Tennessee on Supply Chain Management

S2E3: Navigating Supply Chain's Evolution with Former SC Ports Authority CEO Jim Newsome

November 16, 2023 Season 2 Episode 3
Tennessee on Supply Chain Management
S2E3: Navigating Supply Chain's Evolution with Former SC Ports Authority CEO Jim Newsome
Show Notes Transcript Chapter Markers

In this month’s episode, Ted Stank and Tom Goldsby speak with Jim Newsome, former president and CEO of the South Carolina Ports Authority, at the 27th Supply Chain Forum.

The episode was recorded in front of a live audience on November 7, 2023, in Knoxville, Tennessee.

Newsome (‘76, ‘77) earned both a bachelor’s and MBA in transportation and logistics from the University of Tennessee, Knoxville, before embarking on a more than 40-year career in container ships, ports, and international transportation. He was recently named the 2023 Distinguished Alum by the Haslam College of Business. At the forum, the Global Supply Chain Institute also recognized him as a Distinguished Fellow.

Listen as our co-hots speak with Newsome about his work as an executive at South Carolina Ports, cast a vision for the future of supply chain management, and discuss visibility, sourcing, the labor market, and the evolution of UT’s business education from transportation to today’s highly regarded end-to-end supply chain management model.

Watch a video version of this podcast on YouTube.

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Are you an ambitious business professional ready to take the next step toward advancing your career? It takes just 14 weeks to unlock your true potential with the SEM Leadership Academy from the University of Tennessee Knoxville's Global Supply Chain Institute. Get immediate access to cutting-edge resources and invaluable industry connections with our convenient online format. Secure your spot for our upcoming sessions starting on January 31st by following the link in the show notes or visiting supplychainmanagementutkedu. Accelerate your journey to success with the SEM Leadership Academy.

Introduction:

Welcome to the Tennessee on Supply Chain Management podcast. Listen in as co-hosts Ted Stank and Tom Goldsby set sail into the world of end-to-end supply chain management, diving deep into today's most relevant business topics. They'll share insights and pressing industry issues and tackle the challenges keeping supply chain professionals up at night. If you're enjoying the ride, download and subscribe to Tennessee on Supply Chain Management on your favorite podcast platform now.

Tom Goldsby:

Hello and welcome to another edition of Tennessee on Supply Chain Management. It's great to be with you Coming to you live from the supply chain form at Rocky Top University of Tennessee, downtown Knoxville, tennessee. Tom Goldsby here, your co-host, joined by my good friend and co-host, dr Ted Stank. Hey, ted, how you doing?

Ted Stank:

Doing great, tom. Thanks, hi everybody, how y'all doing.

Tom Goldsby:

Yeah, just point out, we do have a live in-studio audience for this. So a special edition of the podcast and also a very good friend on hand in Mr Jim Newsom. That we're going to get to in short order. But let's go ahead and kind of do a little bit of recap here just to get things started. Certainly a lot going on in the world, in the business world, in the supply chain realm. Where do you think we ought to get started? Do you want to take on geopolitics or where do you want to go?

Ted Stank:

Let's start a little bit. We'll start closer to home. We'll start with, like US Gross Domestic Product Growth, some things going on in our economy right now. I think one of the more interesting articles I read was an economist article Tom sent me a week or so ago. That says economists can't figure out what's going on and they don't know why they've been wrong. So much about predicting what's happening with inflation when we're going to come out of a growth period and go into recession. They keep getting surprised. One of the latest surprises was last quarter's US Gross Domestic Product was almost 5% 4.9%. Who saw that coming right. Manufacturing starts last month up about 2%, Even in Jim. This will get into your territory, but I just saw that October container imports was up a couple of percent. So a lot of good signs, despite inflation. Jobs report in September defied everyone's expectations, Not so high in October, but still pretty healthy. Growth doesn't seem to indicate recession and yet we all feel those clouds on the horizon.

Tom Goldsby:

You all do I tell you what? Go back into the archives. I've been saying, for one thing, I know that the economists are stumped. I'm an economist in training, I know we're trained to look at these typical barometer readings, but I've said it's kind of bunk to some extent. Right, you got some that are pointing up, some that are pointing down. I continue to focus on it raw emotion and the consumer, and the consumer continues to spend and that's going to drive the economy.

Ted Stank:

You have. We've been doing this podcast for over two years now and Tom has consistently said no, we're good, no, we're good, and I have just attributed it to him just being an optimistic kind of guy.

