Our guest on this week's episode is Jason Schenker, president of Prestige Economics & chairman of The Futurist Institute. He is a well-known economist who regularly focuses on supply chains and creates forecasts and economic outlooks for the industry. 2023 was a rough year for most aspects of the supply chain economy. Schenker shares the economic issues that caused supply chain problems during the past year and what issues will affect supply chains in 2024.
We are now past the holiday peak season and we know what that means for retailers – we’ve now moved into the returns season. This year, retailers are figuring out how to differentiate between legitimate consumer returns and those who use returns to conduct fraud.
The new year often signals a new round of industry awards and accolades. This year is no different, as many trade associations prepare to recognize industry professionals for their many achievements. The Women in Trucking Association has been out front on this issue, announcing over the past couple of weeks plans to honor women truck drivers and logistics leaders with two separate awards this spring. We provide details on how you can nominate deserving supply chain professionals.
CSCMP's Supply Chain Quarterly also offers a podcast series called Supply Chain in the Fast Lane. It is co-produced with the Council of Supply Chain Management Professionals. Go to your favorite podcast platform to subscribe and to listen to past and future episodes.
Articles and resources mentioned in this episode:
Podcast is sponsored by: Aptean
Other links
Our guest on this week's episode is Jason Schenker, president of Prestige Economics & chairman of The Futurist Institute. He is a well-known economist who regularly focuses on supply chains and creates forecasts and economic outlooks for the industry. 2023 was a rough year for most aspects of the supply chain economy. Schenker shares the economic issues that caused supply chain problems during the past year and what issues will affect supply chains in 2024.
We are now past the holiday peak season and we know what that means for retailers – we’ve now moved into the returns season. This year, retailers are figuring out how to differentiate between legitimate consumer returns and those who use returns to conduct fraud.
The new year often signals a new round of industry awards and accolades. This year is no different, as many trade associations prepare to recognize industry professionals for their many achievements. The Women in Trucking Association has been out front on this issue, announcing over the past couple of weeks plans to honor women truck drivers and logistics leaders with two separate awards this spring. We provide details on how you can nominate deserving supply chain professionals.
CSCMP's Supply Chain Quarterly also offers a podcast series called Supply Chain in the Fast Lane. It is co-produced with the Council of Supply Chain Management Professionals. Go to your favorite podcast platform to subscribe and to listen to past and future episodes.
Articles and resources mentioned in this episode:
Podcast is sponsored by: Aptean
Other links
David Maloney, Editorial Director, DC Velocity 00:00
Industry economics for 2024. 'Tis the season for retail returns. And recognizing women in supply chains.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, as we begin Season Five of the Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome. Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Aptean. Aptean is a global provider of mission-critical, industry-specific logistics and transportation management solutions. Aptean proof of delivery provides advanced transportation systems to world-leading brands, helping to transform final-mile delivery services, boost operational efficiencies, and drive business growth. Armed with the right tools, your delivery operation can be a powerful vehicle to deliver game-changing customer service and fully optimize your processes. For more information, visit Aptean.com and discover what's next now.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: 2023 was a rough year for most aspects of the supply chain economy. To find out what happened to supply chains during the year — and looking ahead to the economics of this new year — I spoke with well-known economist Jason Schenker, president of Prestige Economics and chairman of The Futurist Institute. Here's our conversation.
Welcome, Jason to Logistics Matters. Happy New Year.
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 01:41
Happy New Year. Good to talk to you, Dave.
David Maloney, Editorial Director, DC Velocity 01:44
Jason, you're with Prestige Economics and, of course, The Futurist Institute. Can you describe your work at both of those?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 01:51
Yeah, so the Futurist Institute is focused on long-term trends, looking at disruptive technologies and other factors that can impact businesses in the long run, and Prestige Economics is a financial market research firm that focuses on the 24- to 36-month window for forecasts around commodities, currencies, interest rates, macroeconomic policy, Fed decisions, GDP, stuff like that.
David Maloney, Editorial Director, DC Velocity 02:18
So Jason, we just wrapped up 2023, and it was a tough year for supply chain companies, including logistics firms and material handling suppliers that we, of course, write about. What were some of the factors that made it a difficult environment for these companies to operate?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 02:35
Well, I think there were a few things going on here, Dave. First and foremost, you've got a rise in capex and opex costs, right? So, you've had high interest rates, which erode margin. You've also had a tight labor market driving up labor costs, and of course, you've had material costs [that] have still been elevated; inflation, it's still been high. So, those factors really just kind of nipping away at the profit margins for businesses in the sector. And of course, we also have seen in some of the data, the proprietary data that we produce for MHI, the MHI Business Activity Index, we've seen new orders data have been not nearly as positive as in the past. We've seen a number of months where they were weak. But shipments remain positive, as we saw backlog kind of burning off unfilled orders and inventories finally getting shipped out the door. But that reduction in new orders is something we'll have to keep an eye on, especially in a high-interest-rate — relatively high-interest-rate environment for a little while.
