Intro/Outro (00:03):

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 Luton (00:32):

Hey. Hey. Good morning, good afternoon, good evening, wherever you may be. Scott Luton and Kim Morder with you here on Supply Chain. Now welcome to today’s live stream, Kim. How are we doing today?

Kim Reuter (00:41):

Doing great. Just coming off a lovely weekend, so it’s a good Monday.

Scott Luton (00:46):

Outstanding. It looks gorgeous up there in Virginia. Thank you. Right. The sun’s coming in summer’s here and it’s making its presence felt, at least down here in Georgia where the temperatures were approaching the mid and upper nineties.

Kim Reuter (00:59):

Yeah, you guys are getting a lot of heat down there.

Scott Luton (01:01):

Yes sir. Yes sir. Well, hey, speaking of heat and hotness, it’s going to be almost as hot as a show. We got teed up here today. Kim, are you ready?

Kim Reuter (01:10):

I am so excited.

Scott Luton (01:11):

We got some great topics we’re going to be talking about folks. Y’all know it’s the buzz. Every Monday at 12 noon Eastern time, we discuss a variety of news and developments across global supply chain, global business. We’re tapping into Kim’s expertise, especially when it comes to retail and e-commerce. We’re talking about may inflation numbers, they just came in. There might be a little bit of good news there. The last Mile Battle, ageless Battle and Retail Keeps On Raging. We’re going to dive into AI with a special guest, John Debo from Zs Associates about 12:25 PM Eastern Time. So Kim folks better buckle up and get ready. Should be a great show, huh?

Kim Reuter (01:44):

Yes, absolutely. Good stuff.

Scott Luton (01:46):

Good, good stuff. So folks, two things before we get going here today. First, give us your take in the comments, right, whether you’re tuned in via LinkedIn, YouTube X, Facebook, Twitch, no matter let us know what you think and secondly, if you enjoy the show today, we’d love for you to share it with a friend and your network. They’ll be glad you did. Okay, so Kim, let’s start with one of our favorite resources around here, and that is with that said almost weekly newsletter. We give ourselves a little bit of wiggle room there, Kim, almost weekly newsletter folks. This went out over the weekend. We dove into the Port of Baltimore, opened back up last week, and they’re expecting to be back in full volume as they were like pre-incident in 2025. They’ve had no major contracts back away. That’s great. Let’s pause there for a second, Kim, that’s not too far from your neck of the woods. Any comments on what’s going on with the port?

Kim Reuter (02:37):

It’s great news that they haven’t had any contracts pull out. I know that they were really worried about that for the Port of Baltimore. They’ve done a lot of investment in keeping the channels open all up and down the Chesapeake Bay to keep Baltimore a good viable part for the country. It’s a great port for inland because of its location, so I’m so glad to see that Baltimore is coming back and the shipping channel has been open for about three or four weeks. So back in business,

Scott Luton (03:00):

That’s right back in business and in fact the roll on roll off vehicle volume has already been picking up, which is great to see. Right. Alright, a couple of quick things as it relates to with that said, and we’re going to drop a link so y’all can check it out. You can be one of the 25,000 cool kids that subscribe to this newsletter. We’re going to make that easy for you and drop it. The cocoa market, it’s raging Kim, the price per metric ton has more than tripled over the last year. I think it’s over $11,000, which is an all time high and for the most part a lot of big candy makers since it got longer contracts, they’re not feeling the pain yet. But goodness gracious, a 2025 renewal conversations, Kim, might be a bit painful you think?

Kim Reuter (03:39):

I think it’s going to be painful. I think we’ve been expecting this to happen. I’m shocked that we haven’t seen a huge price increase in the chocolate market to begin with the cocoa market. It’s not chocolate yet, but yeah, I think in 2025 we’re going to start seeing it hopefully by the time this hits, so maybe our inflation will be down a little bit and the pain won’t be so bad. I hope we’re not in a gas price situation with chocolate here in the near future.

Scott Luton (04:01):

Oh man, that’s going to make life so much more painful, Ken. We rely on chocolate amongst other things.

Kim Reuter (04:08):

I would give a gas before chocolate to be totally honest.

Scott Luton (04:13):

So check it out. We got links to these stories and some perspective there. And then finally a really cool survey by Microsoft and LinkedIn. I think it was about 31,000 people from over 30 countries around the globe and one of their key findings was 78% of Gen AI users are bringing their own tools to work to use Kim. Now on one hand I applaud that, but on the other hand, if you’re managing your cybersecurity, that kind of makes things a little more complicated. What do you think, Kim? It’s

Kim Reuter (04:42):

Extremely complicated. We have security issues. We have every AI is built on a different platform with different tools, with different metadata. You’re going to get different answers from each one. I think AI is a bigger conversation, which we will probably have a little bit later on, but it’s a little bit scary. I’m going to be honest with you, what I see happening with ai, I’m concerned on multiple levels, so we’ll see what happens. It is the shiny new object though, so we’ll see if it has staying power.

Scott Luton (05:10):

Good stuff and we are going to dive into that deeper when John joins us and wish we had about six hours to your point, it is a big discussion. There’s so many elements, so stay tuned folks. We’re going to tackle that the second half of the show. Also stay tuned. We’ve got a great speaking of Microsoft. We’ve got an outstanding podcast coming up focused on cybersecurity best practices and I think that drops the next couple of weeks, so stay tuned there. Also, while we’re offering resources, you may not have checked out the supply chain now YouTube page a lot more and more folks, we’re seeing a lot more traffic folks go there because it’s easier to stay up to date and listen no matter what device you’re on. So check it out. We’ll drop link in the chat as well. Kim, do you watch much YouTube

Kim Reuter (05:48):

A little bit for educational purposes mostly, to be totally honest with you, I don’t use it a lot for entertainment. I use it for when I need to figure out how to do something or looking for tips on how to do business better. Yeah, that’s what I use YouTube for.

