AuthorManual Torres, RUSCA Blog Committee The supply chain industry constantly seeks implementations towards wanting to stay up-to-date and remain competitive. By doing so, there’s a huge focus on staying innovative, and a major usage for artificial intelligence has come to life. It’s beginning to be a norm for each company, and an essential that can do quite a hefty amount of work that wouldn’t have been imaginable decades ago. At first artificial intelligence had specific functions for companies such as coding. However, in today’s world there’s another level of importance and key role it plays in almost every company. If there’s a company that doesn’t have it then there has to be a strong consideration for it. The article, Companies Are Seeking Real-World Supply-Chain Gains in New AI Tools, goes in-depth with the implementation of artificial intelligence toward supply chains and companies overall. It reveals the current trend of the overall development of artificial intelligence throughout the years, and what its purpose was compared to now. Author, Liz Young, asserts that “-the development technology tool that can quickly sort through large amounts of information, make predictions and respond to questions in a humanlike voice” (Young, 2024). Furthermore, we can assume that some of the functions of artificial intelligence are groundbreaking for companies and can see the benefits behind this like cost savings. Is artificial intelligence implemented in everyday tasks for companies today? Yes, and relating to supply chain industries. There are many examples of companies already using artificial intelligence to their advantage, and their everyday uses. Diving into the impact it had on logistics is game-changing. The article, The True Role Of AI In Logistics, greatly explains the strong influence artificial intelligence has had in logistics. Industry thought leader, Bart De Muynck, mentioned that “One of the most significant contributions of AI in logistics is its powerful application in predictive analytics fueled by explosive growth in data” (Bart De Muynck, 2023). In addition, it goes on to reveal the strong ability artificial intelligence has in implementing the logistics field for the greater benefit of the future. The author dives into deeper detail about some of the fascinating abilities artificial intelligence provides. He affirms that “By analyzing historical data and real-time information, AI-powered systems can anticipate demand patterns, inventory fluctuations and potential disruptions which enables optimization of inventory levels, minimize stockouts and streamline supply chain operations” (Bart De Muynck, 2023). Moreover, it’s great to see artificial intelligence having a positive impact on many companies and fields. Providing greater accuracy overall is an amazing step forward for the supply chain industry. Another perspective to take into account is the efficiency that it provides for the future of companies. Mars, a multinational manufacturer, has begun using artificial intelligence to their advantage, and there has been implementation towards their daily strategies. Liz Young brings up the current changes Mars is going through, and it’s interesting. She asserted “German software firm Celonis is working with snack-food supplier Mars to use generative AI to combine truck loads, cutting shipping costs and speeding up delivery. Celonis Chief Executive Alex Rinke said Mars had manually evaluated factors such as the weather to determine which shipments could be combined and whether it needed to use refrigerated trucks for its freight” (Young, 2024). Furthermore, the implementation of improving forecasting is a major step forward for any company. The potential uses of artificial intelligence to greatly benefit the company are exciting to even consider from a different standpoint. Alex Rinke provides in detail the potential benefits of the implementation of AI, and it’s surprising for anybody to even imagine. He mentions “With AI, we can proactively tell them, ‘Here are all the truckloads that you have going out that you should consolidate, – That reduced manual touches by 80% and also made them more efficient as a company because they reduced shipping costs, reduced emissions and improved on-time shipments'' (Young, 2024). In other words, we can evaluate the great promise AI has on the industry, and it's in safe hands for the future. Providing efficiency, speedy deliveries, and cutting shipping costs are all beneficial for any company. Rinke also provided many other uses that AI has for the company. Removing those manual touches more and more, and sooner or later we can see a future without any manual touches. AI has a long road ahead towards being fully implemented for any company in the world, and not only for the supply chain industry. However, AI has begun taking some companies by storm in usage. The importance of adaptability for companies in the supply chain world specifically is significant, and having AI as a tool will provide one of the strongest alternatives you could have. The future will have AI involved and have a complete takeover for industries to come. It’ll only be time in which it does so, and those that aren’t innovative towards implementing it. Those companies would only fall behind and miss out on such a tool. Sources https://www.wsj.com/articles/companies-are-seeking-real-world-supply-chain-gains-in-new-ai-tools-023045e7?mod=logistics_more_article_pos4 https://www.forbes.com/sites/forbestechcouncil/2023/08/17/the-true-role-of-ai-in-logistics/?sh=2a62531251d3 https://gjia.georgetown.edu/2024/02/05/the-role-of-ai-in-developing-resilient-supply-chains/ AuthorAdam Seoudy, RUSCA Blog Committee The COVID-19 pandemic sent shockwaves through global supply chains, and few industries felt the impact as profoundly as the grocery sector. As shelves emptied and prices soared, consumers grappled with unprecedented challenges, prompting the Federal Trade Commission (FTC) to launch a series of investigations aimed at uncovering the root causes of these disruptions. Many have hailed the findings of these investigations as very valuable because companies can learn from their possible mistakes during this pandemic, and react better to future disruptions.
