AuthorNathan Perez, RUSCA Blog Committee In the current day, Artificial Intelligence has been rapidly developing and evolving to meet needs in all aspects of society, including business operations. Currently, in the Supply Chain Planning world, 73% of Supply Chain Leaders use spreadsheets for their planning. 43% of them stated they planned on moving to artificial intelligence and machine learning for some activities, while 17% planned to use artificial intelligence for most activities at some point. Most companies have large quantities of data that need to be processed (Unglesbee), and many companies plan to utilize this new technology to the best of their ability (Jordan).
Consumers are generally difficult to predict as their preferences may alter with shifting trends. Jake Self, vice president of operations for Smart Warehousing stated, “If you crack the code on a perfect forecast with the consumer today, you’re quickly going to be the richest person in the world.” Knowing where to store data and how to analyze it all comes down to the people working with the data and their time restraints. Fortunately, AI allows for quicker processing of this data, which ends up reducing the required time spent. Subsequently, artificial intelligence can also sort out popular consumer trends, including what products are bought the most, to evaluate which products are seeing an increase in demand. Artificial intelligence also enables logistics to keep track of shipments and monitor their orders at their exact stage (Unglesbee). Many businesses, ranging from garage startups to Fortune 500 companies, use historical data to predict what the future forecasts will look like. However, the COVID-19 pandemic caused severe shifts in consumer demand and devastating disruptions to global supply chain networks that were impossible to predict. Having recently faced the consequences of the pandemic, companies are now finding themselves willing to invest in technology that will help curb the effects of future disasters. While many businesses previously could not afford advanced technology, Smart Warehouses, along with other companies specializing in supply chain planning, have made it more affordable. Even one of the largest tech companies, Microsoft, has begun to add supply chain planning services to their Office 365 lineup. Amazon also introduced its own platform through Amazon Web Services (Unglesbee). Microsoft Office 365 uses the Co-pilot feature, which tells the worker using it where there is a problem or a roadblock. Co-pilot can scan news articles to weather risks that can affect and impact suppliers across the globe. Recently, Microsoft added a new demand planning feature to Co-pilot to help companies keep track of items consumers have been enjoying or purchasing. This demand feature allows companies to make faster decisions and gives them more time to react. Amazon unveiled its own artificial intelligence supply chain assistance tools during the same month as Microsoft. Amazon Web Services allows buyers to use their product as an overlay to see the different trends and growths. Amazon wanted its artificial intelligence to help people better understand the problems in real-time without having to use a third-party resource. Ultimately, Artificial Intelligence has advanced the supply chain planning world, allowing companies to analyze data in larger quantities and at a faster rate. AI gives supply chain planners a chance to react and see trends to know what is happening to a supplier or their market. With AI revolutionizing the world, it is only a matter of time before other fields become immersed in artificial intelligence. Sources https://www.supplychaindive.com/news/inventory-demand-forecasting-ai-machine-learning/650781/ https://www.supplychaindive.com/news/microsoft-demand-planning-dynamics-365-supply-chain/698237/ https://www.supplychaindive.com/news/microsoft-promotes-proactive-supplier-collaboration-ai-supply-chain/644827/ https://www.supplychaindive.com/news/aws-supply-chain-pools-data-creating-supply-chain-visibility/637807/ AuthorCary Wong, RUSCA Blog Committee Over the last few decades, government officials for both the United States and Mexico have struggled to effectively deal with the migrant crisis at the border. Ensuring the safety of the migrants has been one of the greatest challenges, as over 8,000 people have died attempting to cross the border over the last 25 years. Since the beginning of September 2023, the crisis has become a much bigger conflict, as an increased amount of people have been attempting to travel to the United States. Although there are undoubtedly many negative effects of this conflict, one of the most detrimental has been the damage done to supply chains.