Scott Luton (06:00):

Hey, you’re in a big bucket of folks that use YouTube just for that and I tell you, you can find just about anything, one of my favorite things beyond what you shared there. I like going down memory lane, especially in the eighties and nineties. I’ve had so many eureka moments of things I’ve completely forgotten about and you can find it of course on YouTube.

Kim Reuter (06:18):

Do you have an example of one that you’ve talked to?

Scott Luton (06:20):

Commercials. I watched a lot of TV as a kid. All three channels we got with a bunny ears and all. And you remember back on Saturdays when it was truly 7:00 AM to 1:00 PM it was Cartoon City. Well all those commercials that I’ve completely forgotten about, so that’s one of my dirty pleasures of checking out old commercials,

Kim Reuter (06:41):

The Kool-Aid commercials and stuff like that when we were good.

Scott Luton (06:44):

Oh, love it. Okay, so we got a couple stories we’re going to dive into here today. I can’t wait to get your take on both of these, Kim and then John Debo with Zs are joining us and we’re going to take a deep dive into a lot of things related to ai, so stay tuned. Alright, so Kim, let’s talk from YouTube from cartoons and commercials to inflation. Okay, so check out this article folks from our friends at Retail Brew. They did do a great job over at Retail Brewery, the whole family of content there. So the US Bureau of Labor Statistics released numbers for May in the last week or so as it relates to economy and especially inflation. The good news inflation wasn’t quite as bad as it was in April, but it only dropped the rate of growth. Only dropped 0.1%. That’s right.

(07:27):

So inflation in April year over year, April, 2024 over 2023 was 3.4% in May. That dropped year over year to 3.3% and of course still way above Kim, the fed’s target of 2%. So looking at a few specific categories, food away from home, like restaurants, that was up 0.4% in May. Apparel prices up almost 1% year over year. Alcoholic beverages that use at home, not in the bars but use at home up 1.4% year over year. Now the National Retail Federation NRF says that retail sales were up in May 3% year over year. And that’s kind of interesting because it’s almost right in line with inflation. Funny kind of how that happens, Kim, but your thoughts as it relates to inflation, retail sales, the whole shebang, Kim

Kim Reuter (08:11):

One, I’m glad to see that inflation’s flattening out a little bit and hopefully this continues. I’m not willing to put money on the fact that inflation’s not going to sneak back up over summer just because those are big spending times for people. As far as apparel being up 1%, I think a lot of that is due. We’re starting to see increases in our shipping costs, our supply chain costs are going up, bringing stuff back into the US that is certainly going to impact our pay prices. As much of our stuff comes from overseas and then retail and restaurants, people are not eating out as much. I don’t think the cost of continuing to do activities. We’re seeing people pull back on vacations or pulling back on rentals. People are tightening the belts a little bit. They’re starting to feel it. And this summer is probably our first big summer where everybody is out and about. We’re not dealing with Covid anymore. So I’m not shocked to see that apparel is going up. I would love to see actual food and grocery stores continue to drop, right? We’re almost at a point where it’s easier just to eat out than to go to the grocery store. It’s almost cheaper for me to actually go into a restaurant. So those are my takes on it. It’s a big question.

Scott Luton (09:15):

It is a big question. We will touch on some of this with the next article, but as a consumer, right, taking my practitioner hat off for a second, as a consumer, one of our go-tos, especially as a family, we got a family of five, one of our go-tos for a long time if we didn’t feel like cooking but we didn’t want to spend much money was pizza. I used to be able to feed the whole family 20 bucks, especially if we went on the cheaper route with the little Caesars takeouts. These days we don’t get away with less than 45 bucks, be able to feed the whole family and it really, it’s just one of those regular opportunities to put your finger on the pulse to I think to see where the overall economy and this inflation battle is. So Kim, you were talking about you wish grocery stores would reflect some of the good news we’re seeing here faster, but you know how it works, right? You raise prices up quick and you drop ’em real slow,

Kim Reuter (10:02):

Warm slowly. Yeah, I mean I can’t get out of the grocery store. I don’t have really a family by the grocery store for under a hundred bucks a week, which is shocking to me. I’m just like, I don’t even eat that much. But I think we’re just right now, we’ve talked about before with inflations with the duties and taxes, the section 3 0 1 duties that we still have in place on our imports coming from China, imports from China have not slowed. I have a shocker for everybody. We’re getting into peak season, we’re starting to hit capacity issues again. It’s not good.

Scott Luton (10:30):

The pain ain’t going away anytime

Kim Reuter (10:32):

Soon. No, it’s not.

Scott Luton (10:33):

But there is some good news and we’re going to get into it here more. I promise more good news. Y’all know me. I love talking to good news and being optimistic, but we got to be realistic as we’re being optimistic, right Kim? Alright, a couple of quick comments. We’re moved to this next story here. Hey Il, great to have you here from Yemen, happy to participate. He’s got a question for you, which Ken, this is a great question we’re going to touch on later, but il, I’m going to go ahead and hey, what are your thoughts on how these technologies can be leveraged to improve efficiency and visibility within the supply chain? Hold that question IL because we’re going to dive into it in the second half of the show. Let’s see here. Charles going back to YouTube, great tool for business operations, emotional intelligence, supply chain operations, and overall learning for those that need more awareness across all those things. Excellent point Charles. And more and more. And finally T squared. Let’s not leave greed. Deflation out of the conversation. It’s still very present. This is

Kim Reuter (11:24):

True. Yeah, this is true. Credit card debt is still at all time high. Yeah, we are still seeing this sort of fill my needs thing going on post pandemic. That’s right. Yeah, I agree.