One glaring takeaway from the FTC's probe is the fragility of consolidated supply chains. Traditionally reliant on just-in-time stocking models, retailers found themselves unprepared to cope with the disruptions brought on by the pandemic. According to Supply Chain Dive, "The study showcased the overall dependence of the industry on a small pool of suppliers, as firms began strategizing supplier alternatives in a bid to protect themselves from overly concentrated markets and take firmer control of their product supply" (Stroh). The report highlights the risks inherent in overreliance on a limited pool of suppliers, urging industry stakeholders to diversify their sourcing strategies to mitigate future shocks. By doing so stakeholders will be much better prepared for shortages regardless of how rarely they occur and how unprecedented they are. Additionally, the FTC's findings shed light on the shifting dynamics of trade promotion during the crisis. With manufacturers struggling to meet demand during supply chain disruptions, promotional spending diminished, posing challenges for retailers who relied on these incentives to drive sales. As reported by the FTC, "Some companies, most often larger ones, re-imposed strict delivery requirements on their upstream suppliers during the height of the pandemic and threatened fines for noncompliance, pressuring suppliers to favor them over rivals" (FTC). In contrast, retailers embracing an "Everyday Low Price" strategy fared better, underscoring the importance of adaptability in times of crisis. The reasoning behind this is in part due to their ability to appeal to consumers who were very price-sensitive in the face of troubling inflation levels. Perhaps most concerning are the implications of the pandemic for market competition. The FTC report suggests that larger players in the industry leveraged their size and influence to gain a competitive advantage, pressuring suppliers and imposing stringent delivery requirements to secure preferential treatment. According to The Wall Street Journal, "Federal regulators said large grocery chains used their size and scale to keep shelves stocked during the pandemic, edging out smaller rivals when most stores struggled with product shortages and distribution bottlenecks" (Young). This consolidation of power not only threatens to eat up the market share of smaller competitors but also raises concerns about market fairness and consumer choice. As consumers continue to grapple with the aftermath of the pandemic, including persistent price hikes and product shortages, there is an urgent need for regulatory action to ensure a level playing field in the grocery industry. By addressing the underlying vulnerabilities exposed by the crisis and implementing rugged surveillance measures, policymakers can pave the way for a more resilient and equitable future for all stakeholders. In conclusion, the FTC's investigations into grocery supply chain disruptions offer valuable insights into the challenges facing the industry in the wake of the pandemic. By learning from these findings and taking proactive steps to strengthen supply chains and promote fair competition, stakeholders can chart a course toward a more resilient and sustainable grocery industry. References Stroh, Kelly. “3 Takeaways from the FTC’s Probe into Grocery Supply Chains.” Supply Chain Dive, 11 Apr. 2024, www.supplychaindive.com/news/ftc-investigation-grocery-supply-chains/712963/. Technology, FTC’s Office of. “FTC Releases Report on Grocery Supply Chain Disruptions.” Federal Trade Commission, 21 Mar. 2024, www.ftc.gov/news-events/news/press-releases/2024/03/ftc-releases-report-grocery-supply-chain-disruptions. Young, Liz. “FTC Finds Large Grocers Used Size to Stock Shelves ...” FTC Finds Large Grocers Used Size to Stock Shelves During Pandemic, 21 Mar. 2024, www.wsj.com/articles/ftc-finds-large-grocers-used-size-to-stock-shelves-during-pandemic-1db4c870. AuthorLiam Ripberger, RUSCA Blog Committee A supply chain is like a real chain; every link is connected to the next, and when something happens in one link, it sends a ripple effect that is felt throughout the entire supply chain. On Wednesday, April 3rd, 2024, an earthquake in Taiwan had a major ripple effect that was felt throughout the entire chip industry. This 7.4 magnitude earthquake was the strongest magnitude earthquake Taiwan has seen in 25 years. Taiwan is used to having many minor earthquakes, and much of the country’s infrastructure is built to withstand earthquakes to a certain degree because of that. Even with these built in defenses, the sheer magnitude of the earthquake caused major damage to the east coast of the country, injuring over 1,000 citizens and destroying buildings in the process.
