For our March episode, co-hosts Ted Stank and Tom Goldsby spoke with father-and-son supply chain researchers Dale Rogers and Zac Rogers, the proprietors of the Logistics Managers’ Index, about diversifying supply chains, global redesign, friendshoring, and much more.
Dale is the ON Semiconductor Professor of Business at Arizona State University, where he directs the Frontier Economies Logistics Lab and the Internet Edge Supply Chain Lab. Like Ted, he is a member of the Supply Chain Hall of Fame and the recipient of numerous awards and grants. He is a leading researcher in reverse logistics, sustainable supply chain management, supply chain finance, and secondary markets.
Zac is an associate professor of operations and supply chain management at Colorado State University. His primary research areas include the financial impact of supply chain sustainability, emerging logistics technologies, and supply chain cybersecurity.
To start the episode, Ted and Tom discussed the positive February jobs report, consumer sentiment, the impact of the election cycle, manufacturing activity, international trade, and more.
The episode was recorded remotely on March 8, 2024.
Related links:
For our March episode, co-hosts Ted Stank and Tom Goldsby spoke with father-and-son supply chain researchers Dale Rogers and Zac Rogers, the proprietors of the Logistics Managers’ Index, about diversifying supply chains, global redesign, friendshoring, and much more.
Dale is the ON Semiconductor Professor of Business at Arizona State University, where he directs the Frontier Economies Logistics Lab and the Internet Edge Supply Chain Lab. Like Ted, he is a member of the Supply Chain Hall of Fame and the recipient of numerous awards and grants. He is a leading researcher in reverse logistics, sustainable supply chain management, supply chain finance, and secondary markets.
Zac is an associate professor of operations and supply chain management at Colorado State University. His primary research areas include the financial impact of supply chain sustainability, emerging logistics technologies, and supply chain cybersecurity.
To start the episode, Ted and Tom discussed the positive February jobs report, consumer sentiment, the impact of the election cycle, manufacturing activity, international trade, and more.
The episode was recorded remotely on March 8, 2024.
Related links:
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.
Speaker 2:Hey everybody, this is Ted Stank, one of your co-hosts for our Tennessee on supply chain management podcast. This is our third podcast coming to you from 2024. And we're really, really excited to have a couple of great guests with us here. We'll introduce them in a minute. I'm also happy to have my co-host, tom Goldsby, back with me. Tom's been going all over the country the last couple of months. He missed our February podcast because he was out at an industry conference in Las Vegas. It happened to also coincide with him attending a big concert in Vegas and maybe even being able to drop in on a big sporting event that he was there. Tom, you want to comment on your travels and welcome back.
Speaker 3:It's great to be back, ted. Thanks so much, and the audience and you. You're going to have to be a little patient with me, right? It's been a couple of months since I've been on a podcast. It might take me a little while to warm up. But yeah, I was in Vegas last month for the Reverse Logistics Association event. I've been talking about some of the returns research I've been doing consumer returns and that was a good place to be. In fact, one of our guests today was up on stage at RLA, so I had a chance to visit with him, but also up on stage was Bono Edge and Adam Clayton of U2. So I got a chance to take in U2 at the spear, which was tremendous.
Speaker 3:And that sporting event I can't recall. I think Taylor's boyfriend was playing football or something.
Speaker 2:Taylor's boyfriend and Travis's brother.
Speaker 3:That's right. That's right. So it was a very, very hectic time. Fun time to be in Vegas, but I did get some good insights there, including from one of our guests. Dr Zach Rogers of Colorado State University was on hand. Heck, I got a chance to see the other guest, father of Zach, dale Rogers, by happenstance. Back around Christmas I happened to be in LA and I was going through a parking garage and I saw a very distinctive car with a very distinctive vanity plate L-O-G-P-R-O-F out of Arizona. I said Dale Rogers is on the scene. So we got together and had breakfast. So we're looking forward to having the brothers Rogers. As I refer to them, not to be confused, they are our father son academic duo. But yeah, it's great to be back on the podcast. Great to have you back, tom.
