Anna Wells: 0:03

We did a survey recently where we asked manufacturers of all sizes what their thoughts were on AI and while a smaller percentage were using it now, and I think like maybe 15% of our respondents said they were using AI tools now. Many more than that. Like upper thirties to 40% were saying that they were actually looking at it as a solution in the near term. So in the next two years

Tom Raftery: 0:27

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Digital Supply Chain podcast, the number one podcast focusing on the digitization of supply chain, and I'm your host, Tom Raftery. Hi everyone, and welcome to episode 333 of the Digital Supply Chain podcast. My name is Tom Raftery, and I'm excited to be here with you today sharing the latest insights and trends in supply chain. Before we kick off today's show, I want to take a quick moment to express my sincere gratitude to all of this show's amazing supporters. Your support has been instrumental in keeping the podcast going, and I am grateful to each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about supply chain. Supporting this podcast is easy and affordable, with options starting as low as just three euros or dollars a month. That's less than the cost of a cup of coffee, and your support will make a huge difference in keeping the show going strong. To become a supporter, you simply click on the support link in the show notes of this or any episode. Our visit tiny url.com/dsc pod. Now. Without further ado, I'd like to introduce my special guest today. Anna. Anna, welcome to the podcast. Would you like to introduce yourself?

Anna Wells: 1:46

Yes. Thank you so much for having me. My name is Anna Wells. I'm an executive editor with Industrial Media. Industrial Media is a media company with brands reaching various audiences along the industrial supply chain. So this includes things like plant execs, managers, supply chain professionals, purchasing professionals, business tech integrators, distributors folks that, you know, have those types of roles. We produce content on a daily basis along with many more old school formats, if you will. We have print magazines. We also do podcasts, video. We do market research. So, I've been working with this team for 16, 17 years. And I specialize in areas like plant operations and, and distribution. So really more as an observer of trends than a technical expert. I know you have many strong technical experts on this podcast, which I am not, so I hope I don't disappoint. But what I hope to bring to the table is just some observations of how industrial manufacturers and distributors are working together to enhance the resiliency of their supply chains in that industrial sector.

Tom Raftery: 2:52

Okay, cool. And you say it's everything from print magazines through to videos and podcasts and kind of everything in between. And you produce content on a, on a daily basis. Are you also doing events or is that not the case? Is it just the, the, the media,

Anna Wells: 3:10

yeah. We We attend a lot of trade shows because we really see the value in that just from a collaborative standpoint and getting to be face to face with some folks. We don't produce our own events at this time, although I wouldn't say that's out of the realm of possibility in the future. We'll see. Cool,

Tom Raftery: 3:25

cool. Yeah. And North America, global, somewhere in between.

Anna Wells: 3:31

Yeah, I would say somewhere in between. Mainly North America. Especially with our print content. That's a really a core legacy north American audience, but I think digitally we're getting to a lot of folks across the globe as well.

Tom Raftery: 3:45

Nice. Nice. And what kind of, seeing, as you mentioned, you are an observer of trends. What kind of trends have you seen in the space?