Scott Luton (11:36):

So we’ll see. We’re going to keep our finger on the pulse of that as well. T squared, great call out. And finally, and this is a big comment might cover us up here, so I’m just going to read it off. Charles, great to have you by the way Charles. Let’s see, in 2023, Charles says the average inflation rate was 4.1% and in 2022 it reached 8% due the pandemic related disruptions. That shouldn’t shock us. We’ve all lived that. I’ve just kind of forgotten about those numbers.

Kim Reuter (11:59):

We forgot that we were paying $20 a rule for toilet paper. We forgot about that.

Scott Luton (12:04):

So true. But he points out for me, I always compare different data to get closer to the truth. Charles, excellent point. And it’s so important to go do your own personal due diligence whether you’re on the supply chain, practitioner side or as consumers. Okay, so Kim, second story before we welcome in. John Desar from Zs. Now I can’t wait to get your take on this topic, Kim, as someone that has moved mountains like you have in retail supply chain, e-commerce, you name it. So lemme unpack this thing a little bit. This comes from our friends at supply chain diving. As they point out that last mile squeeze in retail, that battle continues. So the article really points to some of the key takeaways from home delivery world in Philadelphia a week or two ago where they were a lot of hubbub around three key ways that retailers were protecting profit in this era of rising logistics costs and of course those demanding customer expectations. So those three key ways, kind of general themes, price increases. Yeah, we’re just talking about that. Customer experience differentiators, I like that one. Especially for those organizations that really are good at communicating well there. And then of course tech improvements. Going back to IL’s question, which we’re going to touch on later. So retailers have raised the bar also. I’m not going to say free shipping, Kim, I refuse to say free shipping.

Kim Reuter (13:16):

It’s never free. Don’t say it. Yeah,

Scott Luton (13:18):

That’s right. But retailers have raised the bar for customers that don’t want to pay for shipping. So Macy’s, you now got to spend 49 bucks versus just 25. If you don’t want to pay extra for shipping Abercrombie and Fitch, you got to spend 99 bucks up from 75. And Neiman Marcus, who never had a minimum spend rule recently instituted a $50 rule. If you don’t want to pay extra for shipping, Walmart is going on. The tech front is leveraging AI and predictive technologies to better sort out orders and better understand when shopper surges are going to happen. We’ve had Jennifer McKean, senior executive Walmart and their supply chain team join us. We’ll have to drop that episode here. Good stuff. Well I’m in awe with what Walmart’s done over the last four or five years. Finally, retailers are also leaning on subscriber fees to help protect profit while tweaking that value proposition to make sure customers are willing to pay for it. So Kim, a mix of economic supply chain tech stuff there as a battle rages. I can’t wait to hear your thoughts.

Kim Reuter (14:14):

So this is my sweet spot inflation. I was like, yeah, but this I know. So the cost of logistics is getting higher. The cost to bring stuff to a customer’s door just continues to drive up. So e-commerce companies and retailers are doing lots of things to move inventory closer to the customer and that’s where they’re using a lot of AI to get predictive about buying behavior, seasonality, demand based on historic data. S and OP planning, we’ve been doing it for ages, but we’re able to use AI now to try to make it a little bit more accurate. The one thing I hear a lot of people talking about is they’re like customers want the retail store experience and we’re trying to duplicate that in. And I think that’s a little bit flawed when we think about it because what customers don’t actually want the retail experience, if they wanted the retail experience, they would drive to the store and deal with the retail experience.

(15:02):

So let’s not forget when we go to the store, do they have it? I got to stand in line, I got to do all this stuff. What customers really want is they want it fast, they want it, they just pulled it off the shelf, which is a little bit different than a retail experience. So customers are continuing demand, I want it fast, I want it yesterday, I don’t want to wait for it, but I don’t want to pay for it. So we’re seeing an increase in subscriptions prime like services out there. Amazon is doing buy it with Prime now, which is sort of a similar, you get a great experience. It’s their new version of MFN basically. And so we’re seeing more subscription services, we’re seeing more minimums for people to make purchases. The other thing that we’re starting to see a little bit too is charges for returns.

(15:45):

So that used to be table stakes, free returns, right? Right. New. We’re starting to see $5, $10 buy return insurance is another thing. I’m seeing a lot in the market now pay 7 99 and you can return this bag if not it’s final sale. So we are trying to deal with it, but the cost of it is going to continue to drive the customer experience and you’re going to pay for it one way or the other. Yes. But customers are having more confidence, they’re buying more high value product with delivery. They’re okay with buying the $6,000 Chanel bag and having delivered to their house. They don’t want to hold it, right? Yeah. Well actually when you get the $6,000 Chanel bag, you do go to the store and get it because there’s champagne involved and you did wait for that bag. So that’s not a bad example, but for a five value product, customers are having more confidence in the home delivery market.

Scott Luton (16:37):

Yes. Oh man. You just gave us a retail and supply chain masterclass. I loved your comments there. There’s so much I want to weigh in on. I want to pick one thing out though. I have a very unpopular position when it comes to returns and you were mentioning fees Personally, I think one of the ways that we’re going to be able to better manage the tidal wave upon tidal wave of returns in 2024 is to charge for them, right? It’s still sad. We’ve come some way and of course our friends at Tony Sheroda in the Reverse Logistics Association, we get a lot of great market intel from them and we’ve made some progress, but there’s still so much stuff that goes straight to the landfills and we’ve got some great examples of companies diverting it, but we’ve got a long way to go and unpopular position. I think the should carry a lot more of that burden. Kim, your quick thoughts there.

Kim Reuter (17:22):

So I have two minds on this. One. As a consumer, my answer is no, I should be able to return something for free. But as somebody who works in this industry and knows the cost associated with returning something and knowing that people don’t understand that we do have to do something because the modus now is I’ll order the same thing in four sizes because I can return them for free.