The Taiwan Semiconductor Manufacturing Company, who is the world's largest manufacturer of advanced microchips, was not able to avoid being damaged. The manufacturer was forced to pause production and evacuate during the seismic incident, and experienced damage to some of their facilities. Against all odds, TSMC told reporters that 80% of tools used by the company were recovered by April 4th, the day after the earthquake (Revell). Furthermore, employees were able to return to work within 24 hours of the earthquake to resume production. In total, this production delay and damages to their facilities cost the company an estimated $62 million dollars in damage (Tyson). Although the production delay was relatively minimal for such a catastrophic event, Taiwan is responsible for approximately 92% of the most advanced chip production in the world (Magill), and supplies major technology companies like Apple and Nvidia. In fact, Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology, stated that, “the effects of a catastrophic event knocking out TSMC would be akin to the Great Depression” (Bennett). Therefore, even a single, smaller delay in manufacturing is being felt across major companies’ supply chains throughout the world. This situation has also shed light on the possible risks of Taiwan’s current dominance in the microchip industry. This almost monopolistic control over such a crucial global industry is worrying many businesses and nations alike due to the possible risks. Nazak Nikakhtar, who works in national security, summarized the impact of such market control, telling Fox News, “this should be a stark reminder to the rest of the world that we need redundancies in our supply chains. Looking to one company, one country, or one region for output is a recipe for disaster” (Revell). Knowing of the damage and delays that the earthquake had on the well-prepared Taiwanese manufacturer, it makes major investors in the industry uneasy about relying so heavily on one entity, and one country for that sake. Diversification of manufacturing in the microchip industry is a potential solution that can be considered in order to combat this risk. In recent years, countries like the United States have begun to invest in local manufacturing of the highly demanded technology. For example, The Biden Administration has begun to fund Intel Corporation, a manufacturer in the US, with billions of dollars for research and expansion. According to Drake Bennett from Bloomberg, the White House claims that by 2030, they will go from accounting for less than 10% of global microchip production, to producing about 20% of the world’s most advanced chips (Bennett). Even with such major efforts, Taiwan has held a competitive advantage in the industry since the 1970s, when the United States began offshore production in Taiwan, and will still continue to have dominance in the market for the foreseeable future. Due to the global significance of the Taiwan Semiconductor Manufacturing Company, the ripple effects of Taiwan’s strongest earthquake in 25 years were felt all over the world. Although actual damages to TSMC and delays in production were small, their monopolistic dominance in the microchip market was enough to make major companies and other nations uneasy. Overall, this occurrence was an example to us all of the importance of supplier diversification, and sheds light on how fragile supply chains can be. Sources: “Taiwan earthquake’s impact on chip industry likely to be ‘moderate,’ experts say” https://www.supplychaindive.com/news/taiwan-earthquake-impact-semiconductor-supply-chain-tsmc-micron/712388/ “Taiwan quake to hit some chip output, disrupt supply chain, analysts say” https://www.reuters.com/markets/asia/taiwan-quake-hit-some-chip-output-cause-asia-supply-chain-disruptions-analysts-2024-04-03/ “Apple and Nvidia may see supply chain disruptions from Taiwan earthquake” https://www.foxbusiness.com/technology/apple-nvidia-may-see-supply-chain-disruptions-taiwan-earthquake “Taiwan Earthquake Raises Stakes for Solution to Chip Dominance” https://www.bloomberg.com/news/newsletters/2024-04-05/taiwan-earthquake-raises-stakes-on-effort-to-build-chips-in-us-europe “Taiwan earthquake causes estimated $62 million in damage and disruptions for TSMC” https://www.tomshardware.com/tech-industry/semiconductors/taiwan-earthquake-causes-estimated-dollar62-million-damage-and-disruption-for-tsmc-euv-equipment-reported-to-be-safe-and-sound-report#:~:text=The%20quake%20and%20its%20aftershocks,cost%20TSMC%20approximately%20%2462%20million. AuthorNathan Perez, RUSCA Blog Committee Intel has just received 8.5 Billion dollars in funding from the federal government due to Joe Biden's plan to bring semiconductor production back to the United States from Asia. President Biden plans to bring this back and produce 20% of the world’s leading-edge logic chips. This was passed in the CHIPS and Science Act and has awarded the largest amount of money given under the law.
