In our first episode of 2024, we sit down with two executives from our C-Suite to discuss upcoming trends, orchestration in supply chain, generative AI and a preview of Manifest 2024. Our special guests for this episode are Scott Sureddin, CEO North American, DHL Supply Chain and Sally Miller, Global Digital Transformation Officer and North America CIO, DHL Supply Chain.
In our first episode of 2024, we sit down with two executives from our C-Suite to discuss upcoming trends, orchestration in supply chain, generative AI and a preview of Manifest 2024. Our special guests for this episode are Scott Sureddin, CEO North American, DHL Supply Chain and Sally Miller, Global Digital Transformation Officer and North America CIO, DHL Supply Chain.
Speaker 1 (00:10):
Welcome to All Business Know Boundaries, a collection of supply chain stories by DHL Supply Chain, the North American leader in contract logistics. I'm your host, Will Heywood. This is a place for in-depth discussions on the supply chain, challenges keeping you up at night. We're breaking beyond the boundaries that are limiting your supply chain. In our first podcast of the year, we sit down to discuss supply chain trends, orchestration, generative AI and preview, the first big supply chain industry conference of 2024 manifest. Our special guests for this episode are Scott Sureddin, DEO North America, DHL Supply chain, and Sally Miller, who's global Digital Transformation Officer and the CIO of North America for DHL Supply Chain. Let's dive in.
Speaker 2 (00:58):
Okay, so we have a couple trend topics today. First of all, thanks for being here. It's good to be in person and we're at the close of the year, so I wanted to first get your impression of how'd year go for the business overall in North America, Scott, and what's the economic climate look like going into 2024?
Speaker 3 (01:14):
Well, I mean, for one, thanks for having me, but I would also say it was no doubt that it's an economic slowdown. This year. We did well coming out of that or going through that because a couple of things. I mean, our diverse portfolio always helps us be that we are large scale in several different sectors and products. We had really good double digit new business growth, but our existing customers volume was pretty flat this year and even going into peak season with all the e-comm or peak season business was pretty flat compared to prior year.
Speaker 2 (01:48):
Sally, I know you work with the other regions around the globe. What does it look like elsewhere outside of North America?
Speaker 4 (01:54):
Well, thank you for having me. The year went by very fast from a digital transformation perspective. We had a record number of projects and advancements in tech. Everyone talks about gen AI all the time, but our investment in a couple of use cases to reduce some of our back office functions was a very big focus. Also scaling proven technologies, we expanded some things outside of NorAm to the other regions that was very successful and did a significant amount of investment in data analytics to leverage the data in our systems. So long-winded answer to your question, but very productive, very fast and good year.
Speaker 2 (02:47):
And to put it into scale, how many projects were on the go this year? If you know that off the top of your head,
Speaker 4 (02:52):
I know that the total percent of customers touched by accelerated digitalization is over 90%. So we crossed that mark globally and total over 5,500 projects. So significant and lots of change.
Speaker 2 (03:10):
Yeah. Good, good. Okay, so a couple more trendy topics. First, sustainability, I know that's something that we've been up to for a while, but Scott, I wondered if you could talk a little bit about how customers are coming to us and looking to DHL to address their own sustainability objectives. What are those objectives and then how does the business respond to them?
Speaker 3 (03:32):
Well, I think first of all, working with so many global customers, it is on the agenda. I would say the infrastructure in North America probably is in as advanced as is in Europe. It's a little slower progressing here, but I would say we are making progress. And when I say slow progressing, if you think about just talking about Fleet Electric fleet for trucks, they're just not the infrastructure out there and the OEM just don't have production. So for example, we have 15 deployed now across North America or 13 deployed, I'm sorry, five or C and g and 13 are electric vehicles. And we have those scattered throughout the US to see how they perform in different temperatures and different terrain and things of that sort. We have 35 on order next year, and I'm not sure if they can fill those orders. That just tells you that there's really not as much capacity out there when it comes to our customers. They're all in until they kind of hear the cost of it. So it's really not a great ROI yet, but some customers are making the investments with us and we are committed to making that investment to prepare us for the future. And the only way you can continue to evolve these products or these solutions is you got to go ahead and start with them and continue with the next version and continue with that process.