Tom Goldsby:

I am an optimist.

Ted Stank:

Whereas I'm the pessimist. I guess we're really good teammates.

Tom Goldsby:

Yeah, no, I guess, I guess I'm like the world's gonna end.

Ted Stank:

We're all gonna die.

Tom Goldsby:

Now I guess maybe I've been reading into the positives. You know, and as you pointed out you know, jobs report, so okay. So unemployment ticked up to 3.9%, which you know, generally speaking economists feeling pretty good when it's 4% or south of that right so we're still good. Seems like things are stabilizing. Yeah, I do see business spending slowing down but you know, in gross that's 30% of the economy, consumer spending 70% and I'm seeing indications it's going to be a big holiday, I think. I just think that again. When all that money got in the hands of the consumer in pandemic what do you know? They spent it and they liked spending money and I think they're going to keep going.

Ted Stank:

You know, the Amazon Prime days is always a bellwether for holiday season. And that was up and that was up, and that was up.

Tom Goldsby:

Yeah, it was way up.

Ted Stank:

So we'll see. Yeah, that was you know. You look at inventory levels, which is another traditional kind of leading indicator of what's happening with the economy, and we've seen high inventory levels and they have kind of balanced to a more stable traditional level of inventory, particularly heading into the holidays. So I mean that's an indicator that maybe we will have a decent holiday.

Tom Goldsby:

I know our friends in transportation, particularly domestic transportation, trucking, rail and so forth, have pointed out to this notion of bumping, hitting bottom things, kind of leveling off and waiting for things to tick upward. And again we understood it was going to take some time for that inventory to burn off. I mean, you and I had that Wall Street Journal piece we predicted in spring of 21, we're going to have this bullwhip effect. Okay, so maybe now you know 22,. We experienced it and the economy starting to feel a little bit more like normal.

Ted Stank:

I mean, I tend to think about what happened. It's a giant system, right, and there's so many interrelated, complicated parts and COVID just completely disrupted so many different parts of it. So if you think of any system that once it gets turned off and then you turn it back on, it oscillates for a while, with some highs and lows, until it finds a steady state. And I think we're still kind of trying to find that steady state.

Tom Goldsby:

Maybe we got through that sputter After that shock, yeah. Yeah, but we're getting there. And so you know, again, I continue to be pretty optimistic about things and I throw away a lot of my economics training, frankly, to focus on the raw emotions of people. And we have recognized again, consumers spend a lot of different ways, but again you got to tuck in those elbows. You've been on a plane lately. I mean people are traveling and getting out in the bounce. That's good.

Ted Stank:

You want to talk a little bit about the UAW deal and maybe that has on broader labor.

Tom Goldsby:

Yeah, absolutely so. Since we last spoke, I mean, that was red hot, Seemingly they were nowhere close to a deal. And suddenly, you know, I tell you about this UAW strategy of selectively shutting down operations, particularly things like the Ford plant and Louisville select truck plants in particular that are very profitable operations. That seems like in Tennessee. That said, it seems to bring the OEMs to the table.

Ted Stank:

Well, the whole strategy of striking all three of the major US automakers at one time was innovative as well, I think. Though, talking about bellwethers, I think that the UPS contract, the West Coast ports contract Jim will touch on Gulf and East Coast ports coming up and the UAW contracts have all been relative wins in the UAW case, major wins for labor, and I think that that is a bellwether of labor, management relations and the foreseeable future. A number of unions are talking about taking a tougher stance Next time their contracts come up, because I think they're recognizing that there's this imbalance in terms of the number of jobs versus the number of people available for those jobs, and they're seeing that as an opportunity for labor to maybe regain some strength in their negotiating positions with management. Frankly, they've lost over the last few decades.

Tom Goldsby:

I think that's true. However, we're also at that inflection point with electric vehicles, evs. Putting together an electric vehicle is a little bit more like playing with Legos. You don't need as many people to turn a wrench on an EV. Something like a Tesla engine has like 20 parts, compared to more than 300 parts that go into a conventional engine.

Ted Stank:

Shaking my head. I ain't buying EVs man. I'm not buying that they are the Beall and Dahl, and by 2030 we're all going to be driving that no, I don't think by 2030, but they're coming. The US electrical grid can't support it, the infrastructure is not out there for it and you know, a couple of the big auto manufacturers bet heavily on EVs and guess what they have on their lots? Evs, and nobody can get gas or hybrid cars. I've been looking for a good hybrid of the brand that I like to drive and they don't have them. They don't sell them here, so I don't know. I'm not completely sold on EVs. The supply chain for EVs is undeveloped and scary, frankly, in terms of where we're going to get those minerals from. So I'm just not a totally sold one.