David Maloney, Editorial Director, DC Velocity 03:36
Yeah, and of course, those rates are still very high. High inflation. How much did that affect any kind of new investments in new technologies, which drives a lot of our industry in supply chain operations?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 03:47
Well, I think there are big investments still happening on the technology side. Anything that can boost productivity, that has still seen, I think, tremendous investments. And of course, a lot of businesses in the space — logistics, supply chain material handling — you know, if you need equipment, some of those order times are still quite long because of the backlog that had built up so significantly in 2021 and 2020, and even parts of 2022. They've only really started easing in the past year. So, those things still represent challenges for many companies in the space.
David Maloney, Editorial Director, DC Velocity 04:30
And of course, we've had very low unemployment the last couple of years, and that remained throughout 2023, even though it was a challenging environment. How much has that affected our industry as far as being able to find warehouse workers, drivers for our trucks, and those kinds of positions?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 04:47
Oh, that's been the real bugaboo for the industry, and that's why there's still been such a big interest in automated solutions and technologies that can help the productivity levers across logistics and supply chain. I mean, if you look at some of the most recent data we've had out there — which, you know, unfortunately, doesn't go as far back as we'd like — but, you know, we see that even for the month of October 2023, there were something like 1.2 million open jobs in trade, transportation, utilities. And if we dig in a little bit deeper on that, wholesale trade in the U.S. are over 207, there were 207,000 open jobs; transportation, warehousing, utilities, there were 488,000 open jobs. That's a lot, right? And even though the labor market slowed from 2022 to 2023, transportation, warehousing, and utilities didn't go down that much in that whole year, right? [There] were 491,000 open jobs in October 2022, and that falls only 3,000 jobs in an entire year, down to 488,000. In other words, the reason I'm bringing this up is because the competition for labor is really, really tough, right? You've got less than 2 million people collecting unemployment, and as of October, you had over 8.7 million open jobs. So, you've got a lot more open jobs than there are people, and that's been true throughout all of 2023. And looking forward, that's just such a big spread, such a big difference between how many jobs need to be filled in warehousing. But in other sectors, in manufacturing, right, there were 487,000 open manufacturing jobs in October 2023. That's still almost double the number of manufacturing jobs that were open before the Great Recession of '07, right, when it was closer to 300,000. And, you know, you've just got a lot of open jobs, and that has made it highly competitive for employers in material handling, logistics, supply chain industries. They're competing, not just with each other, but with other sectors in a labor market that doesn't have enough workers and has, you know, we could take the 8.7 million, round it up, and just say there are gazillions of open jobs. And that's why it's been so tough, really, for profit margins, for operation continuity, for business planning on so many levels for businesses in these sectors. And it's likely to remain a challenge still in the year ahead as we see there's still likely to be this hangover and backlog of open jobs still left over from 2020, 2021, and 2022.
David Maloney, Editorial Director, DC Velocity 07:46
Will that place a lot of pressure on raising salaries of those employees?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 07:51
Well, it's definitely a seller's market if you're labor right now, right? That definitely drove up salaries in 2023, and it gave a lot of unions and other organized labor opportunities to push for increases in wages, right? We saw it with the auto manufacturers, we saw it in healthcare, we've seen it across industries. And we could continue to see that if the unemployment rate remains low and the number of people collecting unemployment remains low and the number of open jobs remain high, right, you don't need to run an economic research firm to know if demand exceeds supply, then price goes up. And that means we could continue to see some labor price pressures, and further increases in wages in the year ahead.