Scott Luton (17:44):

That’s right. We’re trained that way.

Kim Reuter (17:46):

We’re trained that way, but on the backend. So it’s not even just the cost of getting it back, right? It’s not in a sellable position why? It’s in the return path. It’s dark inventory and there’s a whole load of downstream things that happen with overstock now because we’re buying stuff they don’t need because the buck. So returns are a problem and they have been a problem for a long, long time and the default answer can’t be we’re just going to throw it away. That’s right. We have to figure out how to recycle it and get it viable again.

Scott Luton (18:16):

Amen. A thousand percent of everything you just shared there, Kim, and I’ll tell y’all, I love to see all the real demand for more sustainable practices and outcomes across industry. However, I can’t wait to see that demand line up. The returns behavior that we see, and I challenge anyone out there, if you get an opportunity to tour a returns center, right, a processing center, and to see those trucks as they back up with everything straight from the store and what those teams have to do to even have a shot of getting Kim, to your point, getting things back in a sellable fashion. Some of y’all out there might change some of your behaviors. And during the busiest times of year, like peak and right after holidays, we’re talking 300 trailer fools of returns coming to some of those processing centers. At least that was a group of years ago and I toured one.

Kim Reuter (19:02):

Yeah, that 300 is a low number on the stuff coming in for these return centers. It’s a shocking amount. The one thing I have seen a company do well with the return thing was Nordstrom, where they actually started repairing things, which I thought was really for high price point products. So ball gowns and a sequence popped off, right? Yes. Never been worn sequence was gone, but the money they save by that $20 to show the piece of sequence over versus losing a $3,000 dress. Repairs are definitely a thing we’re going to see more of.

Scott Luton (19:35):

That’s right. That ree economy, as you’re pointing out, is really growing left and right and I love seeing that. Okay, we’ve got a great second half of the show to get to as we welcome in. John, in just a second. I got really important thing I want to call out. First off, big thanks to Catherine, Amanda behind the scenes helping to make production happen. Amanda says, by the way, for the record, I a hundred percent disagree with Scott return changes and she will not change her behaviors. Amanda will have to work on that. Come on now. And kidding aside, on a very serious note, Larry Klein is here from Albany, Georgia. And Larry, I came across your LinkedIn post a couple days ago where you were celebrating that you had finished chemo and got to ring the victory bell at Phoebe Cancer Center down in South Georgia.

(20:15):

And I’m telling you from our whole family to yours, we’re so very happy for you Larry. So we hope you can check back in and give us another update so you can get back out and do big things in global supply chain. So great to have you here. And congrats man. We got going on retail and I got my 18 pages of notes from the cool stuff that Kim was saying. So folks, I got a great guest here joining us today. You may have seen I had a YouTube interview where we were both at Gartner Supply Chain Symposium back in May. Good stuff there. So our guest brings more than 25 years of consulting and industry experience to the table, especially at that critical intersection of operations, sales and marketing strategy. Our guest is a leader in the supply chain and manufacturing practice, Zs Associates where they help clients create revenue, drive operational improvements, and much, much more. I want to welcome in John to Sabo, principal with Zs. Hey. Hey John, how you doing?

John DeSarbo (21:05):

Hey Scott, good to see you again. Hey Kim. Hi.

Scott Luton (21:08):

You as well. I tell you what, I can’t wait to get you and Kim both weighing in with some of these big meaty topics we’ve got here today. But before we get there, John, we like starting with a little fun warmup question here. And so I love, as I was doing my homework, meaning I was lurking around your social footprint, John

(21:27):

And I like that shot of the Washington Monument on your LinkedIn profile. So now y’all know this because we were checking the pre-show, but I bet a lot of folks out there don’t. The Washington Monument there in DC was the tallest structure in the world from 1884 to 1889. And it was overtaken by, as John knew the Eiffel Tower, but here for the fun warmup question. So you all might look at the monument a little differently next time you see it because you can’t miss it no matter where you’re in dc. But the fun warmup question, John, me and you and Kim all spent time in DC area. That’s where you call home now and we went last year with took the kids and we checked out Ben’s chili bowl. It’s been there since 1958. They’re spicy chili, half smokes. I’m telling you, if I could eat seven of them I would have. But that aside, that’s my recommendation folks. I want to ask you John, and you too, Kim, John, when you bring people in, especially out of town or guests, bring ’em into dc, what’s one place you’d love taking them to?

John DeSarbo (22:21):

Awesome. This is a hard one to pick. Ben’s is probably on the list, but I joke with my kids when we’re retired that I’m going to be driving a tour bus around. So I got a lot of suggestions. But I think probably the one I would say is Arlington National Cemetery, the Arlington House, which is the Lee family house that’s on top of the cemetery. I mean obviously it’s a very solemn, important place in our history, but the view there is incredible. I mean you can see across the whole city. See the monuments do that during the day and then go see the monuments at night when they cool down a little bit. We’re lit up.

Scott Luton (22:50):

Love that John and folks, me and Amanda, when we went years ago, we spent several hours at Arlington National Cemetery and it’s just not enough time. You really need to take it and soak in the sacrifice that just is illustrated in a way that’s tough to see anywhere else. Kim, so DC when you’ve been there, what’s one of the places you do not miss?

Kim Reuter (23:07):

I love the art museums. The modern art museum is probably my favorite. I can’t really compare it to other art museums around the world. People How do you compare it to MoMA? I like it. It’s just one of my favorites in DC

Scott Luton (23:19):

And the cool thing about some of those places is a lot of the fees are either free or really low to get into. I cannot say I’ve been to that museum. You pointed out Kim. I think Amanda might have.

