By Shane Tews
As today’s
supply chain challenges create bottlenecks across the economy, consumers and
businesses of all sizes are dealing with unprecedented situations involving
lack of component parts, trapped inventory, and delayed deliveries. But what if
we could digitize parts of the supply chain and make them more efficient? Where,
if at all, does technology stand to contribute to supply chain management?
On the
latest episode of “Explain to Shane,” I was joined by Glenn
Richey, Harbert Eminent Scholar and inaugural chair of Auburn University’s
Center for Supply Chain Innovation. We had a fascinating conversation on the
causes and effects of the current supply chain dilemma and discussed how blockchain,
digitization, and artificial intelligence could help boost supply chain
efficiency.
Below is an edited and abridged transcript of our talk. You can listen to this and other episodes of “Explain to Shane” on AEI.org and subscribe via your preferred listening platform. You can also read the full transcript of our discussion here. If you enjoyed this episode, leave us a review, and tell your friends and colleagues to tune in.
Shane Tews: Glenn, you are the first
department head of a new supply chain management program at Auburn University. Tell
us about your work there.
Glenn
Richey: Our situation here at Auburn is wonderful for both us and our students.
We’ve had a program in logistics, supply chain management, and transportation
since the early 1970s. It has grown organically over time, but as the world has
changed and as we’ve gotten more emphasis on global distribution, we’ve seen
pretty significant growth in the program.
About six
years ago, we were at about 180 students. Since that time, we’ve grown to 535
students in our undergraduate program alone. Industry has been calling for more
education to fill supply chain roles, and we’ve been providing that
consistently. Now, when you hit 500-something students, you’ve kind of
overblown being part of a different department. So we decided it was time to
build out from that and become our own group, allowing us to also expand our
master’s program, which is growing by leaps and bounds, and put emphasis on our
doctorate program as well.
There’s some
information out there that would say something like 70 percent of people that
work in supply chain management don’t have formal training in the area, which
forces them to stumble out of the blocks instead of racing through to where
they need to be to make things happen. Our goal here is to try to give people a
head start and help industry. And certainly right now, during the pandemic, industry
could use some help.
What was the factor that made it clear we
needed more people trained on this? Was it digitization of information? Take
Amazon, for example. People love to call it a tech company, but it really has
the underpinnings of a logistics company. It just does things digitally.
That’s
exactly right. You could say that about Amazon, Walmart, and a lot of major
retail players who have put lots of emphasis on supply chain management and
logistics — for a few reasons. One is the efficiency that allows you to get
prices down and compete effectively in the marketplace. The other is to make
sure you have the product on hand, you have a source of supply, and you’re
getting the customers what they want.
In the
1970s, we had a very a production-centric concept: If you build it, business
will come. And the role of the supply chain and logistics people was simply to
get this stuff on trucks to where it needed to be. But over time that has
become a more complex and dynamic situation. Now, we’re using technology to get
things leaner and focus more on customer needs and wants. Hopefully that
reduces some waste in the system, makes us more sustainable, and allows us to
really satisfy business partners and customers overall.
Give us your thousand-foot view of today’s
supply chain crisis. What is going on, and who is feeling the effects?
If we think
back a couple of years, Donald Trump’s administration was working to drop
tariffs into different countries with the idea that the playing ground wasn’t
necessarily fair for the United States. At that time, a lot of manufacturing
entities foresaw some level of disruption one way or another, whether it was an
economic disruption that changed the way they priced out and made money from
their products, or whether there were going to be some barriers, blockades, or
quotas that restricted them from actually getting the job done.
A number of
those companies started to change and adjust where they were actually sourcing
their products from. Some moved away from China, some moved away from other
areas in the world, and some moved from single sourcing to multiple sourcing.
Then over time we saw them kind of shift back, which was an act of continuously
planning for challenges that the system could handle, though it might be
strained.
So we saw
some problems and weaknesses across global supply chains and networks. But when
the pandemic hit, it literally shut things down. It shut things down initially
with labor as a whole, specifically in raw material extraction and
manufacturing. Those two areas put a stop to anything that was flowing through
the supply chain. Adding fuel to the fire after that, ports dealt with a big
capacity issue after we saw e-commerce explode. We just didn’t have the truck
drivers and labor on the road and in warehouses to continue moving the
products.
We’re doing
what we can to get up to pace for finding different ways to do different things,
and it may take us a while to get it all streamlined. But the important thing
to realize is that we’re talking about 30–40 years of focus on optimization and
efficiency with not as much attention paid to just-in-case inventory,
contingency planning, safety stock, and those type of things.
One thing I focus on is cybersecurity. If
you’re a company, I’m wondering how much information you’re willing to put up
into a network system to make sure all of your partners are collaborating. When
there are bidirectional information flows going on, is there somebody who makes
sure that’s all secure? And how does blockchain factor into all of this?
Well, part
of the excitement about blockchain that has been out there for quite some time
— but not implemented in the ways a lot of us hoped — is that it could provide
an opportunity for governance to be extended to the entire network. So the
blockchain setup allows you to exchange this information and have all of this
good digitized stuff handy and available to help you decide how your forecast
should be set or who your next business partner should be.
Companies
have been a little slow to transition to blockchain for a number of reasons —
one of which is that the more powerful industries and players in the supply
chain don’t want to give up power. And that’s what this network governance
approach does. If we can get a lot of digitized information into the
blockchain, it’s going to make us more effective and efficient. But there is
also a concern about how secure things are. And, as you know from
cybersecurity, we don’t want to give up our competitive advantage just by
placing things out there on the web. So that’s something we’re still thinking
through.
Going forward, how would you summarize your
expectations for the role of technology in supply chain management? You
mentioned blockchain; what else are you focusing on?
In our programs, we spend a significant
amount of time getting students involved in technology. We have partners in
other academic departments that actually tell us what type of tech the students
need so they’ll be ready to go.
There’s also this discussion of big data. I
think access to big data and some of the analytical tools we have today should
allow us to do a better job with forecasting coming out of this. The
unfortunate thing is: When we see things like this, we see companies overbuy,
and we see the bull-whip effect drive a lot of inventory into different
locations. We saw people panic-buy toilet paper, which might send a ripple
through that system and encourage companies to produce more than they really
need to. Hopefully digitization and the information that’s out there and the
tools that we have will allow us to do a better job of forecasting so we can
hit those demand numbers much better than we did in this last time period.
I will also say that there’s other
technology. Artificial intelligence (AI) can help drive out some of the
mistakes we might make. Certainly there’s opportunities for some of the
material-handling technology and the like to be integrated with AI, especially
at the ports. But as you know, those things take time. The things that we can
put into place more quickly are those that relate to forecasting and
information technology.
The post How can technology help the supply chain? Highlights from my conversation with Glenn Richey appeared first on American Enterprise Institute – AEI.