Intel will invest this money in their projects in Arizona, New Mexico, Ohio, and Oregon. In Ohio, Intel had to delay their 20 billion dollar semiconductor project which is now expected to be completed in late 2026. Intel states, “The funds will support their ongoing work in Ohio and their projects in Arizona, New Mexico, and Oregon.” This is a huge step in the right direction and awards the supply chain with a vast amount of confidence. Intel plans to invest $100 billion in chip production in the US over the next five years. Those plans include five semiconductor process nodes where its most advanced is called 18A. Microsoft plans to produce a chip the software maker designed in-house. These advanced chips will help develop technologies like artificial intelligence and even can be used in military capabilities. Intel CEO Pat Gelsinger says the US will stay at the forefront of the artificial intelligence era as Intel hopes to build a resilient and sustainable semiconductor supply chain. This investment will create over 10,000 manufacturing jobs, 20,000 construction jobs, and 50,000 indirect jobs. All these jobs will help fuel the chip maker's supply chain. This includes 50 million to focus on developing the semiconductor while adding to the workforce. Intel has already spent 250 million on workforce development and building relationships with different communities. Intel will have to face competition as SK Hynix has agreed to invest 4 billion dollars into chip packaging located at Purdue University. Intel going forward will have to wait until these sites are complete but once they are it is “Smooth Sailing.” Intel wants their supply chain to grow, the US has helped them, now all that is left is to see how Intel can produce 20% of the leading chips by the end of the decade. Sources: https://www.manufacturingdive.com/news/sk-hynix-to-build-4-billion-advancing-packaging-fab-purdue-university/712256/ https://www.supplychainbrain.com/articles/39438-south-korea-company-invests-39b-in-new-indiana-chip-packaging-facility https://www.manufacturingdive.com/news/intel-awarded-8-5-billion-chips-and-science-act-funding/710792/ https://www.supplychaindive.com/news/intel-chips-funding-impact-us-semiconductor-supply-chain/711268/ AuthorCary Wong, RUSCA Blog Committee Over the past few months, the world has dealt with more than a handful of major supply chain crises. Many of these conflicts stem from issues affecting important logistics routes on land and in water. Since the beginning of this past fall season, the attacks on shipping containers by the Houthi rebels in the Red Sea have severely altered international supply chains. Meanwhile, the latest logistics crisis has taken place in Baltimore, Maryland. Early in the morning on March 26nd, 2024, the Francis Scott Key Bridge collapsed into the Patapsco River after being struck by a Singaporean container ship called MV Dali. The collapse tragically took the lives of six construction workers who were filling potholes on the bridge. The incident had the potential to be much worse than this, but the ship was fortunately able to send a signal to the authorities, who closed down the bridge just seconds before the crash. As a result, the Baltimore area has been left to deal with a world of logistics problems. The government and businesses must work to navigate these problems for the foreseeable future.
The first area of concern for supply chains resulting from the accident is that the Port of Baltimore has been forced to close. As the fallen debris from the structure is stuck in the river, no ships can enter or leave the port until the cranes clear the water. This clearly presents a conflict to businesses, as they must reroute both incoming and outgoing shipments to other ports. Some of these other port options include nearby East Coast cities such as New York, Charleston, and Savannah. Although Baltimore is not home to one of the largest overall ports compared to others in the nation, it is the number one port for roll-on and roll-off shipments, including cars, trucks, and farm equipment. According to the Alliance for Automotive Innovation, in 2022, more than 750,000 vehicles were imported and exported to and from Baltimore (Lerman). This means that car companies such as Mazda and Mercedes-Benz, as well as equipment manufacturers like John Deere and Caterpillar, will experience increased costs and delays with their shipments. Meanwhile, the other area of concern for supply chains centers around the city’s roads. The bridge was a part of Interstate Highway 695, and it was crossed by more than 11 million vehicles yearly (O’Marah). As the bridge will not be rebuilt for many years, if ever, trucks and their shipments must seek alternative routes in the future. This will add to the delays and will undoubtedly put pressure on local businesses. So far, this decade, and ever since the Covid-19 pandemic, the world has experienced many conflicts that have led to havoc for supply chains. Although the Baltimore Bridge collapse did not have major implications globally, there is no doubt that worldwide challenges will continue to occur into the future, and companies must coordinate with governments in order to minimize the effects. Sources https://www.washingtonpost.com/business/2024/03/27/baltimore-port-economy-disruption-bridge-collapse/ https://www.forbes.com/sites/kevinomarah/2024/03/27/overhyping-the-baltimore-bridge-collapse-impact-on-supply-chains/?sh=33128e5340ca https://www.pbs.org/newshour/nation/how-baltimores-key-bridge-collapse-will-affect-supply-chains-and-the-economy AuthorVaish Konda, RUSCA Blog Committee The Aviation Supply Chain Integrity Coalition was recently formed by aerospace industry giants, mainly focusing on preventing unapproved parts from entering the aviation supply chain. Founding coalition members include Boeing, Airbus, GE Aerospace, Delta Air Lines, American Airlines, Safran, StandardAero, and United Airlines (Stroh). Co-chaired by John Porcari and former NTSB Chair Robert Sumwalt, the coalition is focused on developing actionable recommendations to prevent incidents like the AOG Technics scandal, where thousands of engine parts were sold with forged regulatory approvals.