Kim Reuter (23:29):

I think Amanda went. That’s okay. That’s

Scott Luton (23:31):

Okay. We were

Kim Reuter (23:32):

Stuck at the history and the aviation museum.

John DeSarbo (23:35):

That’s a big one. Oh

Scott Luton (23:37):

Man. Smithsonian is just awesome.

John DeSarbo (23:38):

Fine museum. It’s another one.

Scott Luton (23:40):

Yes, John.

Kim Reuter (23:41):

Oh yeah, that’s a really good one. Yep.

Scott Luton (23:43):

You might be driving that tour bus before. It’s all said and done, John. Alright, we got a lot of stuff to get into here today. I’m really looking forward to really focusing on AI throughout the next 30 minutes or so. And I want to start with this. I think I’ve got A-C-N-B-C article here. So check out this headline and what the article talks about, where it’s suggests from our friends at CNB that business leaders may be using Gen AI. All wrong. You’re doing it wrong. You’re doing it wrong. As reported by CNBC, recent research by Genpact and HFS research says that only 5% of senior leaders at global companies said they have achieved mature gen AI initiatives. And 45% are saying they’re going to take a wait and see approach delaying new and additional investment in gen ai. So John, I’d love to get your thoughts. Are folks using it wrong?

John DeSarbo (24:34):

Yeah, I think first of all, I live in DC right? So the press likes to be a little sensational on their titles. I think this might be the case, but in reality, I think a lot of people are realizing that gen AI is not a silver bullet. This is harder than it looks maybe a few years ago. And the premise behind the article is if people are just focusing too much on how gen AI can improve efficiency, so it’s less that they’re making a mistake and more that they’re not taking full advantage of the technology. And Scott, this goes back to the conversation we had on Gartner about paving the cow paths, right? Yep. I think it’s the same idea. I think there’s too many companies that are looking at gen AI as a way to automate or speed up work. We’re all enamored with its ability to write emails or summarize articles, all the cool tricks that we’ve learned, but really that’s going to tweak the needle, right? It’s going to tweak the performance. Really the real opportunity here is to rethink processes and not just change how we do work, but what we do essentially. Yes.

Scott Luton (25:28):

Well, one quick follow up before I get you to weigh in. Kim in particular, you’re seeing big opportunities I think based on our previous conversations with supply chain planning where folks are doing a little bit with AI in particular, but there’s so much more and so many more outcomes to get there. John, any comments there? Yeah,

John DeSarbo (25:43):

I think this is a great example in supply chain. I very much agree with this premise. If you think about planning, we’re all going through for years, we’ve done demand and supply planning the same way series of meetings essentially where we bring people together, we argue about what the numbers should be and what I see there is that people are thinking about geni speeding up that process, right? Thinking about how do we make those decisions quickly, fewer meetings and so forth. Instead of rethinking that business problem that’s trying to be solved, which is let’s balance supply and demand. And I think if you can look at Gen e AI less as a way to speed up decisions and more as a way to produce insights that help you make better decisions, not necessarily faster planning decisions. There’s a real opportunity there. And at the Gartner conference when there’s a lot of talk about maybe we need to move on from resilience and think about taking advantage of uncertainty and move to anti fragility, if you remember that whole conversation, this is more the real premises for me. I think the real opportunity is how do you make decisions faster than your competitors and better than your competitors and game competitive advantage.

Scott Luton (26:49):

Yes. So Beil says, nailed it. What you’re just sharing there, John and I tend to agree with you, Kim, weigh in. Are we using it wrong in supply chain? I

Kim Reuter (26:59):

Wouldn’t say we’re using it wrong. I agree with everything that John said. It is not the end all be all, but we go through this with technology all the time. We come up with new tech and everybody’s like, this is going to be the thing that solves all of our problems. But to John’s point, it’s an education tool. It’s a different point of view. It’s possibly an unbiased point of view to bring to the table. It’s education and its data. It is not the end all be all. AI is not mature enough to take over SNOP planning altogether. I heard someone give an example probably about six or seven months ago, they’re like, would AI have predicted the pandemic? No, because it had never happened before.

Scott Luton (27:36):

Interesting.

Kim Reuter (27:37):

So when we look at what is AI actually capable of, I think it’s a great tool for education. I think it’s a great tool to have insights to look at things, but to John’s point, it’s not going to take away those decisions. We still need humans.

Scott Luton (27:48):

Yes. Excellent comments there, Kim and John. And by the way, folks, if you want to check out my chat with John at Gartner Supply Chain Symposium, we’ve dropped that link right there in the comments. And one of my favorite parts of that conversation, John, was you mentioned the phrase don’t fall for the AI hoopla. There’s a lot of that out there, right? Yeah, there’s a lot of that there. So check that out. This stuff Kim and John, we’ve got a lot more to get into here today. Let’s see here. The next article we’re going to share, hate to call things clickbait, but this article and the headline is close. So let’s broaden our focus out a bit more. So this great interesting read in the Wall Street Journal prompted quite a few conversations in the last week or two. The AI train it says is losing steam already cost too much. The pace of innovation has started to hit the brakes and more. John, your thoughts?

John DeSarbo (28:37):

Yeah, this one really got people fired up I think for a couple of reasons. I think one, the author Christopher Mims from the Wall Street Journal is really well regarded as kind of a straight shooter. So people were a little surprised that he put this point of view out there as well as it followed the Nvidia earnings announcement, which again, I think if I could turn back time, I would’ve invested in the video, but I think their market cap is over 3 trillion now or something like that. But the key points in the article are, look, there’s a lot of promise with this technology, but innovation is slowing for a few reasons. One, it’s kind of interesting, but the point he made is we’re running out of data to train the large language models that essentially we’re running these models, we’re developing against the whole internet.