Speaker 2:You know, I feel like one of my favorite sports talk shows is part of the interruption, and Michael Wilbon, one of the guys on part of the interruption, is traveling all over to different sporting events, and the other cranky old guy, tony Kornheiser, doesn't even go to the studio anymore, he does it from his attic. And that's me, I'm the cranky guy in my attic, and you guys are traveling all over the world and Kornheiser also never watches any sporting events that end after 10 pm at night. That's another trait of mine. Like Tom has always tried to get me to go to basketball games that start at 9 pm, I'm like no, I got to be in bed by 10 o'clock, I'm not doing that.
Speaker 3:So there's some some synchronicity here with Tony and the other guys, tony and Mark, it's true.
Speaker 2:Well, we got some really good stuff going on today. What we usually do is a quick rundown of some current events that are happening. I feel like we're in this kind of redundant groundhog day loop that the numbers that keep coming out are really similar to the way they've been for many times in the past. We'll look at some of the economic data. We'll look at some of the consumer data. Then we'll look at some of the industry indices and bring Dale and Zach in to talk about specifically their index, the logistics managers index. You want to do a little rundown of some of the economics.
Speaker 3:Yeah, sure, Like you said, it is a bit of a broken record groundhog day sort of thing. You know we do look at those monthly job reports. There'll be a new report out tomorrow.
Speaker 2:And actually a job report came out this morning, tom. Oh, it did Tell me Two hundred and seventy five thousand jobs.
Speaker 3:Oh, my goodness Wow.
Speaker 2:Economists were expecting about 200,000. Came in at two seventy five.
Speaker 3:Well, I guess that that is a bit of a broken record, because it seems like jobs reports keep coming in more robust than the analysts expect. And then they were explaining granted, there will be an after the fact adjustment we'll hear about in about three weeks to say it's maybe not quiet as robust, or maybe it was more government versus private sector, what have you. But that's encouraging, that's, that's good to hear.
Speaker 2:And again like that broken record, really good on the jobs report above what economists expected, but unemployment did jump to 3.9%. So not everything is perfectly rosy right. We always have these conflicting signals and that's what we've had for for several months now. The good news about that is it strengthens the Fed's hand in being able to potentially lower those interest rates that all the markets, of course, are looking at and capital markets for investment, and obviously that's big in the supply chain world Right.
Speaker 3:Yeah, if there's some suggestion that we're getting inflation a little bit more in check, you're right, some growing impatience out there among certainly investors, but also among businesses and also those folks looking to get a cheaper mortgage too. So that would be very beneficial if we could see the Fed say all right, we're ready to get back into action here, bring it back down.
Speaker 2:Consumer sentiment numbers came in down a little bit from January. There were 79 in January. They came in at 76.9, but still up quite a bit from a year ago. You know, consumers still kind of see the negative side of the economy even though the economy is pretty robust. We saw those GDP growth rate numbers from fourth quarter. There's a lot of good news out there. Very interesting to see where we are in the political schedule, with what seems to be the primary season already laid to rest, oh yeah, and a pretty good understanding of who the presidential nominees are. And with the State of the Union address last night, which I know you're going to make some comments on, it'll be interesting to see if those consumer sentiment numbers tick up from there as the Democratic side starts kind of pushing their story a bit more than they have in them.
Speaker 3:Yeah, I did tune into that State of the Union last night and we were exchanging some notes. Beforehand. I told you I had an over under on the number of times that supply chain would be uttered and I said the over under was six. I don't know what the Vegas line was on it. I came in at six and as far as I may have missed it, but I think it came in at zilch. I think it came in at zero times the term supply chain. That said, virtually every talking point in one way or another involved supply chain, as we're talking about US jobs and manufacturing and international trade, international relations, red Sea, houthi attacks, you know this sort of stuff certainly in my mind has supply chain all over. But in terms of raw utterances I think I think zero. But then again, the term supply change did not come up at all either. That's an inside joke. You track on such things. But now no supply chain or supply change being uttered last night. But again, for those who are so inclined, you can. You can find supply chain in anything.
Speaker 2:Something we've commented on before is that for the first time in my recollection, the federal government really has its eyes set on almost like a quasi-industrial policy around supply chain improvements. So obviously one of the big news from the political side of things will be what's going to happen between now and November domestically here in the US Some other things going on, tom. I think one of the big news is that the Fed chair spoke to Congress yesterday, on Thursday March what's today the eighth that would have been March 7th and said that interest rate cuts can and will begin this year and I think, again, the numbers that came out today from Bureau of Labor Statistics kind of supports that position. So I think the markets are kind of baking in a June cut, which means that for all those supply chain managers out there that are holding back some of their requests for investment funding for different initiatives by mid-summer might be able to put that in because interest rates might be coming down and freeing up the capital markets.