Last year, the European Aviation Safety Authority found that AOG Technics, a U.K.-based company, had used around 50 counterfeit parts in CFM56 engines installed in aircraft like the Boeing 737NG, accompanied by forged paperwork (Walsh). The industry responded quickly, with the U.K. Serious Fraud Office investigating and raiding AOG Technics offices in London (Broderick). With such a response, the expanse of unauthorized parts impacted only about 1% of CGM engines and provided an opportunity to create an initiative to prevent future incidents (Stroh). The coalition co-chairs emphasize the importance of thoroughly understanding the aircraft supply chain before taking steps toward maintaining ethical boundaries. By the end of 2024, Sumwalt mentioned that ASCIC plans to publish a report (Broderick). In February, the coalition launched a 90-day review, which will “form the basis of a comprehensive report with recommendations to ensure compliance with safety standards” while preventing unauthorized parts (Aerospace Industry). The Aviation Supply Chain Integrity Coalition brings together prominent players in the aerospace sector to reinforce the integrity of the aviation supply chain against fraudulent practices. The coalition is dedicated to maintaining the highest standards of safety and trustworthiness within the aerospace industry, focusing on collaborating with leaders dedicated to ethicality (Aerospace Industry). As the coalition progresses, it stands ready to play a pivotal role in shaping industry norms and regulations, ensuring the reliability and safety of aviation operations worldwide. By identifying issues and concurrently implementing proactive measures, the coalition preserves public confidence in air travel, safeguarding passengers and industry stakeholders. Sources: https://aviationweek.com/mro/supply-chain/coalition-begins-supply-chain-safeguarding-work https://www.supplychaindive.com/news/aerospace-coalition-aviation-supply-chain-boeing-airbus-aog/708412/ https://www.geaerospace.com/news/press-releases/other-news-information/aerospace-industry-leaders-form-coalition-strengthen-aviation https://www.avweb.com/aviation-news/coalition-formed-to-tighten-aviation-supply/ AuthorManuel Torres, RUSCA Blog Committee Drones have become a discussion point for years, and especially the hype for normalcy in the industry such as their ability to make deliveries is something becoming clearer for the future. There’s finally a promise for drones to become an utilized tool towards fulfilling orders. We’ll go in-depth with the potential impact drones will have in regards to retail giants, and other companies who will be actively in the market for them already. The landscape for drones this year is certainly something everybody can envision becoming a reality compared to previous years when it was only a short conversation.
As mentioned previously, the landscape for drones is becoming clearer, but that’ll depend on federal regulations. In the article, Delivery Drones Are Gaining a Clearer Commerical Flight Path, author Liz Young goes into greater detail about the future of drones. She asserts that “Industry executives say they have an improved landscape in 2024, however, after federal regulators recently granted several drone-delivery companies permission to fly more freely. That has led several retailers, restaurants, and healthcare systems to expand their services across the U.S.” (Young, 2024). Furthermore, regulators have of course begun playing a major role in the rollout of drone delivery, and as mentioned there can finally be a serious conversation about drone deliveries with this news. Worth noting the major wave this will cause for industries and consumers. Specifically, consumers who were either in support of drone implementation, alternative delivery strategy, or other ways that’ll satisfy those consumers. From a certain point of view, this is great news for those in favor of alternative strategies with efficient delivery or the environmental benefits they can bring since they’re battery-powered. However, there are serious obstacles that are still down the road for drone deliveries. Considerations are to be made on its efficiency, cost difficulty, etc. Even with all of these considerations in mind, there needs to be a bigger emphasis on retail giants still being in the market for drones. Young mentions “Retail giant Walmart, which has been among the companies most aggressively seeking to embed drones in its delivery operations, said it will begin offering drone delivery this year to about 75% of the population of the Dallas-Fort Worth region” (Young, 2024). Additionally, companies are partaking in what will hopefully be the next step in delivery alternatives. Taking a step back into the cautions of drone deliveries is still important, and experts are quite hesitant the question whether drones have a major cost differential compared to current transportation trends used today. Not only do these factors need to be taken into account, but also the difficulties behind delivery as a whole. For example, there could be issues when delivering in urban areas such as moving around buildings, apartment deliveries, potential technical issues, etc. Another