(29:18):

We don’t have 10 more internets. So there’s a lot of work to produce synthetic data to train these models. And there’s an argument that maybe that’s less valuable. Gen AI is super expensive and I think a lot of companies are figuring that out. In light of that, A lot of companies aren’t seeing the ROI yet. They’re getting stuck with this run in a pilot or building a proof of concept but not necessarily seeing it scale. And when they do, it’s expensive to do. So. The thing I think people are realizing there’s so many companies that are out there that are offering gen EI tools, applications, solutions. It’s really confusing. I think companies that I’ve talked to are really trying to sort in the week from the shaft and really understand what’s out there that they should be using. I think the articles premise is that all these factors are going to come together and it’s going to commoditize the ai.

(30:03):

There was even a point that I guess Salesforce had done a study where they looked at 75% or three out of four workers are using gen AI today, but only 20% of companies are actually paying for it. So the PI idea was maybe we’re just playing around with this new technology. So the point was on the Wall Street Journal, as an investor, the bus is coming. I dunno, I’m not a stock picker as I mentioned, that’s why I’m still working. That’s why I don’t on the video, but I think Microsoft, Google, these companies are really still in innovating. So I don’t buy that idea so much, but there’s some truths in it, right? I think it is expensive and it is confusing for buyers to really figure out what’s useful. So I think the implications are really, you got to pick the right use cases. Going back to the CNBC article, what’s your business strategy? What are you trying to achieve? Focus your investment there and then be careful who you work with because there probably will be a shakeout just like we’ve seen in other areas.

Scott Luton (30:55):

Excellent take there, John. Kim before, I’ll bring you in. I think one of the dangers related to AI is very common to just about any other techn that ever been introduced. And that is the change management. We see so many organizations and leaders really botching the introduction and the lack of focus as it relates to ai and that can burn out your workforce trying to get the job done every day and trying to do a good job. And I think that’s where leadership out of many other observations, I think that’s where leadership can do better in general. Kim weigh in the AI revolution is already losing steam. I

Kim Reuter (31:29):

Would not say it’s losing steam. I think we’re having a reality check on what AI actually is and who actually has ai. We’ve been using the words AI for 10 years. It used to be machine learning. And so the concept has been around a long time and a lot of companies just adopted that. We have AI technology and as my good friend Charles says, it may be artificial, but that doesn’t mean it’s intelligent. So you have to be careful with who you partner with. To John’s point, is it actually ai? I talked to a company not long ago who was doing broker ai. We got to tell you about this great new thing we’re doing. Broker ai, it’s really just a bunch of brokers that they source out to, which is cool, but is it ai? And so be careful with your partners and technology always goes back to two things, data and process. You can have the most beautiful technology in the world, but if you don’t have good data and you don’t have good processes to do something with whatever that technology tells you, it doesn’t really matter. So AI is great. I think it’s a little bit of extra great ingredients into an already good process, but it is not going to fix a problem.

Scott Luton (32:38):

Got to watch out for the hoopla.

John DeSarbo (32:40):

A lot of AI watching, a lot of confusion as to what type of AI you’re talking about. And I think that we’re all going through an educational process. And to your point, Scott, I think a lot of times it’s the people issues. It’s the people, not the technology. It’s the hardest part.

Scott Luton (32:53):

Excellent point. And Kim, I think every entrepreneur, every marketing mind out there is seeing AI selling. AI is moving stuff. We got

Kim Reuter (33:01):

Ai, we got ai, we got ai,

Scott Luton (33:03):

We’re going to put it on every package. So that’s a great point though. You got to know who you’re working with and really do your homework there because I tell you partnering with the wrong organization is a lot more costly or than returns and return fees. We were talking in the first half of the show,

Kim Reuter (33:19):

If you really relied on an AI engine to do your SNOP, it could cost you millions of dollars in bad decisions. And so this isn’t something to be taken lightly. So any company who’s out there who’s like, we’re just using all AI to make our decisions, it’s going to cost ’em some money. Yeah,

Scott Luton (33:32):

Excellent point. Alright, so we got one more article to go and then we’re going to make sure folks how to connect with John and the Zs team on the move. This is Larry Klein. Larry Klein says, Hey, nothing better than good old human intuition. I got a big value for that for sure. T squared brings up Rudy. Now Rudy is not a new acronym as T squared has pointed out. It is the Jetsons housekeeper. That’s

Kim Reuter (33:53):

The yes.

Scott Luton (33:55):

So T Square says Rudy and the people need to talk and get to know the ins and outs of each other. That’s right. We’ve got to bridge the relationship gap between technology. Technology continues to get smarter and smarter every day for the most part with the human factor. Absolutely.

John DeSarbo (34:08):

There’s a phrase nowadays that everybody’s talking about’s got human in the middle, that humans that are, it’s not about replacing people, it’s about empowering them to make decisions. And I think I know listening to the buzz previously, this has come up. I think that the sort of paranoia, the nervousness, anxiety of AI taking our jobs, I think that’s less likely to occur. And really this is more positive than it is negative.

Scott Luton (34:30):

Excellent point. And I’ll tell you, if AI looks like this, this is kind of a scary image. It’s captivating on the front end of the Wall Street Journal. If this is the kind of bot that’s coming to my front door delivering pizza, I’ll be very fearful of automation, ai, the whole game. Let’s see here. This is Thomas. I think this is a big comment here. Thomas says, AI already exists in Microsoft Office and other productivity tools in an effort to improve user’s ability to leverage ai. That’s right. It’s no longer the little animated paper clip. Remember 20 or 30 years ago, right? Clippy or whatever that was called.

Kim Reuter (35:02):

I miss clippy. Yep.