Speaker 2 (04:48):
And back on the trucks, those are class eight. So what you'd see a semi-truck on the road? Yes. And that's 35 for next year. Out of what's our fleet size approximately?
Speaker 3 (04:58):
We have over 2000.
Speaker 2 (04:59):
Okay. So it's still small, very
Speaker 3 (05:01):
Small still. But we have a plan. We have a plan to, to, we want to reduce our carbon footprint, as you know, by 30% by 2030, and we're on target to hit that. I don't see an issue with that. It's a pretty big investment by us, and not all of it's being covered by customers. Part of it is our investment to the environment and we predicted it's close to about a $40 million incremental spend versus a class eight diesel truck.
Speaker 2 (05:27):
Okay. Yeah. So that's sizable. Sally, do you see a role for information technology or digitalization to play into the sustainability agenda?
Speaker 4 (05:36):
I think it does, particularly in the transportation space. We have monitoring of driver performance and we are able to reduce heartbreaking and things that cause us to be less efficient. There's been a lot of investments made in AI applications to monitor driver behavior to make sure they're safer. So there are a lot of capabilities that we've deployed this year to improve the safety and efficiency and the transportation side as well as the warehousing side, which causes us to not need as many people with deployment of different technology solutions.
Speaker 2 (06:25):
Okay, great. So Scott, we've talked a little bit about sustainability within the supply chain division. I know some of our sister divisions have bigger carbon footprints. What's happening in those groups with respect to sustainability?
Speaker 3 (06:38):
Well, when you talk about the express division, they're mostly going to electric vans, electric vehicles, and the smaller vehicles. So they're way down the path on that. When you talk about our airplanes, we are trying to buy renewable. We did place an order for one of the first electric airplanes that will come out, and I don't think it hits production for a while, but we are making investments with partners in areas like that. But I would think the biggest thing they've done is all around the fleet because fleet's not class eight, like our big tractor trailers on the road, their fleet are easier to make electric.
Speaker 2 (07:13):
And back to the infrastructure point in the us, what's it take to charge one of these class eight trucks? And is the charging infrastructure around or how's that handled?
Speaker 3 (07:23):
Well, that's another point back to what I mentioned, that we've ordered 35 for next year. There is no infrastructure. So we're having to do this where we can put 'em at our warehouses and where we can get enough electricity from that area to cover these trucks. So it's not like I can just go to one of my yards and say, I have a hundred tractor traders that are diesel there. I'm not sure if I can get enough electricity to charge those. So we are now building our new buildings to make sure we have enough capacity and partnering up with the municipalities that actually can give us the capacity. But a lot of existing warehouses, you can't just go in there and retro it and say, I can park a hundred to 200 trucks there. So there is a capacity and it's more by the cities or municipalities and what they can give us. Electricity.
Speaker 2 (08:07):
We're talking earlier this week about the nature of the business that these trucks can handle. And if I heard it right, most of 'em are on a fixed route. That gets back to the origin point. At the end of the day,
Speaker 3 (08:18):
Yeah, we're only getting 250 miles, so it's usually, we're not doing anything really over the road on these yet. The capacity's not there yet, but as I mentioned before, that's why we're making the investments now and partnering with so many different OEMs to continue the next cycle, the next version to continue expanding the functionality of these trucks.
Speaker 2 (08:37):
Okay. Okay, good. So I want to switch gears to accelerated digitalization, and I'll start with you Scott. So as a business leader, how do you think about accelerated digitalization? How does it contribute to your respective businesses in North America?
Speaker 3 (08:51):
Well, I think a few things. One, data is so big now mean we're using data to figure out solutions to be more proactive, more predictive solutions for us and our customers. The other piece that has really accelerated is the use of collaborative robots. Even though we've been using those for years, it's really accelerated in the applications we can use in that. I mean, I'll give you an example. This year of last year we hired 12,000 Audi Associates for peak season for the same volume. This year we hired 8,000. Now part of that's our efficiency with our productivity and other things. Part of that was we added 700 more collaborative robots. We usually run about 1500 collaborative robots, steady state. We run about 2200 during peak season.