Speaker 2:On the negative side, there's some dark clouds around commercial real estate and banks that are holding a lot of collateral and loans on commercial real estate. That's something to keep our eye on. I don't think people really know where it's going now. I've read that it's going to be a coming calamity and I've also read that it's kind of overthought about. It's not that big of a deal but something we'll think about coming up.
Speaker 3:For sure, and I think we'll hear maybe a little bit something about that, as it involves maybe logistics, infrastructure and where capacity is, and moving and storing the stuff, if we talk about the Logistics Manager Index a little bit later. Hey, one thing I did want to also drop in there is it involves federal government. We'd been waiting to see where the Securities and Exchange Commission was going to come down on environmental rolling, on carbon recording. There was widely believed that they were going to require scope one, two and three recording from publicly traded companies. They came down shy of that scope three which, by the way, that's the toughest stuff to measure because that's all the indirect in your supply chain but the scope one and two. It looks like those rules variable could go into effect later this year. Companies are starting to rally and figure out how they're going to measure and accurately report that information. So that was a big piece of news that came down yesterday. Do you have any sort of reaction to that, ted?
Speaker 2:Yeah, I think that's big. I think that's big for companies because, quite frankly, every company I've talked to had no clue about how they were really going to measure that. Some are also saying that if you can accurately measure scope one and two and get that end to end across the supply chain, then you're capturing it all anyway. So, again, the flip side of that, though, is that that's a US national policy. California is not abiding by that necessarily. They have more stringent requirements, and Europe has more stringent requirements, so any companies operating in either California or in Europe are probably going to have to still play by those more stringent reporting requirements. Again, we'll see how this all works out.
Speaker 2:Some other things going on that I would track on. Is international trade still somewhat down? A lot of big global brokerage companies like DHL and Kunin Nagel released earnings reports and are showing the weakness in international trade. Expect that to continue through much of this year. Again, really interesting to see how our guests feel about that with the logistics manager's index Shipping attacks. In fact, after the US and the UK announced several raids against the Houthi rebels, things seemed to calm down for a few days, but in the last couple of days, those attacks have increased, including with the first fatalities on a ship that happened just in the last couple of days. So, again, broken record. We've been tracking what's been happening in the Suez Canal, what's been happening in the Panama Canal. That still is there and we just got to keep an eye on it. Most shipping going from Asia to Europe is going around the Horn of Africa and just dealing with that extended shipping time and cost of fuel.
Speaker 3:So yeah, it's also happened to bring more ships into the fleet, given that they're out to sea for longer, and that then allows them to raise rates.
Speaker 2:Yeah, in fact, a lot of companies that are in negotiations for contracts with their shipping providers are actually holding off on finalizing those contracts with the hope that there'll be some resolution of this Red Sea deal and therefore they won't have to pay those higher shipping rates that the carriers are charging.
Speaker 3:Well, we also pay attention to some indices out there, right. So again, just quickly. I know you had pulled up ISM service sector index came up shy of expectations, still north of 50. But meanwhile the ISM Manufacturing Index went further south of 50 from 49.1 to 47.8. And again that was below general expectations and in that particular index showed 16 consecutive periods of decline of manufacturing activity. So yeah pretty alarming there, and US factory orders also fell 3.6% in January.
Speaker 2:And that coincides with the JOBS Report, tom. The JOBS Report showed that the only sector of the higher-end environment that decreased in February was in manufacturing. So again, some softness in manufacturing.
Speaker 3:But speaking of indices, maybe the nearest and dearest to our heart is the Logistics Manager Index, or LMI, which has a growing following not only within our field but more widely around in business. And we're very fortunate to have the proprietors of the LMI on hand. Mention Dr Rogers and Dr Rogers, dr Zach Rogers. I'm going to say it, I know we got tenure associate professor of supply chain management at Colorado State University. Congratulations on that promotion, zach. Great to see that. Of course, it was anything but a question. We all knew it was going to go down.
Speaker 1:And.