Scott Luton (35:04):

So Thomas continues. You can use Google Gemini to ask questions and improve the effectiveness of searches. But in the main right now, I think in general right now, much more AI is available to help you do your job better versus a new way to do your job or replace you. John, kind of going to your point there. Good stuff there, Thomas. Let’s see here. All right, so let’s keep driving here. I got this third article. This will be interesting here. Lemme tee this up and I’ll get John and Kim to weigh in here. So this is an interesting view from MIT professor Darren Aslu via our friends insight. Now he says, the professor says AI may not exactly be leading the next great industrial revolution, at least on a scale that many have spoken about. Specifically, organizations like Goldman Sachs have predicted a 7% increase in global GDP over the next decade, powered mainly by ai. But Dr. ACLU’s data shows it may be more like 1%, which I think is the middle of the range that he’s pointing out. So John and I love this. Looks like AI over here, kicking back, waiting on lunch or something,

John DeSarbo (36:07):

Relaxing.

Kim Reuter (36:10):

Bring him something, he’s just coffee.

John DeSarbo (36:14):

So we’re starting to see a little bit of a dueling economists here, like a bit of a debate in the academic community. I like to think when I read this article, it’s almost like he’s calling out his peers. Let’s meet behind the schoolyard and duke it out over whether we’re going to have an impact or not. But it’s an interesting article. I think what’s made it so I guess controversial, whatever, is that it refutes some of some recent studies that show a much bigger impact. Goldman Sachs had talked about essentially in 10 years we’re going to see 7% impact in productivity and most of that on the GDP. One of my former professors who’s now at Stanford Ericson had a pretty famous study looking at the impact of gen AI and call centers and so forth, and then really showed much bigger impact. So what this professor Darren did is he’s a macro economist.

(37:00):

So he applied this idea of taking microeconomic analysis, so what’s happening within a business, and then based on that analysis, applying it to estimate the macroeconomic impact or the impact on our economy. And basic idea, again, I’m not an economist either. So he essentially looked at how are we using gen AI today for different tasks and then how many of those tasks are there in the economy and what’s the average cost impact per task? Essentially, if you count up all the tasks, it’ll tell you what’s the benefit in terms of productivity or cost reduction in the economy. He did all that analysis and to your point, I think he came up with less than 1% impact on the GDP in 10 years, which is a big nothing burger, right? Although when you’re talking about GDP 1% to me seems pretty important.

Scott Luton (37:50):

That’s

John DeSarbo (37:50):

Right. His points were, we’re using this for simple tasks today and when we start to apply this to more complicated tasks. So instead of writing emails, making decisions, prediction that there’s much less of an impact that’ll occur, it’ll take longer. He also looked at the downside is it’s going to impact some of us more than others. So it starts to drive inequity in the economy. And so that counters what you see as benefits. So look, I don’t know different economists predicting the future. I think from my perspective, we’ve kind of seen this movie before. I think to Kim’s point, we’ve gone through different technology waves, video conferencing, for example, the first video conferencing tool was in 1964, and I can remember in the nineties using Picture Tell and

Kim Reuter (38:35):

WebEx.

John DeSarbo (38:36):

Yeah, well, so that there has been around since for 25 plus years. Other technologies, the CRM, customer relationship management, Salesforce just celebrated their 25th anniversary

(38:49):

And our space in supply chain, I think Connexus rapid response was launched in 95. So it takes time, right? I think it’s 20 to 30 year impact before you really see impact. I think a lot of us were so excited about Geni because we were all adopting it so quickly, but there’s the difference between experimentation and adoption and impact. And I think that’s the story that’s playing out right now is they’re the people that are figuring out how to use this to really drive their individual and company performance and those that are still learning and it’s going to take time for it all to play out.

Scott Luton (39:23):

Yeah, good stuff there. John. Kim, your thoughts?

Kim Reuter (39:26):

Again, I agree with John, and it goes back to what we talked about earlier is that there’s data and there’s processes and AI is great, but until you kind of get these two things figured out, it’s just technology. And we’ve already talked about it’s got to learn, we got to teach it, we’re running out of material to teach it. So there’s nothing magic. I feel like a lot of people have gotten excited about it because they can type something in or they can circle something on a screen and they get an answer and they’re like, this is great. But behind the scenes, what we’ve been talking about, it all depends on how you built it, what platform is built on, how much information, how accurate it is. And these are the things we’re going to continue to figure out. I don’t think we’re going to have AI doing heart surgery anytime soon. These more complex tasks are always going to be a little bit elusive.

John DeSarbo (40:12):

And to that point, it’s here. I mean, I think the person who came in on the chat, this is built into copilot, it’s built into the Google suite and so forth. So we’re using it. I mean it’s here. It’s not a question of the robots are coming or what have you. This is part of our toolkit, and I think it’s reality, but it’s not going to create this dramatic transformational change unless we really figure out how to use it in the right way. So for supply chain professionals out there, it goes back to the basics. What’s your strategy? What are you trying to achieve as a business? How does the supply chain enable that, right? And then what are the key decisions really that need to be made? How can you use these tools not to replace you, but to support you in making those decisions, right? And that’s what it’s all about.

Scott Luton (40:53):

Good stuff, John and Kim well said. Okay, I’ve gotten this wrong again on a lighter note, Rosie. I was going to

John DeSarbo (41:00):

Say, had the skirt. Had the skirt. Yeah.

Scott Luton (41:04):

Rudy was at George’s job. So T squared, that’s why he keep using Rudy. That was the technology of his job. I got

John DeSarbo (41:11):

It. There was the dog too, right? The robot dog.

Scott Luton (41:14):

Well, I bet T squared knows the name of that dog. I can’t remember right off. But regardless, John and Kim, a lot of good stuff. And one of the common threads throughout our conversation today was kind of what’s old is new. Again, getting back to the leadership basics and of course being really particular and doing your homework on who you partner with because Kim pointed out you take the wrong approach. And not just ai, but really a lot of things in supply chain, you can lose millions and millions of dollars and burn your team out. And that ladder is just as important as the dollars for sure. So John, let’s make sure folks know what you and the ZS team do in a nutshell. How are you helping organizations out there?