Tom Goldsby:

Well, I mean, this is where a multi-billion dollar, cojillion dollar sort of industry is redefining itself, and they darn well better get it right from an end-to-end perspective to your point, right, I mean, in terms of being able to define, you know that, end-to-end supply chain.

Ted Stank:

One word for you, young man. Remember this movie the Graduate and the Plastics right. Hydrogen, hydrogen. The big gas companies, exxon Mobile, are investing in hydrogen. They see hydrogen as the real alternative fuel for the future. I don't know enough of the.

Tom Goldsby:

I rode in a hydrogen taxi in Germany a few months ago. It was phenomenal.

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Really, and I heard this sloshing.

Tom Goldsby:

Did it fly? It did not fly, which that was disappointing. I don't know if it would, but I heard the sloshing as I opened and closed the door and the driver said well, that's where the water's stored.

Ted Stank:

Really yeah, the water.

Tom Goldsby:

That's the byproduct of that. That's right, interesting, so pretty cool. So I saw a little bit of a glimpse of the future, so you might be right there.

Ted Stank:

What else do we have here, tom? Well, I'm just talking about A couple other topics I want to hit before we get to Jim. One of them let's save because it's about the Panama Canal. So we'll save that for you, jim. The last one I'm going to save this one for you too, because you told me one time don't buy into this. I'm talking about Convoy going bankrupt, flexport struggling and all these kind of digital brokerage companies, and you were not bullish on them when the venture capital industry was. So let's bring Jim, let's do it. I have to read this. I'm going to pick it up and read this. Jim Newsom is our guest. Jim Newsom is the recently retired president of South Carolina Port's authority. Previous president of Hapag. North America has just done amazing things in his career, but I want to read some of his accolades South Carolina Public Servant of the Year. National Transportation Coalition Person of the Year. Rainmaker. International Maritime Hall of Fame inductee Order. I love this one. Order of the Palmetto, south Carolina's highest civilian honor. That's really cool. And then, just as of Friday night, the Haslum College of Businesses Distinguished Alumni of the Year, which I had the great honor of awarding to Jim in a wonderful ceremony. So let's get Jim's take on some changes in the global supply chain environment and things happening in international trade. Jim literally has connections all over the world. He has introduced us to people in Europe, asia, middle East, south and Central America. I've had dinner with you at a few of those different continents. They've always been good. So, jim welcome.

Jim Newsome:

Well, thanks for having me. Tom and Ted Really appreciate it. It's an honor to be here.

Tom Goldsby:

Well, let's just go ahead and cut to the chase. Where did we get it right, where did we get it wrong in those opening?

Jim Newsome:

seven minutes. The best story about an economist is the best thing is a one-handed economist, because they can't keep saying on the other hand. But no, I think you've got it essentially right. I think that, if I look at what happened in the shipping and port industry, I was in Asia. I used to go to Asia right after Chinese New Year every year, and it was March of 2020. And we would normally go to China and COVID this thing called COVID had started. We didn't know what it was in China, so I bagged that part of the trip. I was just coming back and the virus was following me back home and then we had to make a budget because we were July through June fiscal year. So we had never managed in a pandemic. What did a pandemic mean? For container flows, container volumes? Gee, I was really pessimistic. I figured we'd lose 25% of our volume, whatever. That's what I told our board. And, of course, what I didn't realize is that in a couple of months, everybody would be bored. They couldn't go anywhere. They were doing 10 hours worth of Zoom calls a day to look at their couch and say this is the ugliest couch I've ever seen. I need a new one. So furniture was the number one commodity and we had 20 months of and we measure volumes in our shipping industry by imports about 20 months of 2.5 million TUs when the port industry had about 2 million. Us port industry had about 2 million TUs. So we stretched every element of the supply chain to its limits, meaning we had days we couldn't unload ships until we took containers out. Basically, Shipping lines chartered every ship Even if it wasn't a container ship, they'd chartered a ship. Truckers were expanding capacity. We had ships waiting 20 days in certain ports not Charleston, but in other ports. So we went through this boom cycle that really showed how fragile the import global supply chain, the total US global supply chain, is, and I think what has happened is we have sort of returned to normal, normal being 2019. Ted mentioned it. We were about 3% up year on year through the totality of the year. I think October was about 11% up according to data mine, and that's about 2.3 million TUs. And I think what happened? The big retailers were facing the same thing. They didn't know what demand would look like and they were seeing shortages on shelves because the supply chain was getting bogged down. So what was their solution? They just ordered more Order, more. Deal with it later and we're still. That's about it, thank you, thank you. I think the major thing we're still dealing with today is this inventory overhang in the good cycle, because people switched to going back to Italy taking trips, so we've still got this big overhang of goods if you look in a lot of the warehouses and stuff. So there's. I think the other point you got right is we're at an inflection point. We really don't know where we're headed. I mean, every indicator says we should have a consumer recession, but we don't see that yet. But there are some things in terms of population trends, workforce trends, power trends, evs that we can talk about a little bit. I think that would be productive.