Speaker 4 (09:37):
And this year the collaborative robots have more functionality than they did in prior years. So that enables them to do more things than just picking, they can be involved in the putaway process, which makes them even more efficient and helpful to us.
Speaker 2 (09:53):
And Sally, are these the same robot platforms or are they new platforms that do different things?
Speaker 4 (09:59):
It's the same robot platform that we've been able to scale and we have strategic relationships with these companies and we help develop use cases where we can use the robots to do other things. I think that we will continue to add more use cases with existing vendors as well as pursue new vendors. When we look at our activities within the four walls, where the labor is spent is where we target our solutions.
Speaker 2 (10:35):
So I know the collaborative robot story has been a good one and it's taken place over a lot of years to get us to where we are today. But I wondered if you could describe kind of the lifecycle of how we identify, like you just described a use case that makes sense. And then how do you engage with manufacturers and technology companies to bring that stuff up and then ultimately scale it out?
Speaker 4 (10:56):
Yeah, at a high level, as I mentioned, we have tremendous amount of our labor in unloading trailers and loading trailers in picking and put away and all the different activities. So we look at where the most labor is spent and come up with the use cases that we can automate or assist with those activities. And we have a very multifunctional team working what we internally call the left side of the funnel. How do we find new solutions? How do we work with startups and existing manufacturers, MHE providers to deliver US autonomous solutions, collaborative solutions, whatever the case may be to meet the use case. So we attend all the trade shows. We have a DHL trend, radar report where we're investigating trends in the overall industry. We talk to venture capital companies, various software companies. We have a lot of resources focused on this. And then we engage with the players that we think have the capacity and the funding and the executive team to meet our needs. And I think to date the bets that we've placed with Locus, Boston Dynamics have paid off.
Speaker 2 (12:29):
That's great. So after the new year, we're going to be at manifest conference. And you're the keynote speaker, Sally? Yes. What are you going to be talking about there?
Speaker 4 (12:39):
I'll give a recap of our digitalization strategy, mainly around the robotics side, data and ai. So a brief recap of where we are today and spend a fair bit of time on what's next, and just some highlights, introduce orchestration. And we're defining it, I think at a bit more granular level to look at optimizing multiple solutions within the four walls. So you would have large scale automation, you would have assisted picking bots, mobile sorters, how do you make that as efficient as possible along with labor? So that's the first layer of orchestration. Then you have coordinating the activities between the warehouse and transportation in between distribution centers, and then the larger orchestration, which is managing a customer supply chain from supplier through delivery to end customer. I'm looking forward to the events. It's very well attended and supply chain leaders through the industry. Looking forward to it.
Speaker 2 (13:55):
Yeah, it's a great conference and it's still early days. I think it's the third or fourth year of it. So it's great that you'll be there and we'll be able to interact with industry peers. Orchestration is sort of a buzzy term right now in the supply chain world, and I think it's going to stick around for a little bit. Scott, I wondered what it means to you. I mean, Sally said we're still defining it, but from where you sit today, how do you think about it?
Speaker 3 (14:17):
Well, I mean, everyone always talks about how you manage it end to end, but it really comes down to what is your cost per unit, your cost per car, whatever it is. And I think it's all about figuring out the movement is throughout the supply chain and how we manage that and how we get visibility to a cost per unit or a cost per case or a cost per good. And that's what we're always trying to focus on is, okay, so what tools do we have in orchestration that will deliver whether it's the end user or a customer, a cost-effective solution?
Speaker 4 (14:51):
I think it's a big opportunity for us because what we're describing is a much more complex environment than in prior years. Technology is changing so fast and for customers to do it themselves and not to outsource, they don't necessarily have the skill sets and capabilities. So this is an opportunity to outsource more of their parts of their supply chain so that they can focus on their core competency. So we see the increasing complexity driving the potential to do more orchestration of customer supply chains
Speaker 2 (15:36):
Because customers just aren't able to keep up with all of it. Correct. Yeah. Yeah. What Scott was sort of the most surprising development in the industry over the last year or so to you?