John DeSarbo (41:51):

What do you do? My family members have been asking this all the time, but no, I mean, short story is Zs. It’s been around for 40 years helping companies with challenges like this, right? I think we’re all about accelerating profitable growth by applying technology and analytics to tackle really complicated business problems and improve customer experience. So it’s figuring out what’s the next wave of technology and how do you apply it to your business? That’s what we do. And there’s lots of ways we do that. I think help people with different projects implement these technologies to find their strategy, choose the right players to work with. We have some of our own tools that we’re applying and bring to our clients to accelerate their adoptions, but it’s all about what’s the latest and greatest, how do I apply it to my business? That’s what we’re all about.

Scott Luton (42:35):

I love it. Well, John, I’ll tell you what, if I were to share your answer with my family, they’d get it. So I bet your family, now that you’ve got that nailed down, I bet they know exactly what you do out there. John, you’d

John DeSarbo (42:45):

Be surprised at the dinner table conversations be the star House.

Scott Luton (42:50):

Well folks, let’s make it even easier. Let’s see here. We are dropping information about Zs out in the comments. You can learn more about Zs scaling generative AI for value by building chains of interconnected use cases. So check that out. And we’ve got some little links there you can connect with both John and Zs and John, how can folks, before I get Kim Reuters patented, key takeaway and make sure folks want to connect with Kim. John, how can folks connect with you? What’s the easiest way to find you?

John DeSarbo (43:17):

I’m a big LinkedIn user. I got off the train at that point in the social media spectrum, not Instagram yet. Yeah, just hit me up on LinkedIn. I’m happy to start conversing with people on these issues. You can actually hit our website as well and you’ll see a little bit more about me, but I’ll link back to LinkedIn. That’d be

Scott Luton (43:32):

Good. And your blog articles folks, you got to connect with John so you can check out the LinkedIn articles in the course, the Zs blog as well. So John Debo, principal was Zs great to have you here today. Thanks so much.

John DeSarbo (43:43):

Thanks Scott. Thanks Kim. Good to see you

Scott Luton (43:45):

Both and we’ll see you soon. Thanks John. Take care.

John DeSarbo (43:48):

Bye.

Scott Luton (43:49):

Alright, Kim, well man, a lot of good stuff there. I wish we had a couple more hours with you and John, just the AI topic alone, like you said on the front end. There’s just so much to it. But all that aside, so Kim, we covered a lot of ground. We’ve established that you nor I nor John are economists. That’s important. I don’t even pretend to be one. From the economy and the inflation to the final mile, which that battle keeps on rolling to a lot of stuff about AI and a lot of different opinions out in industry right now. What was one of your favorite things that folks got to take away from our conversation here?

Kim Reuter (44:22):

I’m going to step away from AI because it’s such a big topic and everybody’s talking about it and focus on the last mile. We’re going to continue to see cost increases in last, and I think consumers have got to brace themselves for footing a little bit of that bill, even if it’s a couple dollars for returns here or there, or paying a subscription fee for free services or free shipping services. We are going to continue to see, I mean, consumers are not going to stop wanting to have stuff delivered to their house as soon as possible, but we are going to have to start paying for it. I don’t think there’s any other way around it. I mean, consumers are going to have to level set their expectations.

Scott Luton (44:56):

Yeah, I completely agree with you. And it’s beyond time for that to happen, Kim. So love that. Look forward to our future conversations. Kim, beyond the great work you do, you’re also keynote out there a variety of events. Where can folks find you this fall?

Kim Reuter (45:10):

We have a big event coming up. So my next big event for e-commerce is going to be in Bangkok. I’ll be speaking at the WCA E-Commerce Conference, and we are going to be talking about how freight forwarders kind of focus on small, medium freight forwarders can add value and participate in the e-commerce supply chain because there’s a lot of companies out there who want to get into this. So how can you do that, make some money and be relevant to e-commerce sellers and vendors.

Scott Luton (45:35):

Love it. Love it. And folks can connect with you on LinkedIn as well, right? Yes. It’s just that easy. So folks, hey, don’t take my word for it. Connect with Kim. Connect with John. These are folks that you want to add to your network so you can really, as Jake Barr likes to say, keep it real so you can separate the hoopla. One of John’s terms, I love coming back to, because there’s so much fluff out there, you want to connect with folks that can give it to you straight and what you need to know about, whether it’s technology or supply chain or retail, e-commerce, you name it. We also dropped other resources out there. You can check that out. If you’re particularly interested in the gen AI aspects of our conversations here today. We’ve got Zs generative AI insights resource. Check that out and let us know what you think.

(46:18):

Okay, so we have a big week of programming. Kim really enjoyed knocking out these conversations with you. I loved your perspective here today. I look forward to hearing your takeaways from going to visiting Bangkok in a few months. I bet that is awesome. But I look forward to our next show together and to all of y’all out there, right? Be sure to connect with John. Connect with Kim. Let us know what you think throughout this conversation today. If you’re listening to the replay, drop a comment, right? Check out the resources we dropped, including with that said, which we covered on the front end. But here is the biggest challenge of the day, right? Take one thing that Kim or John dropped here on our show today on the buzz and put it into action. Your team is ready to do things better, smarter, more successful, the way to change the business, but the onus is on you leadership to take that action deeds, not words. And with all of that said, on behalf our entire team here at Supply Chain now. Scott Luton challenging. You do good. Get forward, be the change. We’ll see you next time. Right back here. Supply chain now. Thanks everybody.

Intro/Outro (47:16):

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