Ted Stank:

Yeah, let's do that. A couple of things I want to put out there. First, what is your take on? You and I talked for a long time over the last I don't know six, eight, almost eight years. Right, the new locks in the Panama Canal opened in 2016,. Right, and the projection was that increasing amounts of freight from Asia Pacific were going to go through that new locks of the canal and inbound Gulf and US east coast ports, and we have seen that bump in imports considerably over that time. But now Panama Canal is facing some pretty dire circumstances with drought. I think. The number is typically 42 ships per day and a normal operation cut to, I think, 30 per day today and predictions of down to 18 per day come February. All bulk and oil petroleum ships have been denied access. They're going to have to go around. I saw recently there was a lottery for a slot and a company paid two and a half million for that slot. The container ships seem to be okay because they pre-book those. What's your take on some of that stuff, Jim?

Jim Newsome:

Well, I saw I mean, I knew Alberto Alamon very well, know him very well demanded the was the impetus behind building the third set of locks and they knew they could have some water issues. It was not unknown, they didn't know that they would be this bad. But I think what's happened over time? When containerization started and I've old enough to have seen it speed was important. We took a lot of cargo off on the west coast and railed it at whatever cost across the country in containers and over time, as containerization particularly during the pandemic, as containerization was seen as less reliable for a number of reason ships waiting, whatever congestion I think companies decided that the way to reestablish reliability is to get the cargo closer to where it's needed. So it was meaning 70% of the people live east of the Mississippi River. 13 states of a million population or more are growing and they're mainly in the southeastern Gulf. So there's been a tolerated acceptance of longer transit time to establish reliability, even if the absolute days are longer. And what's happened since 2019, the east coast in Gulf has gained 5% of share points versus the west coast on imports. We predicted that it's about 50-50. And I don't think it's ever going back the other way and everybody said well, the strike is over on the west coast, all the freight's going to go back to the west coast. There's no evidence that that ever happened and there's no evidence that that ever will happen. So you're right, the container ships are getting priority. However, I read yesterday it is starting to affect container ships. They're starting to route some ships via the Suez Canal, which is a longer transit time, and part of that is also that nothing stands alone in this industry. It's also tied up with a trend of shifting manufacturing from China to Southeast Asia, because that you know geography. Those ships in Southeast Asia need to go via the Suez anyway, and we've seen that China's share of US imports has gone from 48% to 38% in a really short period of time.

Ted Stank:

And that's a percentage of a big number.

Jim Newsome:

Percentage of a big number. So China's not going away. But this China plus one thing is kind of inculcated in global sourcing today. So that feeds. So lines will go to the path of least resistance. So the Panama Canal gets congested, they will reroute the ships. Ships are mobile assets. They'll reroute the ships via the Suez Canal, which takes longer, probably takes an extra ship, but that's not a problem today because the lines have more capacity on order than they've ever had on orders. 30% of the world fleet of 28 million TUs is on order today. And those are not small ships, they're 10,000 TUs and above and they are being delivered right now. So for a shipping line, adding another ship to a string is a way to soak up excess capacity. So I think the impact of it can be minimized through those types of steps.

Ted Stank:

You talked about the China plus one strategy that a lot of companies are looking at from a sourcing standpoint. Where do you see the big winners?