Speaker 3:Dr Dale Rogers. I have to admit I'm a little bit nervous on this podcast because we got two Hall of Famers and I'm not one of them. Dr Dale Rogers is also in the supply chain Hall of Fame, along with our own, dr Ted Stank. But I've known Dale since we've got common heritage. At Michigan State University he got his PhD, as well as his previous degrees, out of that fine institution, went on to have a great career, start the program at the University of Nevada, by the way, he taught me, it's not Nevada, it's Nevada University. Nevada then went on to Rutgers University over on the East Coast, only to settle down in the desert Tempe, arizona, arizona State University. Dr Rogers. Dr Rogers, great to have you both with us. I think we want to lead off with a little bit of background about the LMI what was the impetus for bringing forward the LMI? And then we'll get into some current reads on it.
Speaker 4:Well, thanks, tom. I guess the old guy will tell you the background you know. The truth is that Zachary does most of the work on it, but we need a pretty face to put up front.
Speaker 4:So the original idea is really old. You know I love the Purchasing Managers Index. I don't know if when you were at MSU as a student you had Dr Hoglund. And Hoglund and Dr Fearon, who started the ASU supply chain program here a long, long time ago, came out here in 1961. It wasn't called supply chain then, but they started the Purchasing Managers Index which has become such an important economic indicator.
Speaker 4:And Dr Hoglund used to keep me after class in 1981 and talk to me about stuff and I always thought there's a huge hole in the PMI. You know it sort of reflected when the US was a big manufacturing hub but it didn't really contain the logistics components. I didn't think. And so before something goes into GDP it has to go on a truck, it has to be in a warehouse and it's an inventory and we should really be looking at that because if you do then you can sort of tell the future.
Speaker 4:And so I've been talking about it around the dinner table and wherever for probably pretty much Zachary's whole life. And when he graduated from the Arizona State University PhD program and he actually precedes me at ASU, you know I was 3,000 miles away in New Jersey at Rutgers. I came to visit him and they offered me a job and I just stayed there so he thought I was 3,000 miles away. All of a sudden I'm in the hallway and it was a touch traumatic, I think. But when he graduated he said hey, dad, I'll do that with you.
Speaker 4:And so we got some other younger guys than me Shin Yen Yurt to now an associate dean at Rutgers that I hired at Nevada, and then he was at Rutgers with me and Stephen Carnivale, who is the editor-in-chief of the Journal of Purchasing and Supply Management, who was a PhD student of mine, and Ron Limke, who I hired 30 years ago, I guess this year at Nevada, and they sort of help us, but the main person driving it really is Zach. And so that's the genesis of it and, truthfully, the cool thing about it, at least from us, because I thought is this a good idea? Will it really tell us what? I think it will, and the truth is, is it really has had the ability to tell the future? There was one turn in the economy we didn't see coming, and that was the pandemic.
Speaker 2:Well, Dale and Zach, I'd love to hear you guys take this forward. Look, in the end we're talking about you know these conflicting things. The Fed says, yeah, they're going to lower interest rates. President Biden's talking about touting the return of the economy. So, given the accuracy of prediction of LMI, where do you see us going?
Speaker 5:We've had pretty good predictive forecasting of where everything's going, like what was just said, In December 2021, we actually we had a call out that said, hey, inventories went up, that's not supposed to happen in December. We think we're having the bullwhip effect. And then, sure enough, two, three months later, everything sort of catches up. We also saw at the end of July this year hey, all this capacity exit of the market. It looks like maybe we're starting to have a little bit of rebalancing. And sure enough, I guess it was the January report. So five months later we start to see some upticks in transportation prices. Now we're not seeing anywhere close to where they were in 2021, but we've definitely hit the floor and we're bouncing back.