David Maloney, Editorial Director, DC Velocity 08:39
Well, as we've mentioned, we're — we've just finished 2023. Kind of happy to see it go, because it was a difficult year in our industry. Let's look ahead at 2024. Do we think that we'll be able to achieve that soft economic landing that people are hoping for?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 08:53
Well, that's the hope right? At the end of the day, the good news is that about 70% of GDP is driven by people buying stuff. It's driven by consumption, and people with jobs who are making more money than they've ever made, are out there spending. So, that's the good news, right? Because we have, like — it's a double-edged sword with this labor force deal, because, while we have a really tight labor market, that's, you know, really competitive for employers, erodes profit margins, and that's an issue. On the upside, by driving up wages and having full employment in the economy, you've got people out there making money, spending money, and that drives consumption, and that drives GDP. So, that's the good news, as well as, for companies and corporate profits, part of the bad news, right? So, it's really a mixed bag, but trust me, we would rather be in an economy with a tight labor market that's growing, rather than an economy where, oh, suddenly it's easy to hire people, but there's no business, because we're in a recession. because so many people don't have jobs. So, this is the much more preferred scenario at a macro level, right? If I were to take a poll of any number of companies working in supply chain and logistics and I said, "Hey, would you rather struggle to maintain your profit margin, but still have lots and lots of business? Or would you rather have no business, but suddenly it's cheaper to hire people, but since you have less business, you know, you don't need the workers really anyway. Right?" So, trust me, most employers I talk to, most businesses would much rather be in a situation where we have a solid economy, solid growth, strong consumption, and, yeah, labor's become pricier and it's challenging to get high-quality people, but at least there's business to be done and a reason to hire.
David Maloney, Editorial Director, DC Velocity 10:50
Jason, [that] all sounds very hopeful. So, what are the prospects for our industry, for supply chains in 2024?
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 10:59
Well, I think we're going to see more geopolitical risk, and then we started to see that throughout. I mean, we've seen this for a number of years, as we see Cold War Two continuing to devolve, and the trade tensions, which have spilled over into regional proxy wars between the United States and China, and their associated groups of allied countries. You know, we're beginning to see Cold War Two really come to fruition in a way that proxy wars are likely to proliferate. We see this interfering with trade. We began to see that happen in the Red Sea, interfering with what's going on in the Suez Canal and the ability to use that for safe transit. We've got other supply chain issues or challenges in the Panama Canal, as well, that have cropped up in the latter part of 2023. You know, as we're looking ahead to this 2024 we're in now, I think there's still reason to keep our eye on these supply chain bottleneck risks. And of course, the Russian war on Ukraine isn't over, and that presents all kinds of commodity risks. And that's, by the way, a lot of what engendered significantly high inflation. So, that risk hasn't gone away. And of course, the geopolitical tensions in the Middle East present real risks to oil prices, if we were to see a broadening of the conflict that Israel has been waging against Hamas since Hamas broke that ceasefire on October 7th of 2023 and invaded Israel. So, you know, following these two conflicts —which we could see more conflicts proliferate globally, right, that presents risks of various stripes to supply chain industries, not just from a sourcing standpoint, but even from a transit standpoint. So, I think geopolitics is going to be front and center as both an inflation and a cost risk, as well as a security-of-supply risk.
David Maloney, Editorial Director, DC Velocity 13:12
It does sound like there are a lot of risks that we're about to face, but I think supply chains have gotten to be more resilient over the last couple years, and hopefully some of that will bear some fruit in 2024.
Jason Schenker, President, Prestige Economics; Chairman, The Futurist Institute 13:23
I think we have seen some improvements of resiliency, but the level of risk that we're facing on a global basis is truly significant. I'd say for a largely U.S. and North American audience, which I assume is the DC Velocity audience, you know, we're in a blissful situation economically compared to the situation in China, where their economy's been weak and there are some major systemic problems, or in Europe, where the Russian war in Ukraine has had significant impacts and there have been some significant weaknesses. So the U.S. economy is in a charmed position economically, as we're projecting out how the rest of the years going to be, even if our growth slows; even if job gains slow; even as inflation falls, the potential for lower interest rates increases, right? Those things are all, they look increasingly likely, but even though we see some slower growth or some slower job gains, we don't see a collapse, and part of the reason is that massive backlog of open jobs we've got across sectors, and because that is what's fueling those jobs, those wages, those are fueling the economic growth. So, we're in a better spot than most economies, but for globally active businesses, securing your supply chain and being aware of how geopolitical risks — both from a material-cost and from a security-of-supply standpoint could reverberate across your cost structure — that's going to be absolutely critical. Good advice, and you always have some great insights, and we thank you for your time. Our guest today has been Jason Schenker, the president of Prestige Economics and chairman of The Futurist Institute. Jason, thank you again for being with us, and have a happy new year. Thank you, Dave. Wishing you and all your listeners [the] best year ever in 2024.