potential issue for the future of drones would be a privacy risk. Many people could consider an invasion of privacy when many drones are flying everywhere when it comes to passing their homes. Author, Trevir I Nath, in the article How Drones Are Changing the Business World. He maintains, “Widespread use of drones also can be expected to increase privacy concerns among citizens already nervous about corporate and government data collection. Drones typically use a camera and GPS to navigate delivery destinations, which many believe to be intrusive” (Nath, 2023). Furthermore, this greatly reveals one of the many concerns if drones ever become a norm in day life deliveries. Once again it still needed to be noted whether it’ll be cost-efficient for companies. Director of research of the Massachusetts Institute of Technology’s Center for Transportation and Logistics, Matthias Winkenback, adds to this by mentioning “It’s not just hard to fly these drones on a technological level, it’s also just simply extremely hard to fly them cost-effectively,” (Young, 2024). Additionally, drones could well be within certain constraints before heading straight into the business world and diving into upgrading alternatives for supply chains. After all the potential considerations are made there’s still a great hope that’ll eventually become a reality. Other factors are needed to be aware of, but there’s still a positive side working continuously to make it happen. When it comes to privacy and potential hazards for aircraft technical issues never arise to that extremity. “They have also been working on what’s known as detect-and-avoid technology that teaches the devices to around obstacles including other aircraft” (Young, 2024). Furthermore, this should provide some relief for those unease of those specific concerns. As for industry-wise concerns regarding whether drone deliveries can become a viable business implementation. The FAA asserts “routine, scalable, and economically viable (Young, 2024). Additionally, the work behind the scenes is evident when it comes to drones. Drone deliveries may have their many concerns as that was the main discussion during COVID, but now the many cons are becoming non-existent with the efforts being made towards fixing them. We shall hopefully see what lies ahead for the good of industries. Sources https://www.wsj.com/articles/delivery-drones-are-gaining-a-clearer-commercial-flight-path-dec702be?mod=logistics_news_article_pos2 https://www.mckinsey.com/industries/aerospace-and-defense/our-insights/future-air-mobility-blog/drones-take-to-the-sky-potentially-disrupting-last-mile-delivery https://www.shippingsolutions.com/blog/the-future-of-drones-in-logistics-and-supply-chain-management https://theweek.com/tech/drone-delivery-pros-cons AuthorAdam Seoudy, RUSCA Blog Committee In recent years, fluctuations in the housing market, characterized by increasing interest rates and diminished home improvement activity, have presented challenges for major retailers like Home Depot, impacting their sales performance. However, rather than passively weathering these economic shifts, Home Depot has strategically realigned its supply chain operations, with a specific focus on better accommodating the needs of contractors and optimizing bulk purchasing dynamics.
As written in Young's report (2024), Home Depot is proactively establishing new distribution centers tailored to meet the requirements of contractors. These centers are purposefully configured to stock substantial quantities of construction essentials such as lumber, insulation, and roofing shingles—materials integral to large-scale projects. This strategic pivot underscores Home Depot's endeavor to target a specialized market segment while remaining responsive to the evolving landscape of the construction industry. Central to the success of these distribution centers is their ability to offer bulk procurement options at competitive price points. By facilitating bulk transactions, Home Depot not only extends cost-saving benefits to contractors but also capitalizes on economies of scale, thereby enhancing its own profitability. Furthermore, this initiative underscores the company's concerted effort to prioritize the promotion and movement of core products that previously faced stagnation within conventional retail settings. Beyond the financial implications, the adoption of distribution centers includes operational benefits that enhance the customer’s experience. By reducing in-store clutter and optimizing spatial utilization, Home Depot cultivates an environment conducive to streamlined shopping experiences. In addition, the reduction of burdens associated with managing bulky inventory affords store associates increased capacity to provide personalized assistance and guidance to customers. These supply chain improvements create savings for Home Depot and then those savings are able to be passed onto customers, creating value for all parties involved. This, in essence, is the future of supply chain management, according to Home Depot. At their new distribution centers, there are customer-centric enhancements and features aimed at improving convenience and flexibility. These include provisions