Speaker 5:One of the things, Ted, that I think is germane to what you guys are talking about with the Fed is every month we take a measure of our three price indexes, Basically, so we have inventory, transportation and warehousing costs, and so we aggregate all those together and make an aggregate logistics price, and it's that was in our report this month. So basically what this is and just in case people aren't familiar with the how it change index works any number over 50 is growth further over 50, the faster rate of growth. Any number under 50 is contraction. The further under 50, the greater rate of contraction. And we and we come up with these numbers by going and asking a whole bunch of folks who are director level above who would have a 20,000 foot view of of the supply chain hey, are things slower, faster than last month? And our aggregate price number this month was down a bit from where it was last month, and here's why that's important. Last month we saw a little bit of concern because inflation was a little hotter in January than I think people wanted it to be and we had had, from December to January, our aggregate cost index, our price index, had gone up about 22 points from a 164 and 150, since we just add the three together, 150 is a break even from a 164 in December to a 186 in January, and I think that kind of made some folks nervous. And really what we've come to understand, especially from 2022 on, is that inflation is incredibly complex in terms of of what the sources of inflation are. It's nuanced. I think it's easy, especially if you're the Fed.
Speaker 5:It seemed like what everybody's focusing on is people are spending too much money. We got to bring unemployment up and what they missed was the biggest contributor to inflation in 2022 with supply-based inflation. We had a shortage. We had a big shortage when inflation really kicked off Russian-Veigukrain suddenly, one-eighth of all the diesel fuel in the world has just gone. Two of the five biggest producers of wheat gone, and then we have not enough livestock. Feed gas is more expensive, so everything gets more expensive to ship. That ran into a chicken shortage, which somehow, surprisingly to everyone else, was an egg shortage. Six months later, I feel like we could have saw that coming if we had a chicken shortage Well, probably egg shortage coming. But so we had all these shortages and that was really the contributor to inflation.
Speaker 5:Friend of ours, Adam Shapiro, does a breakdown of inflation contributors for the San Francisco Federal Reserve and all through 2022, it was all about supply inflation and if you look at our aggregate numbers back then, like two years ago, so I said, okay, this month we're 184, we're down a bit.
Speaker 5:Two years ago, March 2022, when inflation was getting crazy, it was 271.
Speaker 5:Okay, that would be the equivalent of one of our regular numbers being a 90 out of 100.
Speaker 5:So that was really the crazy inflation and so, yeah, we popped up a little bit last month, but now we've come down two points from January and it seems unlikely, and this is what gives me some confidence in what the Fed said yesterday yes, there will be some cuts is yeah, inflation is still in the threes and that's not the 2% that someone made up in 1940, which is where it needs to be. Maybe the economy has changed in 1940, I don't know but if it's not around three, maybe we got to change it. And so I think what we're seeing now is logistics are aggregate costs were down to 184. So down a little bit from last month and that's actually still below the all time average. And so, in terms of the supply side now the demand side I don't think is what's going to push us back towards craziness In terms of the supply side, which we're tracking, it seems like inflation is really moderated and it seems unlikely we're going to see another big spike unless something happens.
Speaker 4:I think, understanding the mechanics, inflation I won't do the whole geeky thing here, but inflation back in the 70s, and you know that inflation was primarily demand driven inflation. So it was a real hot consumer economy. As Zach said, this really started out with lack of supply coming out of the pandemic. It wasn't because President Biden was putting too much money into the economy, that wasn't it at all. There was a sugar high because of that money, but it only lasted one month. And then what happens is there's like an inertia piece. So the supply driven inflation feeds raising of prices and then people realize we can raise prices and so there's kind of an inertia thing and it keeps going. And so that's really been what we've seen.
Speaker 4:And as those faucets got turned back on and in 2021 and 2022, it was kind of like the time after World War II was very similar where you had all of those factories were producing stuff for the war effort and now all of a sudden they're making cars and washing machines and stuff and it took a while to turn the faucet back on and the change in demand from the pandemic to what we're seeing now is the same sort of thing and a lot of those supply chains were broken. We're seeing a lot of diversification of supply chains, as you think. Well, maybe having three suppliers in Wuhan China maybe that wasn't such a good idea. Actually, someone actually said that to me because you know, dale, we thought we were diversified, but three suppliers in Wuhan China didn't seem like it was that diversified. We really can see kind of an end to that, and I think there's a little bit of a boomerang here that we're seeing as well right now. We started, as part of the LMI, looking at upstream and downstream and see if there's differences between those.