Speaker 3 (15:48):
Well, it's probably more than a year. I mean, I think the pandemic changed a lot of things in supply chain. If you go back and look at that and see what's come out of the pandemic around having more redundancy, nearshoring offshoring, all of those strategies changed and the whole inventory management piece of that. So I think that was the biggest trend that it woke up a lot of our customers around that didn't have enough nodes, didn't have enough redundancy, I think was the biggest change. And you look at this past year, going through the year in the peak season was the best year our customers have had on inventory management. It was very well managed and done a lot better than it had in the past. And those were all lessons learned through the pandemic on how to set up your inventory in the right places and have some sort of redundancy.
Speaker 2 (16:34):
Yeah. Do you think the pandemic accelerated the pace of the technology development in the industry, Sally, or was that just coincidental?
Speaker 4 (16:41):
I think it may have been coincidental. I would say in the past year, I've been surprised of the advancements in ai. AI has been around for years, but the past year has been the pace of advancements. It's almost a daily watching of what's next, and it's happened a lot faster.
Speaker 2 (17:06):
So on ai, what are some examples that you've seen recently?
Speaker 4 (17:10):
Definitely the large language models chat, GPT-3 0.5, 4.0, Google announced Gemini, and it will be a neck and neck race and more players will be entering. And I think most companies like ourselves are taking a look at what activities could be automated using these tools and how best to approach it, the change management aspect of it. I do think that gen AI will have a significant impact on the way work, not only in supply chain, but all industries.
Speaker 2 (17:53):
It's kind of a blizzard of activity. So how do you stay on top of it and how do you think we need to be organized to take the same position we have in AD with ai?
Speaker 4 (18:03):
There are two things that we focused on quickly. One was developing, identifying some impactful use cases, and the second was developing our own internal platform to protect our I customer's data and empower our associates to have access to chat GPT, because we all know if you're under a certain age, you're out there playing with it anyway. So enabling our associates to leverage the tool, and we hire 500 new college grads every year. All of them are using it in school, and so we need to have these tools to make everyone more efficient. So those are the two things that we focused on right away in terms of how we're going to be structured. We continue no different than data analytics and other AI applications. Where we are identifying use cases is having people in our business who understand our processes and understand data and how we can do things better so they can up with use case ideas. We have it do the tech setup behind it, and then they can manage the rollout deployment and adoption. So it's important to have that ownership within the business and the expertise
Speaker 2 (19:36):
At the kind of site level. Yes. Yeah. I want to ask you both your outlook for next year, but I want to do it start with you. This has been a horrible freight market this last year. Do you see volumes coming back in 24 and if so, early, late or not?
Speaker 3 (19:52):
The inventory levels were really well managed during this fourth quarter, which is the first time we've probably seen that in many years. We've been in a transportation recession. We are coming out of that, and hell, I know that is because our sister company, when you talk about ocean freight and air freight are starting to see more volume come out. So it starts with the ocean and air freight, and then it comes to the domestic freight. So we do see us coming out of that in the first quarter of next year. There is tighter inventory now, as I mentioned, because of managing inventory. So people now need to restock based off of a pretty good November, December, and we're still kind of in it the next couple of days, peak season. So we believe coming out of the first quarter, the economic slowdown will be a lot better. Good,
Speaker 2 (20:33):
Good. And Sally, what's on the horizon on your agenda?
Speaker 4 (20:37):
I would say more of what we've talked about, more products developed on the robotics front, more use cases being deployed in data analytics and AI and gen ai, and more growth in supply chain in North America.
Speaker 1 (20:56):
Good.
Speaker 2 (20:57):
Well, that sounds very exciting. Thank you very much.
Speaker 4 (21:00):
Thank you all. Thank you.
Speaker 1 (21:02):
If you enjoyed today's episode, be sure to rate us and subscribe to us on Apple Podcasts, Spotify, or wherever you get your podcasts. You can also re-Listen to our entire library of episodes on our website, dhl.com/a BNB podcast. See you next time.