for product reservations, direct delivery to job sites, and deferred payment options—a suite of amenities tailored to the preferences and exigencies of contractors operating within the construction domain (Young 2024). Also, these benefits include digital tools like new order management capabilities to better navigate complex pro orders, as per Stroh’s report (2024). Home Depot is changing how it handles its supply chain, not just because of market changes, but to fortify its position as an industry leader, despite the market. By pioneering innovative approaches to supply chain management, Home Depot is trying to secure a larger market share while consolidating its reputation as the preferred destination for contractors. In addition, this strategic trajectory may serve as a precedent, potentially causing its competitors to do the same in order to remain relevant in the broader retail landscape. In summary, Home Depot's strategic adaptation of its supply chain underscores a commitment to agility and responsiveness amidst dynamic market forces. As the retail sector continues to evolve, Home Depot's proactive measures to fortify its place amongst the top players in its industry prove Home Depot will be there to evolve with the market. By creating savings through economies of scale for their customers, they are using their supply chain innovations to win a larger share of the market. And finally, their approach of aligning with contractor needs epitomizes a forward-thinking approach to sustaining relevance and success in an ever-changing marketplace. Sources Young, L. "Home Depot Is Bulking Up Its Supply Chain to Serve Contractors." The Wall Street Journal, 2024, https://www.wsj.com/articles/home-depot-is-bulking-up-its-supply-chain-to-serve-contractors-ae4614ea. "Home Depot Opening Four New Distribution Facilities to Fill Pro Orders." Chain Store Age, n.d., https://chainstoreage.com/home-depot-opening-four-new-distribution-facilities-fill-pro-orders. "Home Depot Bulks Up Its Supply Chain to Serve Contractors." Supply Chain Dive, n.d., https://www.supplychaindive.com/news/home-depot-distribution-network-pro-orders/710222 Current Cocoa Supply Chain Issues Are Just the Start of a Problematic Future for Chocolate3/25/2024
AUTHORLiam Ripberger, RUSCA Blog Committee For centuries now, chocolate has been one of the most essential ingredients for many of the world's favorite treats. However, recent trends in cocoa prices shine light on the dire cocoa supply chain issues. Going into February of 2024, cocoa prices are at the highest we have seen in 46 years. According to CoBank, an agricultural financing company, these price highs for chocolate are approximately 65 percent higher than they were around the same time last year (Zimmerman). Chocolate prices have been steadily rising for the past three years, with this year being the worst yet so far for supply issues. This year's yield is projected to be worse than last year in Ghana, where the yields for cocoa were the lowest they have been in the past 13 years (Zimmerman).
Although these supply issues have already created record high chocolate prices, the average consumer has not yet seen the worst of the price hikes. According to Matt Spooner, a supply chain management specialist for Kinaxis, the prices will be realized by consumers a bit later in 2024 (Casey). Consumers may not have noticed the price changes yet, because many of the chocolate goods for Valentine’s Day, and this upcoming Easter have already been manufactured and shipped to the shelves. Therefore, as cocoa supplies run out before the next cocoa harvest later in the year, chocolate will rise exponentially as we inch towards the holiday season late in 2024. Spooner believes that, “Maybe by reducing the actual size of the bars of chocolate, what the consumer sees is mitigated a bit, so you’re not seeing that the price of cocoa for the producer is up fifty-percent,” (Casey). These high costs could lead large chocolate companies to cut jobs, something that Hershey has already announced. In order to understand why all of this is happening, it is important to get to the root of the issue, which is the cocoa tree. Just like many other crops, cocoa trees are struggling to acclimate to the effects of climate change. The overwhelming majority of cocoa supply, roughly 70 percent, comes from different areas in West Africa (Zimmerman). However, erratic rainfall has been terrorizing the region, resulting in lots of flooding, and even extended droughts. This is incredibly detrimental to the agricultural output of the area. On top of this, areas like Ghana have been struggling with black pod disease, which, according to the Ministry of Agriculture, is a fungal disease that preys on cocoa (Seedial). This disease thrives in rainy seasons, which is a lethal combo for cocoa trees when paired with the recent rainfall in Ghana and other parts of West Africa. These past few years have seen rising supply chain issues surrounding cocoa farming, which raises the question of longevity for the industry. According to scientists from the National Oceanic and Atmospheric Administration, cocoa trees are on track to go extinct by 2050 (Sherman). This is because of the way