Jim Newsome:

Well, I mean Vietnam, thailand, Indonesia, india a question, given that highly educated nature of the Indian society, if they truly want to be that big a manufacturing player, but apparently they do. But certainly Vietnam gained initially Thailand, everything, indonesia. Everything moves south, but scale wise. I think what most people don't Remember is that China spent 25 years developing a very reliable supply chain. They built the Yangshan bridge you know, from Shanghai, 32 Kilometer bridge in like 18 months. It would take us 20 years to build that and with massive government Investment to. So China is not going away. The Chinese economy is very Export-dependent and it has a lot of problems today. Yeah, so so they have to keep being a player and I think, if you talk to Walmart or Target or the big importers, they can't abandon China. That's really not possible, right.

Tom Goldsby:

Hey, jim, you were talking about pre pandemic through pandemic, the Buildup of all those container ships sitting off the West Coast ports. I think you in the past you kind of suggested that having 40% of us imports come into two ports are located Next door to each other's maybe asinine my word, not yours and so it presented tremendous opportunity. Again, the migration to the southeast people are living here in mass Distribution capacity is following. How did you all ramp up and prepare to absorb that 5% share gain that you saw? I know that certainly been tremendous investments in South Carolina ports as well as other southeastern Corridors. But how were you able to even embrace the opportunity when it presented itself?

Jim Newsome:

Well, the good news I would say is we saw it coming. It was fairly obvious where people were moving. It was fairly obvious that ships were getting bigger. When I started with the port in 2009, the biggest ship we had was a 5020 foot equivalent ship. Today we had 16,000 and we you don't hide ships when they're being built, they announce the order book so you can see they're being, they're bigger. So we recognized immediately that we had to deepen our harbor. When the first 13,000 tu ship came to Charleston, we had two cranes that could work the ship at full height. The rest were too short so we had to raise cranes by new cranes. So we ended up investing, with the help of our state, about two billion dollars in ten years. And that same story is in Virginia, it's in Savannah, it's in Houston. The operating ports have invested heavily because they're not land constrained and they see the benefit of ports for economic development and they know this that we knew the South was going to grow. We always said I I'm not an economist, I never knew what trade flows are going to do. I said, but will Be double the US port volume in the southeast because we should grow Above the market. Unfortunately, we were able to do that. So a lot of blood, sweat and tears and permitting and building infrastructure, which is never easy, improving our rail network and really trying to expand the reach of the port to and all along hoping we were right.

Ted Stank:

Yeah, could you expand on that, jim? I think one of the one of the really innovative things you did was the the inland port concept, especially if you realize Charleston and the geography of Charleston is a peninsula, so it's you can only get there from one direction, so that was a constraint well, rail, intermodal rail and what a lot of people make a mistake.

Jim Newsome:

They look at a rail network and they think containers can move on every inch of rail. They really move on about five percent. It's very high density sort of operation. And we had some land up in Greer, south Carolina, which is Greenville in the north or southern wanted to convert the BMW container traffic to rail, intermodal container rail, and we wanted to build an inland port. We'd seen the one in front or Royal Virginia, and we knew the Greenville area, being between Atlanta and Charlotte on the 85 Carter, which is probably the if you've driven it, you know it's probably the densest freight quarter around. So in 2012 they asked us if we would work together and we said yes. The big tension point was they said they wanted to run the inland port. We said no, we don't like the way you run inland terminals, we want to run it more like a port. So we invested a lot of money I mean it's close to a hundred million dollars, there's nothing's cheap in our world and built a essentially a grounded container facility which could take chassis out of play and the main catalyst was to serve BMW. But I would say today that less than 50% of the freight is BMW. It's very diverse and it's actually export dominant, which is the only one like it, because BMW at today we didn't foresee it then. They export more than they import because of CKD and SKD. So just to give you some order of magnitude, I figured that In five years time that inland port. First of all many people told me it was a stupid idea. I mean, that's the way ideas work and I kept a few of those emails for I select a group of friends that I'll show them one day at their retirement. But anyway, I thought it might do a hundred thousand lifts in five years. I knew it'd be successful. It's up to a hundred and sixty thousand. The port after I left has meanwhile expanded it. The northern, southern is expanded. I think it easily can do two hundred and fifty thousand lifts and At a hundred sixty thousand lists is three times bigger than any other inland port. So it's port owned inland port. So it's been a amazing success, you see, being Santa Fe going in this direction in the west, kansas City, colorado, alliance, now Phoenix. So we've got to find an intelligent way to move more containerized freight by rail. We can't continue to have 75 or 80 percent going by truck because we're not gonna have enough truckers we have. We're going to have a real shortage of truckers in this country.