Anna Wells: 3:55

You know, there's been a lot going on, especially as it pertains to the supply chain, as you know, it's been a bumpy couple of years. One of the things I wanted to talk about today, is just in time, which I think is really been associated with the industrial space for a long time. And as you, as you probably know just in time has long been the, the key approach for many industrial manufacturers and their suppliers. You know, for anyone who doesn't know that concept, it's essentially distributors are holding inventory and the carrying costs for their customers. They're increasingly becoming more and more woven into the inventory management of those customers. So the benefit for manufacturing customers is they get to avoid those costs. Many distributors have been going to market on being this you know, this is their value proposition, right? This is what they can offer. The pandemic shifted the mindset around this quite a bit especially as companies in 2020 and 21 were really scrambling to get inventory. There was a lot of talk at the time of just in time being dead. Right. Yeah. And I, I don't think that quite happened. I think we emerged from that theme a bit and just in time did get beat up a little bit as a concept. We've, you know, we've heard people refer to it now as just in case. Yes. I think companies are more wary of giving up control of really all of their stockpiles. So we've seen them add some safeguards in generally to account for emergencies, and you see more industrial companies keeping some safety stock in house. Distributors for their part, I think they stocked as much as they could get their hands on. And now in many cases are sitting on a lot of inventory, which is, you know, kind of their cross to bear at this point. But but I think there's also been more emphasis on the where and understanding if this is a critical part, how much volatility is surrounding it? Is it coming from New Jersey in a pinch or is it coming from China? Right. And so I think the important takeaway for US manufacturers especially was looking at the supply chain as suddenly being fallible. They, you know, for a long time, and I think you know this of course, is that I think a lot of companies thought the supply chain is strong enough to support any variability and just in time can function. I think that that was a roll of the dice in, in many ways. And we saw the, the impact of that with the pandemic. But you know, obviously now they're adding some safeguards cuz they learned they can't rely on it to support every need at every moment that they need it. And I think that was an important lesson. Mm-hmm. And then I think besides the safety stock, you're seeing companies diversify their sourcing, which is also an interesting shift from pre pandemic because it sounds like common sense, and I don't know if it's like this in every industry, but in, in industrial, there's a real trend for big distributors to try to push themselves as a one stop shop with services to support it. So, manufacturers who are looking to streamline their procurement costs and cut down their supplier base to save money, they would cut down almost to the bone. Some of them were using just like one to five to a dozen key suppliers, which, you know, now looking back feels like a, a tremendous risk, right? Like, yeah. And I, I, you know, some, some of these some of these distributors did a great job of servicing those customers during the pandemic. But in some cases, you know, stockouts were really out of their hands, and manufacturers I think got spooked a little bit, just enough to try to modify that approach a bit. And so we're seeing them looking for a little bit more control there.

Tom Raftery: 7:35

And so, Do you see this as something that's going to continue to be the case, Anna? The, the idea that the manufacturers are keeping safety stock, which obviously increases costs, or do you think things will slowly, gradually go back to the way they were pre pandemic, where they push that cost out to the distributors? Or will it be a mix, or is it gonna be a kind of a pendulum effect where it goes back out to distributors and then there's another big shock and it all comes back again? Or where's that all gonna end up, do you think?

Anna Wells: 8:04

I think that's a really good question. And to be honest, I don't exactly know. You know, we do see a lot of that pendulum swinging as far as these relationships between manufacturers and their, their key suppliers. But you like to think that that companies learned some painful lessons during the pandemic, and so is, so I'm, I'm, I'm hopeful that they're gonna see the value in modifying that just in time to be more of a, of a nuanced approach that provides some protection because, you know, it's not like they have to go back to curing all of their own inventory and having safety stock on every single thing that they, they use. It's identifying what is most critical to their operations. And I think between a fear of downtime, which drives so many business decisions, and then also maybe you know, just feeling that sting of what happened during the pandemic. Perhaps we're gonna see more of that, where they're using. The other thing too, is like being able to use technology and applying that to your operation and really understanding what is a critical part, what does that mean? How do I define it? And making sure that those are the ones that you're targeting and not everything.

Tom Raftery: 9:16

Hmm. And what about, you know, n-tier suppliers? Because let's say you're buying your parts from three different distributors, but they're all sourcing from one manufacturer somewhere in China or Japan, or Vietnam or wherever, and they get hit by a typhoon or a, an earthquake or a fire or whatever, and suddenly your three separate distributors are all out.

Anna Wells: 9:48

Mm-hmm. So is the question, do these companies have, how do you mitigate against stuff? Yeah. Yeah. We are seeing a lot more diversifying. We are seeing companies hold true to their promises, to reshore and nearshore in a, an attempt to kind of bolster those supply chains. You know, I, you remember this as well as I do during the pandemic. So many companies were paying lip service to that concept like, We are, you know, immediately taking steps to reshore key supplies so we can have better visibility. We're gonna shorten these supply chains so we know exactly where this stuff's coming from. And that is happening to a degree. I think if you look at the data being put out by organizations like the Reshoring Initiative, the, there has been a boost there. RI says that you know, in 2022 I think they said like, Job announcements due to reshoring and foreign direct investments. So companies building here, essentially foreign companies building here were at the highest rate ever recorded, and that's been true for the last several years, I think. And, and they think that, you know, legislation like the Chips and Infrastructure acts are helping with that. So that's been exciting. I think there's definitely been more of an emphasis on decoupling supply chains from China versus textbook reshoring and bringing operations to America. And so I think with that in mind, we're seeing a, a lot of nearshoring as well. So bringing some of this supply to Mexico versus being in China, that's been an appealing prospect. And with that, I think companies are, are looking at shorter delivery times, greater visibility. They have a little bit more influence on quality and they're in at the same time zone. So you're seeing definitely more of that as well.