climate change is impacting West Africa, making about 89.5 percent of the land currently being used for cocoa harvesting go sour by 2050 (Sherman). Though this is scary for the future of chocolate, researchers at UC Davis believe that with their partnership with Mars, Wrigley, there is still hope for the cocoa trees. Being one of the largest chocolate manufacturers and distributors, Mars is investing a lot of money into researching cocoa trees. They intend to focus on solutions that will help the plant withstand climate change and overcome diseases. Davis Alan Bennett, a professor of plant sciences for UC Davis, is incredibly confident in the future of chocolate production, stating that: “chocolate is not going anywhere [...] I think it still has a bright future,” (Apodaca). Right now the price of chocolate is at a record high and still rising, affecting everyone along the supply chain from manufacturers to customers. Whether or not cocoa trees will survive the impact of climate change is unknown, and for now all we can do is hope for the best and savor chocolate while we still can. Sources: “Cocoa supply issues could lead to smaller chocolate bar sizes: expert” https://www.supplychaindive.com/news/cocoa-supply-smaller-chocolate-bar-sizes-kinaxis-ivory-coast-hershey-mondelez-easter-candy-prices/707464/ “Surging cocoa prices could lead to Valentine’s Day sticker shock” https://www.fooddive.com/news/chocolate-prices-rise-africa-cocoa-supply-cobank/706762/ “Could research being done at UC Davis save the future of chocolate? Mars Wrigley is betting on it” https://www.cbsnews.com/sacramento/news/saving-chocolate-mars-wrigley-researching-cacao-at-uc-davis/ “Scientists Expect Chocolate to Go Extinct by 2050” https://www.foodandwine.com/news/scientists-expect-chocolate-extinction “Black Pod Disease of Cocoa” https://agriculture.gov.tt/wp-content/uploads/2017/11/Black-Pod-Disease-of-Cocoa-pdf.pdf AuthorNathan Perez, RUSCA Blog Committee Walmart has developed into a leading member of the E-commerce industry. Walmart is strict when it comes to supplier deliveries. Walmart required 98% of the suppliers' deliveries to be on time and in full, but they have since relaxed them by lowering their demands to 90% on time and 95% in full. These new demands come with great hope for suppliers since before this, if the delivery wasn’t on time or in full, the supplier would be subject to a fine. The logistics industry is always unpredictable since trucks can break down or deliveries can be delayed by traffic, so mandating 98% was extremely tough on vendors.
Walmart has also cut costs to Last Mile Shipping. Back in November of 2023, Walmart began to add parcel stations in major consumer states which have since cut Last Mile shipping costs by 20%. The cutting of these costs has been a success for their consumers as they have more time to order and have a greater assortment of merchandise. While on the flip side, it has become more efficient and easier to distribute online orders (Jennifer McKeehan). Walmart’s parcel stations have automated fulfillment centers and have created twice the capacity and throughput at the same footprint (Rainey CFO). Rainey further states that the parcel stations are a tremendous benefit to the efficiency of delivering packages. Walmart, trying to keep up with major competitors like Target and Amazon, has added early morning delivery services. Walmart wants their customers to have shopping personalized and tailored to the customer’s lifestyle. The addition of early morning delivery adds to the already established services of curbside pickup, late-night express delivery, and on-demand delivery. In addition, Walmart and FedEx have reached an agreement which allows for lower discount rates for members of the Walmart Marketplace. The announcement comes after UPS became a supported carrier for Ship with Walmart. The lower rates will allow companies to use the Marketplace to save costs and Walmart also has benefits for their members to use the fulfillment Services. The new sellers will see a 50% off storage fee and a 25% off fulfillment fee for 90 days. Walmart will continue to try to steal e-commerce market share from its competitors like Amazon and Target. Walmart continues to deal with its large competitor, Amazon. They have taken action to lower costs, be more lenient with suppliers, and even be more understanding to their customers. The effort Walmart is producing to become the leader in e-commerce has sparked rivalry in the industry. The competition of Amazon, Walmart, and Target will be exciting for all supply chain enthusiasts. Sources: https://www.supplychaindive.com/news/walmart-adds-early-morning-delivery-option/709771/ https://www.supplychaindive.com/news/walmart-parcel-stations-stores-last-mile-delivery/700379/ https://www.supplychaindive.com/news/walmart-marketplace-fedex-ground-discounts/707648/ https://www.supplychaindive.com/news/walmart-last-mile-delivery-fulfillment-cost-reduction/708379/ https://www.wsj.com/articles/walmart-eases-supplier-delivery-demands-as-stocking-pressures-recede-b2a93505?mod=logistics_more_article_pos5 https://marketplace.walmart.com/solutions-providers/ |
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