Ted Stank:

Just do the demographics and just the quality and you throw in other social issues like traffic density on the highways and carbon footprints and things like that.

Jim Newsome:

So sure, I mean just when I was in school here in the dark ages they called it transportation. You know you didn't do railing under 500 miles, right, that was kind of the mantra. Well, this is a 212 mile inland port. We did one in Dillon for 160 miles in short haul rail, intermodal, I think, shuttles and things of that nature, even in urban areas, extended combined statistical areas. I think there's a way with the future there.

Ted Stank:

You also built up your rail side Capabilities in the port itself right.

Jim Newsome:

Right, we were and we were Admittedly behind in that we had not Arranged the near dock rail and the way that it needed to be arranged. But we play, playing there, playing catch up there now and, I think, developing a very creative solution that doesn't rely on trucks to move from the port facility to the rail, hopefully using a barge service to take trucks off the road. Yeah, I've said it for years a Shortage of container trucking is going to be the Achilles heel of this industry. If we're not careful, we, we simply cannot continue to grow 5% a year with it. With the same owner operator truck model, it doesn't work.

Tom Goldsby:

Jim, let me ask you a question. I mean, we made a reference to China and how they're able to Move so aggressively with a centrally controlled government. Basically set a strategy as a nation, the construction follows. You know, here in the United States, obviously it's private sector, public, private enterprise as well, but there is no such thing as a national transportation strategy or policy per se. Where do you think there are deficiencies and maybe where should government be involved and where should they not be involved? Perhaps?

Jim Newsome:

Well, I think I always told Ted I probably have the last national transportation policy book ever written in the US, and it was written in 1970.

Tom Goldsby:

I thought it was in the 70s.

Jim Newsome:

So we don't have such a policy and I would say that intelligently. The best thing we can do from a public policy strategy point of view is intelligently build infrastructure In the example I always give. If you think about the interstate highway system, which was built in the 1950s, admittedly to support war, think about this country without the interstate highway system, how you would get around here. So it was very intelligently done. The problem with infrastructure today, in my observation, is sometimes it's politicized. We don't get a lot of infrastructure grants in South Carolina because it's a red state. We're not a swing state. It goes to a lot of swing states because it's politically motivated, if I'm honest about it, and you have to pick winners and losers and the public sector does an incredibly lousy job of picking winners and losers. How do you tell a port X, y or Z that you're not in the top 10, you don't need to grow. The state's not gonna like that, honestly. And then, although we talk, I didn't find out about making permitting easier to build infrastructure. It's really not Because there's a lot of inertia within the pipeline and the agencies that do this sort of thing to keep the status quo, because that's what they know. I think that commit to building intelligent infrastructure to support the supply chain is important, and being able to make the right choices and do it faster. The Savannah Harbor expansion project took 25 years. Wow, 25 years Now. There's reasons for that. We could go have a whole podcast on that. It took us from conceiving a harbor deepening in 2010 to delivering it in 2022, 12 years. The only thing and we deepened the harbor in 2004, the only thing that changed between 2004 and 2022 was the age of the fish in the harbor that hadn't been caught by fishermen, because the harbor was exactly the same, yet it had to be restudied again, et cetera. So those things are not productive in building the time. China grew in outsourcing of retail goods because they had a scalable infrastructure. They built big ports. Costco grew from nothing to the number four line in the world, and that was all a conscious strategy.

Ted Stank:

Tom Menser, my predecessor here at University of Tennessee, told the story about working with some guys in the transportation ministry in China about locating highways. They did a location project and locating highways between a few major hub manufacturing cities and he flew over to I think it was Shanghai, maybe it was Beijing to work with them on well, like year one, let's say, to talk about this design, and they figured out where they were gonna do it. He flew back a year later and they took him for a drive down the highway.

Jim Newsome:

Yeah Well, I mean, the biggest city in China is not Shanghai or Beijing, it's Chongqing. It's up the Yangtze River, it's like 35 million people and they've built infrastructure to that right. And we talked about new buildings of ships and you talked about fuel. This sort of 30% of ships on order were built in spite of the fact that the shipping lines don't really know what the fuel of the future is, and it's not LNG, it's not ultra low sulfur fuel. So I would echo what you said. I think it's hydrogen. Most people would say it. There's some ships being built with biomethanol today, but most people believe and I would say the International Maritime Organization would tell you that hydrogen is probably the fuel of the future for ships.

Ted Stank:

Not plastics.