Speaker 2:You know what I love about this, you guys. You know all the policy folks in DC and all the financial market folks in New York. They see things at a real macro level and particularly all these statistics that Tom and I were talking about are all lag statistics. What you guys are tapping into are leading statistics and leading things happening at the operating level that really contribute to understanding what's happening in the economy. You know it makes me think of Warren Buffett saying he's never going to buy a company, that he can't understand the operating model. And here we are, a bunch of loggies right Saying we know what trucks are moving things and how much is moving and where it's moving to. Zach, love what you said. You know, if there's a shortage of chickens, can't we predict that six months later there's going to be a shortage of eggs? And if you're looking at a real high level, you miss all that. And what the LMI does is really bring that richness of what is really happening out in operations and how that's going to impact the economy.
Speaker 4:Well, and partly the Fed doesn't have that many tools. You know, to some extent the emperor has no clothes, because the Fed can raise rates, they can change the money supply, and they can't heal supply chains, they can't make supply work better. At least we don't seem like we have that tool now, and so it was quite predictable and you could really see it in the LMI leading into all these things. Now we're in that sort of inertia phase and I think the Fed knows that this inflation is probably it's either going to be the new normal or it's not going to go crazy and get dangerous levels. Now that's in the US and I don't know how many listeners you have outside the US. But I was whining about inflation and interest rates and so on and have a project in Ghana and last month their inflation rate was 42%.
Speaker 4:And it was primarily due to supply problems, a lot because of Ukraine, and so, while we have had inflation, it's much milder, because partly I mean. The real story, ted and Tom, is that US supply chain managers have done an incredible job in moving supply to meet demand very quickly and it's a better machine here than it really is any place in the world, and that's why our inflation and our employment numbers and so on and our economy is healthier, and it is something that a lot of the pundits and economists miss that it's really we're able to match supply and demand, which is the folks probably listening to the podcast. That's what they're doing.
Speaker 2:Hey, dale, you touched on something I want you to bring out, because this is another theme that you push on quite a bit. Not a big surprise, just like Zach's kind of chicken and egg was not a big surprise. So we do do a great job of matching supply to demand, but that is infinitely harder. You talked about post World War Two, right, and how quickly US manufacturing changed to make war materials and then how it changed back to making consumer materials. We have somewhat lost that because of our decisions over the last 35 years of putting our three suppliers in Wuhan, china, and I know that this whole global network redesign is another topic area that you've spent a lot of time looking at and thinking about. Can you guys go into that a little bit? What are your thoughts on where we're going with global redesign and how that might affect this whole picture?
Speaker 3:Down, particularly semiconductors and Dale. I know you've done some work that's making some head waves in industry, but also with our federal government.
Speaker 4:Yeah, actually, semiconductor supply. Making sure that that works well and we have the latest technology is really not just to make businesses work well, but it truthfully has something to do with our long term survival as a civilization, because the way that wars are fought I mean, how come Ukraine, this little country, has been able, at least a little bit, to hold Russia at bay is because Ukraine has higher tech weapons that are driven by US semiconductors. And are there any really good Russian semiconductors that you guys can think of? There are not. However, it is a very long supply chain and the folks that make the best machines to manufacture semiconductors are in the Netherlands, and TSMC, which is based in Taiwan, makes the most advanced microprocessors, and so we're seeing a kind of a scrambling around.
Speaker 4:I think the US government has been late to this party, realizing that man, wait a minute, we can't even do anything without semiconductors now, and so we're seeing a lot of movement to try to bring some of it back.
Speaker 4:Actually, I'm part of a brand new project, the thirteen million dollar project coming out of the state department, and we're Trying to look at assembly, test and packaging in five countries outside the US.
Speaker 4:None of them named China, so Mexico and Malaysia and Costa Rica and so on, and because we realize that bringing some of the manufacturing back, but also Diversifying from China, where a lot of the packaging happens now, is something that we have to do, not just for business but probably for the long term survival of civilization.
Speaker 4:So it's it's a really interesting time and we're seeing senior supply chain executives and if you're a senior supply chain executive in your listening to this and you're not doing this, then you might not be a very good senior supply chain executives but we're seeing the senior guys really think about new diversified sourcing patterns. It's not enough to have two or three suppliers, but you need to have geographically diverse suppliers, not just minority on businesses and big businesses, and you need to also have geographical diversity. And so it's an interesting time in the supply chain world is people are moving quickly, with incredible speed, to sort of diversify. That's a long answer. It's one of those things that you know I could easily give a three hour lecture about of all the pieces that are moving around right now, because there's more hot spots, there's more economic turmoil. You know we're we're seeing events happen much faster than when you were a young man and I was not quite as young a man as you.