Tom Raftery: 11:39

Okay. Okay. And is it, is automation helping in that? Because you gotta think increased automation will reduce the per worker cost to organizations because one of the big advantages of moving to China was the labor costs there were cheaper. But of course, if you're using less labor and more automation, then that advantage is reduced.

Anna Wells: 12:02

Yeah, definitely. Yeah. And you know, automation investments are up. A3 is the, the Association for Automation and Robotics. They track purchasing. They've been saying now for a couple of years that investments in, in industrial robots and automation are increasing in sectors outside of just automotive. For a very long time, automotive was really taking those lion, the lion's share of those you know, automation type spend that was, that was really in that sector. Now you're seeing that spread out a little bit, which is encouraging to me because I think, I think A3 said last year was a, a record high for the second year in a row for investments in automation. So we'll see if that continues as manufacturers are, you know, it depends on if, if they're shoring up capital right now for fear of a recession. That's potentially true, but but the fact that we can see that these investments in automation are spreading out across many manufacturing verticals is, is encouraging. So, you know, hopefully that means that some of that operational capacity can stay on US soil because of that. But yes, the, the cost advantage of Mexico from a labor standpoint, you know, there's a lot that you have to overcome to kind of make that work in many cases. Okay.

Tom Raftery: 13:21

Okay. And what other trends are you seeing in technology investments?

Anna Wells: 13:29

You know, forecasting has become so important that companies I think are starting to look at AI seriously. And this is, in my opinion, this is a big deal because manufacturing, especially in the US is, you know, it's comprised of course of many big conglomerates, but also a ton of SMBs. And so I think, you know, I think that's been a longstanding challenge with tech is that the business case at the enterprise level of a corporate giant, for example, is much easier to pitch than someone who operates, say, a 30 person business. You know? So, and, and some of those companies, though, of course, not at all of them have been tech laggards for a long time. You know, this is how we've always done it. That thing they don't, they don't see the fit for their business, or maybe it's, you know, very customized or built to order. So they don't see how they use these tools, but I do think that something is shifting with AI. We did a survey recently where we asked manufacturers of all sizes what their thoughts were on AI and while a smaller percentage were using it now, and I think like maybe 15% of our respondents said they were using AI tools now. Many more than that. Like upper thirties to 40% were saying that they were actually looking at it as a solution in the near term. So in the next two years. Whether that plays out, I don't know, but to me that reaffirmed that there is some progress being made there because because there is a lot, I think, around perception. You know, it wasn't very long ago that many manufacturing companies were sort of uniformly fearful of AI and, you know, associated it much in the way that automation was characterized like 15, 20 years ago. It's gonna kill jobs, it's coming from my job. Just a lot of fear around that narrative. Now I think they're seeing a little bit more of the nuance there and the business value. Notably because it can respond so well to their critical challenges. Things like forecasting, things like realtime inventory and other supply chain related issues that they felt the pain of not having a handle on going into that. So I think understanding how to access that realtime data that, you know, impacts profitability. That was a really good lesson. I think there was some concrete takeaways there. I also think that acceptance of these types of tools has also been propelled by workforce issues. Right. You know, at least anecdotally things like ChatGPT for things like customer service, machine learning, AI, as I said, to help establish buying trends and get a better handle on how to predict what they need. I think they're starting to see that, the capabilities there, and so I do think we'll see more of those investments. And as I said, you know, automation and robotics, very strong market right now in industrial, and I, I think we'll see more of that as well.

Tom Raftery: 17:29

Okay. Okay. What about I mean apart from AI and robotics, are there other technologies that people are looking into to invest? I mean, if I'm thinking of any, that was at an event this last week and there was a lot of talk there about blockchain, for example. Do you think that's gonna make an impact in the next few years? Cuz it's been talked about for a long time, but hasn't made a huge impact yet.