In response to the abundance of new migrants, government officials have had no choice but to increase the number of inspections and security levels, or even close border crossings to try and get the crisis under control. This has had an extremely harmful effect on the logistics and transportation industries, as trucks have been halted and unable to operate normally over the border. According to CANACAR, Mexico’s freight trucker’s union, stricter customs inspections have resulted in a slowdown of up to 10,000 cargo trucks and have led to over $1.2 billion in export losses (Suárez). On the other hand, operations on railroads going over the border have arguably been damaged more severely. Many migrants have recently been attempting to hitch rides on trains, which has led to fatal outcomes. Many of these people have unfortunately gotten hurt, and even died in the process of trying to travel aboard these trains. Consequently, train companies have been forced to halt operations to prevent the risk of further fatal accidents. While choosing to pause trains is the inherently right decision to make morally, it has seriously hurt businesses and supply chains as a result. For example, Ferromex, Mexico’s largest train operator, suspended more than 60 of its trains carrying cargo on the way to the United States. According to Ferromex’s management team, this resulted in financial losses of up to 40 million pesos ($2.32 million US dollars) a day while operations were stopped (Putzger). Although the crisis’ recent new wave of migrants has been detrimental to supply chains in Mexico and the United States, there is not currently an effective resolution path to resolve the issue. This conflict comes as many American manufacturers and importers are thinking about moving their sourcing and factory operations from Asia to North America. While these business leaders would like to shorten their global supply chains by moving to closer countries like Mexico, they must now consider if it is worth it to navigate the logistical challenges of the border. Sources https://www.wsj.com/articles/turmoil-over-migrants-at-u-s-mexico-border-is-straining-trade-flows-3549ebf9 https://english.elpais.com/economy-and-business/2023-10-02/migrant-crisis-leads-to-customs-closures-and-daily-losses-of-35-million-for-mexico-us-trade.html https://theloadstar.com/mexico-us-trade-flows-checked-as-borders-become-pressure-points/ https://www.reuters.com/world/americas/union-pacific-says-freight-traffic-hit-by-migrant-crisis-us-mexico-border-2023-09-21/ https://abcnews.go.com/International/wireStory/mexican-railway-operator-halts-trains-migrants-climbing-aboard-103324657 AuthorShane-Anson Bootsma, RUSCA Blog Committee Consumers worldwide have been tightening their purse strings, spending less and less in the face of continued inflation: a reversal of trends previously seen during the COVID-19 Pandemic. As U.S. consumer confidence amid concerns of inflation, higher prices, and a potential economic recession, people are saving more and cutting back on consumption of all goods, leading to reduced profit margins and volume of sales for many companies. This has been particularly felt by carting, freight, and other shipping companies, with powerhouse industry leaders like A.P. Moller Maersk and Union Pacific taking significant revenue hits. While shipping companies have seen record profits due to various circumstances during the pandemic, container shipping rates have plunged as consumers pulled back from spending. Maersk, a global shipping and logistics giant, can be used as a sample of a trend seen throughout the industry. With freight rates dropping 58% this year, and down 90% since their peak during the pandemic, Maersk has seen a downward spiral within the company. Maersk’s second-quarter profits are down to $2.9 billion, compared to $10.3 billion in the same period last year, and their third-quarter profits plummeted to $521 million compared to $8.88 billion last year (Paris, Chopping). At current, low freight rates, voyages for companies like Maersk are often unprofitable. In the past, these companies ordered additional ships and created new jobs to handle the excess demand over the pandemic. As demand for seaboard trade continues to decrease, companies now face a surplus of ships and sharply lower freight rates. In the face of a now-volatile market, Maersk is experiencing 10,0000 job layoffs, and it and its competitors have announced other budget cuts to salvage revenues (Chopping). Other shipping/freighting giants, like Union Pacific, a railroad carting company based in the Western