Speaker 5:But you need to keep things tied together because we can't go it alone, and I think that's been a revelation. You know, I think the government thought, okay, we'll put fifty two billion dollars Into building up semiconductors and education and will be fine. And then okay, of course it turns out one fab cost about twenty billion. So that fifty two is not going to go as far as you think and it's not going to go as far in the US as it will another places. And I think One of the terms that you might start to see is something called friend shoring. You know we have reshoring, we have near shoring.
Speaker 5:About friend shoring come Mexico is our friend Costa Rica, that would be nice. And so I think, especially if you're gonna say, okay, we're putting taxpayer money and we're gonna build a factory in Costa Rica, you gotta have a good reason for that and a good excuse. And so I think the idea that there is pieces of this, especially for semiconductors, but it's true for anything It'll never make sense to do the packaging in the United States. It's too low margin, it's it's really labor intensive, it's not gonna happen, and so you need to be able to spread it out a little bit and I think, much like being late to the party, like we need semiconductors, there's also a little bit of lateness on how do we actually put these together and how fragile and how complex the supply chains for these things are.
Speaker 3:That's the great appreciation, right, of the complexity of end-to-end supply chains and, as you indicated, fabrication, where the product actually comes together, is part of the puzzle. But again, you've only got so much supply of those raw ingredients in the earth, and so figuring out where we can source that at infraternity locations. And, yeah, we've been undertaking some work in what we call X-shoring, of which friend-shoring is certainly in that portfolio of options. You know, as I think about it, we're getting close to the end of our time with you two gentlemen today, and we could talk about any number of topics, right? I mean, dale is the brand in reverse logistics. He literally wrote the book and then famously gave it away for free, which proved to be a great marketing decision to make it got in far more hands than, frankly, any of my books that charge ridiculous prices. And then Zach has followed suit. You know you're doing a lot of work, and consumer returns In fact that's what you're up on the stage talking about at RLA was consumer returns, and so we've got a lot to talk about there.
Speaker 3:I'd love to direct people to the research you did on the effectiveness, or maybe better said, the ineffectiveness, of the tariffs that we've imposed. You both have research recently published on that topic. That's just fascinating. But, dale, you did mention the work you're doing in Africa. I'm wondering if we might bring you back in on that. Talk about this Pan-Africa project, kyruska, I believe is what that's called. What are you doing in Africa? I recall sending you a birthday greeting back late last year. I think you were about to dig into some tiramisu with a birthday candle.
Speaker 4:I was in Ethiopia that day. Actually, it was a really lovely visit on my birthday. They were so nice to me over there. One of the things we're really seeing is we're sort of pivoting away from China. Where could the future of sort of manufacturing be? And Jag Schaeth who you guys probably know, jag, and I think he's in his 80s now, but he came to Rutgers when I was there and he said you know, the 19th century was the British century, 20th century the American century, the 21st century, the first half is the Chinese century and then the second half could very well be the African century, and I don't know if that is right or not. Certainly the 19th and 20th part was right. But there are still having babies over there in Africa. So the families are growing.
Speaker 4:The human resources over there I mean, they're really smart, they're really sharp folks over there the structure and how they deal with things and so on, you know, needs some help, and so ASU and the Kwame Nakrumah University of Science and Technology, which is in Kumasi, ghana, which is our partner, we got a $15 million grant back in 2020. It's a five-year project, but the center, I think, will last for a long time, and so we've been working on developing a center for supply chain management. I mean, we use the University of Tennessee supply chain forum as sort of an example of where we want to get to over there and it's been a really fun thing to do. And actually I think as academics we need to do more research because supply chain management works differently over there. A lot of the principles are exactly the same, but I've learned some really interesting lessons, and that's a whole other thing.
Speaker 4:And you know I know, tom, when you ask me a question, you're always hoping I'll be brief. This is about as brief as I can be, but this summer we'll have a big research summit. Last year we had 700 people from all over the world, a lot of Americans. You guys are welcome to come. It'll be beginning of June in Kigali, rwanda. I believe it's exciting times over there, a lot of good stuff happening and I'm quite bullish on Africa. That's awesome.