Anna Wells: 17:53

Mm-hmm. Yeah, I, I'm not a blockchain expert, but I do know that it, I always feel like anything that attains that sort of buzzword status has to work doubly hard to get where it needs to be. And to me, blockchain is one of those things where I think a lot of companies maybe like AI was, you know, a few years ago. They're like, what's it gonna do for me? I don't understand it. Forget it. Until they see their peers start to use it or, or really understand the business case for how that they could apply that to their business. And I think there's maybe some work to do there. We are seeing some other interesting tech a lot of things workforce related like, apps that people can use on the production line to maybe better recruit a younger workforce. It's like almost like a gamification tool where you can input everything that you're doing, you can collaborate with your team. And people seem to really like that stuff. We're seeing interesting tech behind inventory management. In industrial, they have long relied on industrial vending machines. And so you've seen some development there around new approaches to that. There's a, an interesting company right now that's working on, well, it, it, the product has hit the market. It's like a walkout technology, so that type that's been associated typically with Amazon, there's stores where you can just walk in, take what you need and leave. So there's a company who made basically an industrial version of this. It can be applied in a mobile tool crib situation, you could essentially turn your entire warehouse into a vending machine. That's kind of their go to business. And it uses sensors and cameras to track your movements. They know everything that comes in and out. So they can also, at the same time, amass data on what's being used so they can get some advanced notice, avoid stockouts and other procurement issues that they might have. And it's different from R F I D because you don't have to tag anything. So that's been kind of a cool tech intro that I've been keeping my eye on.

Tom Raftery: 19:56

Mm, nice. Any IoT stories out there that you're aware of? Any big shifts in trends for that?

Anna Wells: 20:03

I definitely think that it's just gonna continue to hum along. People are starting to understand the value of having everything talk to each other and, you know, everything be digitized. And manufacturing has held on and distribution as well, held onto their Excel spreadsheets for a very long time. And their, their, you know, the notebook in the back pocket that's got all the maintenance best practices on it. And then I think the pandemic did a lot of almost fear-based you know, lessons learned, but. But so has the, the wave of baby boomer retirements and just this tribal knowledge that's been walking out the door for these companies. And as they're really struggling to get a handle on their workforce, they need to implement these tools that make their business more streamlined. That, you know, you have a digital record book of everything that's happening. All the machines are talking to each other and And then if you're a plant manager, can you remote in and fix a problem? I mean, that's become like really a critical piece to the way they operate.

Tom Raftery: 21:09

Okay. Just going back for a second to the inventory management discussion we had. If you were advising any manufacturer now on inventory management strategies, you know, would you tell them to have a huge emergency stock in stock stockpile, or would you advise them to shove it, shove it back out to their distributor again? Or, you know, where, where do you, where do you see manufacturers? Where do you advise or where would you advise manufacturers to go that way?

Anna Wells: 21:45

Mm-hmm. Yeah. Well, I mean, it's certainly a cost center, right, for manufacturers to hold on to inventory and so perhaps it, it really depends on where they're at financially and maybe with the economy getting a little soft here in the near future, if that were to happen you know, maybe it does make sense for them to try to push that back onto the distributor as much as they can. I will say that that whether or not they have a policy or a recommendation there's a lot of emergency and safety stock just being, I hate to use the word hoarded, but people in manufacturing plants oftentimes have their own stash. And and the reason is because the reason is in a sock drawer somewhere, right? Yeah, exactly. Like in a desk drawer, you know? And. And the reason is because they don't wanna be caught in a panic situation and take the blame for something being offline. Downtime obviously is tremendously expensive. So you do see that with folks on the plant floor or management that they do have their own kind of secret stash of things. But the problem there is that that that inventory is untrackable. It, it is prone to becoming out of date. If it's a chemical, it could expire, it could get lost, it could walk away in someone, you know, in someone's pocket on the way home. You don't know what happens to that. So it is definitely an area where manufacturers can lose a lot of money quickly. Mm-hmm. And so I think there is a lot of fear there of like, if we do bring some of this back in house, how are we tracking it and making sure that we're not overdoing it and having too much stock that's either getting lost, expiring, becoming out of use. Maybe we retool, we don't use it anymore, but here we have this stuff that we can't unload. So I would say it's a balancing act. I do think industrial distributors especially, they do a really good job of keeping tabs on what their customers need. And that often takes the form of vending machines, but also just a lot of these big distributors, they'll send a person on site and their, your account rep, and they come in once a week. They almost feel like an employee. They check everything that you need and they make sure that you get it on time. So I do think that even though people got spooked by the pandemic and some of that stuff, that it is a, a, a pretty robust system. But yeah, a a little emergency stock probably isn't gonna hurt. A little.

