep using that NASCAR data. That’s right, Greg. That’s right. Vignesh. When it comes to manufacturing in particular, what are you projecting where we’re going next?

Vignesh Balasubramanian [00:49:06]:

Before I get into that, I love your inference to take a car to the track to get be on track. I love that. Love. I think in manufacturing, for me, I feel that getting supplier visibility and getting multi tiers of supplier visibility is critical. And I think a lot of the companies are going to use genetic air technology and the technology out there to really get to understand beyond their four walls of their factory to see where their parts are really getting visibility into the supply. I think that’s going to be critical and there’s going to be technology evolution to really get the manufacturers there. I think the second thing is this concept around driving for circularity. I think sustainability initiatives are key and a lot of manufacturers now have this agenda to deliver on the ESG goals.

Vignesh Balasubramanian [00:49:53]:

And one of the ways to do that is how can they recycle, reuse and resell some of the parts and finish codes and things putting technology together to drive sustainability is going to be other. And these are on top of obviously adopting Jai. But since we already spoke about, these are two things that really stand out to me as manufacturing stuff.

Scott W. Luton [00:50:15]:

Love it. The re economy is blown up and I love you. We got to lean on technology to make bigger sustainability gains because everyone demands that. That’s really important. We do that. Kevin, Greg and Vignesh kind of both painted a picture of what’s to come from retail and manufacturing standpoint. Your comments?

Kevin L. Jackson [00:50:32]:

Well, I think there’s a lot more to learn with respect to the intersection of AI, leveraging AI to improve sustainability and their ability to monitor that much better and also give feedback to consumers. We don’t know what our actions do to our planet. And if we leverage AI to improve our visibility into what we do to affect our climate, I think the feedback loop will be tremendous with respect to not only sustainability, but profitability in business.

Scott W. Luton [00:51:19]:

Excellent point, excellent point. And I would just add, folks, when you work hard and you obtain the visibility across your supply chain, that’s not a finish line. Because a greater question for your teams, for your consumers, your customers, your suppliers, the whole ecosystem is what you do with it. Okay, folks, a fast and furious finish. I want to make sure folks know how to connect. Greg, let’s make sure folks know how to connect with you. All of your other great analyst work, your webinars, your podcast, newsletter, you name it. How can folks track you down?

Greg Buzek [00:51:49]:

Greg yeah, just do you find me on LinkedIn at Greg Music there on x as well or greglservices.com is my email.

Scott W. Luton [00:51:59]:

It’s just that easy. Really enjoyed your expertise, perspective and commentary here today. Big Nash, same question. How can folks track you down?

Vignesh Balasubramanian [00:52:08]:

Yeah, LinkedIn, email, both work. My email address is my first name with last name and my get my last name right. But I know it was really lovely chatting with all the experts on the score. So I enjoyed it. Appreciate the opportunity.

Scott W. Luton [00:52:28]:

Wonderful. I appreciate that. Great to have you here. Vignesh. I loved your practical, been there, done that examples of illustrated art opportunity. Kevin, I’m going to share a couple of quick resources and I’m going to get your final word and then we’re going to call it a show. Folks, don’t sit on the information we shared here today. Act on the opportunity.

Scott W. Luton [00:52:49]:

8 hours, five minutes. What sounds better? None of your team’s votes. And here, maybe these resources will help you learn more about how you can unleash. I love that word, Microsoft Dynamics for your ERP, check out that infographic. You can also connect with Fig Nash. And then secondly, cybersecurity is keeping plenty of us up at night. Check out this YouTube presentation that sheds light on what they, developers in particular need to know about today’s threat landscape. So as you’re driving and optimizing and improving, make sure you’re doing it securely.

Scott W. Luton [00:53:23]:

That’s really important. And we drop both of those links right there in the chat one click away. Really easy to take advantage of that information and do that. Connect with Greg and Vignesh as well. Kevin, you’re patented key takeaway before we wrap here with this dynamic one two punch.

Kevin L. Jackson [00:53:40]:

Oh, yes, I’d be remiss if I didn’t mention that Microsoft Dynamics 365 copilot. It’s the world’s first API copilot for ERP and CRM applications linking those two critical business processes together. And this AI capability for Dynamics 365 are just getting better, right? It’s getting rid of all those types of laborious processes so that you can have interactive AI powered systems. And you know, as always, I’m online at the X on Kevin Jackson and on the LinkedIn, ready to give you follow the latest information on digital transformation. Thanks.

Scott W. Luton [00:54:36]:

Love it. Great to have you here as always, Kevin. Live from our lunar studios, Kevin L. Jackson. We’re working on that connection, but always glad you’re here. Hey, folks, time is a ticking. And you know what? If you don’t take advantage of these powerful technological opportunities out there, your competitors sure will. So big thanks again.

Scott W. Luton [00:54:56]:

Greg Buzek, President of the IHL Group. Greg, thanks for being here.

Greg Buzek [00:55:00]:

Pleasure. Thank you.

Scott W. Luton [00:55:02]:

Vignesh Balasubramanian, Senior Product Marketing Manager, Dynamics 365 with Microsoft. Vignesh, sometimes I got to slow it down a little bit. I talk too fast. But thanks for being here, my friend.

Vignesh Balasubramanian [00:55:13]:

Thank you. Thank you so much.

Scott W. Luton [00:55:16]:

Of course, big thanks to Vignesh’s, the Microsoft Team that helps power these important conversations here at Supply Chain Now. But folks, now the onus is on. You take one thing from this conversation here today, put it into practice make life easier for your team to get more stuff done, do it more profitably and securely in a way that, as Vignesh pointed out, it’s more understandable for your team. You’ll never know the light bulbs that go off and new things that will take place when you do.

Scott W. Luton [00:55:41]:

With all that said, Scott Ludon here on behalf of the Supply Chain Now team challenging you do good, give forward, be the change, and we’ll see you next time. Right back here at Supply Chain Now. Thanks, everybody.

Narrator [00:55:52]:

Thanks for being a part of our Supply Chain Now community. Check out all of our programming at supplychainnow.com and make sure you subscribe to Supply Chain Now anywhere you listen to podcasts and follow us on Facebook, LinkedIn, Twitter and Instagram. See you next time on Supply Chain Now.