Speaker 3:And you know it's really cool to see the impact that you're having. Not only something that you're very much regarded for along with Dr Ted Stank is the impact you have on industry. It's really cool to see you have that impact also in federal government, as it is now globally and really helping to advance that future. Lmi helps us to get a view of what that future might look like and meanwhile, stepping in and being very effective.
Speaker 4:There's a Ghana LMI actually, and your listeners can Google that and they can see it. They're doing it quarterly because you've got to get the data differently, you've got to actually go visit the companies to get it and we've got students doing that. But it's interesting. It follows our LMI, the US LMI, exactly. It's just more extreme both on the lows and the highs, which is kind of what you would expect. It's been really a fascinating thing.
Speaker 5:You know, speaking of that, I got to give you guys one more note before we go out. You know I love to start a story in class with two minutes left and I'm going to do that here too. So one of the things we see with the LMI that I think is really important. And, ted, this gets back to something you were talking about earlier. With imports being down and things like that, we split our respondents into upstream and downstream, downstream being retailers, upstream being a lot of manufacturers, a lot of wholesalers, people who are more likely to be importers than the downstream folks, and so for the last year we have had negative inventory growth upstream and downstream has kind of been OK. It was up for Christmas, it was down, it was up Now for the first time. In January this is the first time, I believe, in like 18 months we saw a significant increase upstream. So it went from a 47, which is contraction in January to a 60 in February. And when we look forward, hey, where's this going the next 12 months? They say it's going to be a 63 for the rest of the year, and so we are seeing some momentum.
Speaker 5:Now it's not just manufacturing, it's a few different things, but we are seeing momentum upstream and we haven't seen that in a year. Downstream, meanwhile, there are 55 right now and they predict 55 for the rest of the year, which tells me JIT, Nature has healed itself and we're getting back to the normal way that retail is supposed to be. So, looking forward over the next 12 months, where are we going? Retail is back to normal, I think, as long as Taiwan doesn't get invaded or whatever. But back to normal JIT, which means we're using trucks, means we're using warehouses, and upstream, the part of the supply chain that has been really slow is finally coming back to life and I think we're going to see a sort of balance across the supply chain that really we haven't had since pre-COVID, and we're going to get back to seasonality being a thing again and some of the things that were in the textbooks, that were wrong for the last three years, I think, are going to start to be right again. So that'll be nice.
Speaker 3:So maybe my books will start selling again. Jit is not dead.
Speaker 5:Exactly, you've come back to correct them through the other side.
Speaker 3:That's it. We're usually right about a lot of things. The timing is where we really struggle. So, gentlemen, thank you very much for your time today and also the timing that you helped to lend to a supply chain analysis, both the domestic and abroad. It's just been really great to have you. And, speaking of hosting Zach, I think you're going to be hosting a good number of us academics out your way in the Rocky Mountains in about a month's time, with the logistics.
Speaker 5:Doctoral symposium yeah, the doctoral symposium, April 11th, 12th, 13th.
Speaker 3:Looking forward to that. You still going to have some good skiing for us if we can find some free time.
Speaker 5:I mean, it's snowing right now. So, yeah, I think you're going to be more than fine, especially if you get over about 8,000 feet.
Speaker 3:All right, fantastic, go ahead, ted, you want to take us out today?
Speaker 2:Sure, hey guys, it has been so great to have you on. I can talk to you guys all day long and in fact, one of these days we're just going to have to figure out what watering hall to go to and spend an afternoon. One of the things that really really excites me about what y'all are doing is what I brought up before. You're down in the details of where business really happens and you're showing how understanding those details of what's going on in rolling stock and warehouses really dictates the economy, and that's really exciting to me and I think more people need to wake up to the fact that we are the those of us in the supply chain really have our feet on the ground of what's happening. So thanks again, guys, for coming to share with us.
Speaker 2:I am always in awe of the kind of things you're doing, dale. The scope of the work that you do is amazing For our listeners. Again, if you have any thoughts on topics or speakers, gsci at utkedu, if you want to send us any thoughts, notes, questions, and we will see you again from our spring supply chain forum with a couple of senior executives Peter Anderson from Westrock and Jeff DeLulo from Phillips talking about those two companies' initiatives in sustainability. So stay tuned for our April podcast.
Speaker 1: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.