Tom Raftery: 24:23

Okay, good. What about the, the impacts of digitalization on manufacturers? So, and when I, when I speak of digitalization, I mean particularly shifting business models and so going down the, the product as a service route, for example. And as well, I, I've seen a couple of manufacturers while not going down the full manufacturer, or sorry, the full product as a service route, starting to stand up stores, digital stores, e-comm stores for B2B of spares, for example. Are, are you seeing that trend taking off as well?

Anna Wells: 25:02

Yeah, definitely. E-commerce has been a big area of growth in the last couple years. You know, there's, there was always a push towards e-commerce in this market especially in distribution. Those are, you know, selling organizations. So they should be online. They should have been online many, many years ago. Mm-hmm. But and but you do see, yes, that, that there's more emphasis being placed on this, not just from an availability standpoint. You know, some companies. Many companies are using their websites just for transactional operations, right? People come in and they put a product in their cart and they buy it. But but the other thing is as demographics change in your customer base if you don't have a, a robust website that positions your company as a market leader it's really a lost opportunity in terms of marketing. And so I think they're seeing that as well. It is just knowing that if somebody is looking for a product and they Google you, maybe they don't make that purchase online. Maybe it's more of an omnichannel thing where they check you out online, they look at what you have, and then they call a rep to customize it. Right? Right. So even if you think that your cus your, your products are too customized to sell online, that does not mean that you should not be online. And I think that that is becoming more apparent to businesses as well.

Tom Raftery: 26:23

Interesting. Okay, cool. Cool. Anna we're coming towards the end of the podcast now. Is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to think about?

Anna Wells: 26:38

Well, since you know, manufacturing is near and dear to me. I always like to take the opportunity when I can to share my optimism about US manufacturing. I know that people. Are concerned about impending, you know, economic softness or recession potentially. I, I, of course, am as well, but I do think there are some really bright points about manufacturing that I feel super optimistic about. Employment growth and productivity both up in the latest pmi. I think that drives, you know, a lot of economic growth. Those two things combined. And then new orders for durable goods were up in May for the third consecutive month. So there's some, some really good news there. And, and I also see, I know people are getting concerned about all the layoffs that they see in the news. Mm-hmm. A lot of that's in tech. Right. And I see that less as a bellwether and more of an opportunity for other industries, industrial included, to take advantage of this talent pool that has been held up in the tech sector for a really long time. So I think that industrial businesses need to look at, you know, how can we take advantage of that? And you know, I just, with lots of, there's lots of predictions out there right? About what's gonna happen next. And I choose to look at the ones that, that say that we're gonna see a mild bump in the road. And, and looking at the way many industrial businesses sort of right sized and invested in tech during the, and after the pandemic. I think they really scrutinize their operations outta necessity. And then I think that because of that, many of them, not all, but many are well, are well suited to handle any of these speed bumps. So I'm, I'm really hopeful for the future.

Tom Raftery: 28:17

Nice, nice. Lovely. Anna if people would like to know more about yourself or any of the things we talked about in the podcast, where would you have me direct them?

Anna Wells: 28:26

Sure. So, we The, the brands we represent are Industrial Equipment News, which is ien.com, manufacturing.net industrial distribution. We have a podcast that's hosted on our manufacturing.net website. It's just manufacturing.net/podcasts. If you're interested in hearing more, we just talk about the top stories that are impacting the manufacturing sector. We talk a lot about You know, new and innovative design and safety issues and compliance and things like that. So, if anyone is interested in that please do check us out.

Tom Raftery: 28:59

Great. And I'll put links to those in the show notes so everyone has access to them. Anna, that's been, thank you. Really interesting. Thanks a million for coming on the podcast today.

Anna Wells: 29:07

Thank you so much for having me, Tom. It's been fun.

Tom Raftery: 29:09

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, simply drop me an email to TomRaftery@outlook.com If you like the show, please don't forget to click Follow on it in your podcast application of choice to be sure to get new episodes as soon as they're published Also, please don't forget to rate and review the podcast. It really does help new people to find a show. Thanks, catch you all next time.