Jim Newsome:

Not plastics. That's the whole other topic.

Tom Goldsby:

Yeah right, jim, you have a very impressive track record of making some pretty big bets and having them pay off. I just wonder if you go on the record with us this afternoon and kind of cast forward what do you see the future of supply chain and maybe bring it back a little bit to what we do here at UT and what role we can have in advancing that future, making it happen.

Jim Newsome:

Again. I was in school here in the 70s, it was called transportation. It's now this big, enormous part of an organization structure called supply chain, which I think has been a great development transportation through logistics to supply chain. So it's given great prominence to the field. I tell people they laugh. It said the supply chain became really important when we couldn't find toilet paper on the shelves anymore. People thought that was the end of it. Right, so people appreciate it. So supply chain has grown in sophistication. It has to continue to grow. As I said, if you look at the four operating ports, they're building two billion or more of infrastructures. We have to continue to build infrastructure. I think one of the missing components in the import-export supply chain is visibility. There are good companies today there's, some are going to be here. I know Project 44 is here. I'm doing some advising for Gnosis freight that are really honed in on container life cycle management, because one of my friends at Gnosis explained to our governor here at Mastery. Said you know? Governor? Said what do you do? He said well, I tell people where their car is. He says they don't know where their car is. No, they don't know where their car is. And we saw example after example of people ordering millions of dollars of goods not knowing where their containers are and paying a lot of demerge because of that. I always said 80% of the questions we got in customer service in a shipping line or a port were questions you'd never asked UPS or FedEx Where's my container? Where's the ship? Is it custom? Clear that all should. So we've got to get, because if we can improve the visibility we will improve the reliability and the efficiency of the supply chain. But I believe we're going to continue to source more foreign goods. We can't bring all the manufacturing here because they're in the workforce. We're losing. I'll tell you tomorrow we're losing two and a half million workers a year in this country. We have no way to make immigration legal. It's not politically palatable, so we have a problem. So Mexico and Southeast Asia they're going to be the beneficiaries of that. And I think the other thing and I probably poke a raw nerve here is supply chain has grown. This procurement and operations functions have sort of become estranged a little bit. So procurement is purchase price variance and operations has to deal sometimes with the best that procurement creates right, and some I think the best supply chain organizations are going to be the ones that get those in good alignment. And then the last thing you write so you mentioned this freight forwarding thing. So about every 10 years and I won't name companies, I don't want to hurt anybody's feelings In 10 years someone tries to revolutionize a basic industry by digitization and it's really about 10 year cycles. You can name the companies and unfortunately, unfortunately, the world's a wash in private capital. So a lot of these private equity folks get really excited about this digitization. They will overpay for these companies. Especially when interest rates were not when money was free, right. Well, money's not free anymore. And guess what? People that do freight forwarding are really established expeditors Kuna, noggle, Danza's, schenker those are really established companies that provide great service. You're going to knock them off the ledge because they just have some form of digitization or whatever. So we have to be realistic about what the needs are. What can truly move the needle in improving the reliability and efficiency of the supply chain?

Ted Stank:

You worked at a place that was relatively labor intensive and you brought on a lot of couple times about the labor issue and we're going to lose in two and a half million workers a year from a port standpoint and then broader in the supply chain. What is your vision of how we're going to deal with this labor crisis? That's not short term. It's going to be around the age of the youngest person in this room. It's going to be around the rest of your life. Because, that's what global demographics are doing.

Jim Newsome:

So I'll say too let's talk about labor on two fronts. You raised it earlier. The workforce issue is severe and it wasn't caused by the pandemic. I go to a conference every year in Florida. I probably wouldn't go to that conference in Cleveland, but it's in Florida in January, so I go. And we've been talking about the demographic wall that we're hitting. There's way more of my age people retiring and unfortunately dying than they're being born, and that's two and a half million years. So, number we have to have some intelligent form of legal immigration in this country and we probably have to stop illegal immigration to make legal immigration palpable. And that's not hard to see. But there's no answer. Without doing that you can't automate everything. Everybody's just automate Well, that sounds nice, but it doesn't always work that way, right? So that's one thing. Labor in shipping is going to be a challenge. East Coast and Gulf Labor situation. I don't think it's any secret. Our current president has said he is the most union supportive president that we've ever had, and this is emboldened to labor unions. And in East Coast and Gulf the carriers in the union had a chance to do an extension during the pandemic when they were all making a lot of money and that probably could have gotten done at pretty good wages. But now they're going to try to do it in 2024. The rates have in the meantime slid. The results, the mercs you saw the announcement they're making negative results in container shipping. So it ain't going to be that easy to get a 30% or 40% increase in 2024 when that contract's up. And the head of the union yesterday basically said we will not extend. They've always extended Come October 1,. We'll have a contract or we won't, and I don't doubt for a minute that he's sincere about that. So it will create uncertainty, particularly when you and I want to get to grain. You've got a lot of foreign flag carriers and a direct employer relationship with the union that they don't employ. That doesn't make any sense at all, going to create a lot of uncertainty for big shippers. It's hard to contingency plan because what do you do? You got a mill in making Georgia. You going to ship over Vancouver, no, I mean LA. No, you're probably not going to do that. It's not easy to do. I mean I think I'm pro-worker, I think we all have to be pro-worker. These are a given. You have to pay today, right, I mean, if you don't pay you won't get people. But the pro-union side of it is really you saw it in the UAW it's emboldened the unions and I don't think that's going to change short of a change in the administration. And now, last thing I say please, just you asked me to tie it back to UT supply chain and I'm fortunate enough to sit on the Dean's Advisory Council, which really means a lot to me, as did this award, you know, with really an honor having a 50-year association with the supply chain program here. And I would really say a lot of credit goes to you folks, ted and Tom and your colleagues, and what you have done to raise the visibility of this program and the worth of this a degree from this program to the levels that it's at today. I give you a lot of credit for that. And the best years are clearly ahead. The university is going to have 70,000 applications this year. It's a record. And I always tell kids the difference in transportation and supply chain degree from the 70s and now about 20,000 a year in tuition and about 60,000 a year in starting salary. So I mean that's the difference.

Tom Goldsby:

Well, jim, we are where we are because of friends and alums like you. You know we have the wisdom to listen to you and invite you in and again to benefit from that wisdom and put it into action. So, thank you for pushing us beyond, pushing us, giving us that impetus. Well, thank you as well.

Ted Stank:

Jim, you've been one of our closest partners for many years now. You're also on our advisory board, the supply chain management global supply chain Institute advisory board, and they've given us really insightful ways to improve our programs and our initiatives, and I thank you for that. I think this is a great way to wrap this up and welcome the folks here, and pretty soon we're going to welcome a lot more folks to the November 2023 version of supply chain forum. We're upwards north of 75 companies that are forum partners with us right now and we're going to welcome about 300 of their people here in Knoxville this week, and I really do believe that the partnership we have with those 75 companies and the 300 managers that come a couple of times a year to meet with us are real reason why this program has gone where it's gone in the last 15 years or so.

Jim Newsome:

Well, when I was with the port, I would say our participation in the supply chain forum was one of the most meaningful things that we did. I mean, for a very reasonable cost we could get around some of the top decision makers in US global supply chain. So it's phenomenal what you've done. One of many examples.

Ted Stank:

Well, thank you again for joining us here. This is your second time with us.

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Second time.

Ted Stank:

Peter Anderson out in the audience, one of our other really great partners. Peter, we got our crosshairs on you. We're going to have to get you on as a guest soon. Okay, Tom, I think we'll sign off.

Tom Goldsby:

Yeah, let's close off, and this is the 26th anniversary edition and we made a big deal of observing the 25th anniversary last year. I'd say we got to celebrate the 26th year just as big Of the forum.

Jim Newsome:

What do?

Tom Goldsby:

you say Of the forum. We're excited about the next two days ahead of us and again, not only our industry partners but all those students are going to have access to such.

Ted Stank:

We expect about 700 people to roll through this room in the next three days between our industry partners, faculty staff and students.

Tom Goldsby:

For those of you that aren't part of the forum, we ask you to maybe give it some consideration. How can you do that? Reach us at GSCI at utkedu. We'll get you started down the path. So with that, thank you so much. Thanks for those of you attending, and we'll see you next time.

Introduction:

Thanks for tuning in to Tennessee on Supply Chain Management. If you enjoyed the episode, subscribe today on your favorite listening platform to get all of our episodes as soon as they drop, and don't forget to take a moment to leave us a rating. Have any questions, thoughts or feedback? We'd love to hear from our listeners. Email us at GSCI at utkedu. Join us next time as we continue pulling back the curtain on the world of supply chain, educating and entertaining you along the way. Until then, listeners.

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