U.S., have also taken revenue hits due to decreased consumption and macroeconomic trends. As the housing market slows, Union Pacific ships fewer forest products, reducing average revenue per cart and volume of freight (Seal). For consumers, we may see decreased prices as retail companies see a reduced average cost of goods sold. As freighting companies charge less for their services, large retailers will either cut down prices or enjoy higher profit margins as a result. Large retailers may see surplus inventory due to consumption slowing before the Holiday season. We expect this decreased demand to reduce profit. Supply chain companies may continue to cut costs and budgets. SOURCES: Union Pacific Profit Falls on Weaker Freight Demand (Dean Seal) https://www.wsj.com/articles/union-pacific-profit-falls-on-weaker-freight-demand-c986f22d?mod=logistics_more_article_pos10 Maersk to Cut 10,000 JObs as Cargo Boom Ends (Dominic Chopping) https://www.wsj.com/business/logistics/maersk-to-cut-more-than-10-000-jobs-as-industry-faces-new-normal-0d95faa1?mod=logistics_news_article_pos1 Ship Freight Rates Tumble as U.S. Consumers Buy Fewer Goods (Paris) https://www.wsj.com/business/logistics/ship-freight-rates-tumble-as-u-s-consumers-buy-fewer-goods-ff7fc08 Author Vaishnavi Konda, RUSCA Blog Committee The United Auto Workers strike has officially ended, with the union directing employees to return to work on October 30, 2023, and making tentative agreements with the Detroit Big 3: Ford Motor Company, General Motors, and Stellantis. Yet, the impact of this strike suggests future changes and possibilities for the auto manufacturing industry’s supply chain. From consumers to first-level suppliers, the one-month halt will impact the flow of producing cars in the coming months. Companies supplying auto parts and other materials to the three manufacturers were at risk due to the lack of demand. Gabriel Ehrlick, an economic forecaster at the University of Michigan, mentioned “...seeing some layoffs among automotive suppliers, ranging from seat makers to steelworkers” (Moreno and Nerkar). With manufacturers having lower demand due to the strike, parts that are usually made-to-order halt production until needed. With a strike, production remains stagnant. In September, CIE Newcor–an auto parts supplier–warned workers of potential layoffs at Michigan plants starting October 2, signifying the detrimental impact on suppliers (Aeppel). Similarly, car dealerships that directly tend to consumers tend to profit the most from car repairs and services, making it profitable enough to maintain individual stores; with a shortage of necessary auto parts that are typically required during repairs, the entire service at dealerships is at risk (Moreno and Nerkar). Regardless of a union agreement, the halt at the production stage may eventually lead to a temporary shortage of parts for repairing services, causing delays for customers. It is unsure whether or not manufacturers and suppliers can recover quickly from the impact of the strike, but there is potential. Although supply chain impacts are yet to be felt by the general public, the Detroit Big 3 are aware of its implications in production and sales. For instance, Ford recently withdrew their full-year forecast, mentioning they were ‘uncertain’ after contractual agreements with the U.A.W. (Dumas). With increased pay for union workers, labor costs are driven up and foreshadow the same for automobile prices; it is still too early to tell, but the chances are high. This raises concerns about profit and consumer behavior: would customers turn toward competitors with lower prices as a result of the strike? As the world shifts towards sustainability, automakers are beginning to move towards investing in electric vehicles, which prove to be more costly for manufacturers to sustain. The U.A.W.’s intent to enter the EV industry to support workers proves to be an additional challenge for the Detroit Big 3, which will be addressed frequently in the coming years (Ferris). Supply chain interests will evolve as battery plants are unionized, shaping the future of the automobile industry as a whole. SOURCES: https://www.reuters.com/business/autos-transportation/uaw-strike-set-hit-deep-into-industrys-supply-base-2023-09-22/ https://www.foxbusiness.com/economy/the-uaw-strike-might-be-over-but-will-consumers-feel-it-later https://www.nytimes.com/2023/09/28/business/economy/uaw-strike-dealerships-parts-suppliers.html https://www.eenews.net/articles/why-the-uaw-wants-inside-the-battery-factory/ |
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