David Maloney, Editorial Director, DC Velocity 15:26
Thank you. Let's hope for that. Now let's take a look at some of the other supply chain news from the week. And Ben, we're now past the holiday peak season, and we know what that means for retailers: We've now passed into the return season. Can you tell us how the industry is preparing for the challenge of the many returns they're facing?
Ben Ames, Senior News Editor, DC Velocity 15:46
Yeah, I'm glad to Dave. We're talking here about reverse logistics, and that's an expensive procedure for most companies, because distribution centers are generally designed to store bulk goods and ship them out, not to receive thousands of packages coming back in the door. But as the ratio of e-commerce to brick-and-mortar shopping continues to rise, retailers are seeing more and more returns. We recently heard some preliminary numbers from the National Retail Federation, or NRF, showing that U.S. retailers actually seem to have chipped away at the total return rate this year, from about 17% of total returns — that's online and in store — the past couple of years, down to about 14 and a half percent in 2023. That part's good news. But NRF also said that the portion of those returns that's due to fraud and abuse has continued to grow. One reason is that e-commerce just makes things complicated. That 14-and-a-half-percent return rate includes almost 18% for online sales, but just 10% for pure brick-and-mortar returns. So, you can see there's a real difference there. In terms of the fraud and abuse, NRF says that happens because in their survey of retailers in their organization, nearly half of those retailers say that they've seen returns of used nondefective merchandise — that's something called "wardrobing," where people might order something, wear it once, and then return it. 44% — just under that — cited the return of shoplifting, or stolen merchandise, when people shoplift something and then return it for money. Over a third said they had seen returns of merchandise that was purchased on fraudulent or stolen tender — we're talking about stolen credit cards. And about a fifth said that they had experienced return fraud from what's called "organized retail crime groups." Now, all those numbers are kind of hard to substantiate. For example, NRF itself just last month had retracted its own study on organized retail crime. Those estimated numbers were too high. And also, the statistics that I cited earlier include, as I said, wardrobing, when the shopper buys an expensive item, maybe wears it once and returns it, and also "bracketing," when consumers buy multiple units of similar items, maybe different sizes or colors, to see which one they like better, and return the rest. So, neither of those things is actually illegal. Those are just kind of common practices that retailers offer to try to please customers and ensure their shoppers' loyalty.
David Maloney, Editorial Director, DC Velocity 18:33
Ben, it sounds like retailers are trying to walk a fine line between keeping shoppers happy and letting them get away with fraud.
Ben Ames, Senior News Editor, DC Velocity 18:42
That's exactly their challenge, yeah. NRF actually said that some of those retailers are now trying to push back on that challenge, narrow the funnel a little bit. They're testing some in-store policy changes. They're trying to limit the flexibility of those online returns, you know, make that a little bit of, less of a thin line to walk. For example, last year — in 2022, excuse me — retailers allowed 22% of returns to be accepted without a receipt. But in 2023, that number dropped by about half. However, in return, more shoppers are now committing fraud by using counterfeit digital receipts, or by asking for store credit to compensate them for an online order that they made that they claim was never delivered or was delivered damaged. So, you know, it's a complicated thing. As I said earlier, e-commerce makes things tougher to track and to control. So, it looks like this struggle is just going to continue in 2024.
David Maloney, Editorial Director, DC Velocity 19:42
Right, there appears to be no easy answers, I guess, as long as you have some people who choose to be dishonest.
Ben Ames, Senior News Editor, DC Velocity 19:49
It's the truth. It's usually a couple bad apples out there, isn't it.
David Maloney, Editorial Director, DC Velocity 19:52
Right. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 19:54
Glad to.
David Maloney, Editorial Director, DC Velocity 19:55
And Victoria, you wrote this week about an annual recognition program that honors women working in supply chains. Can you share the details?
Victoria Kickham, Senior Editor, DC Velocity 20:04
Absolutely, Dave happy to. So, yeah, it's a new year, and that often signals a new round of industry awards and accolades, and this year is no different, as many trade associations prepare to recognize industry professionals for their many achievements. The Women In Trucking Association has been out front on this issue, announcing over the past couple of weeks plans to honor women truck drivers and logistics leaders with two separate awards this spring. Women In Trucking is seeking nominations for the 2024 Women In Trucking Driver of the Year Award, which is sponsored by Walmart, as well as the 2024 Distinguished Woman in Logistics Award, which is given in conjunction with freight-management company Truckstop and the Transportation Intermediaries Association, another industry group. Nomination deadlines for both honors are coming up in the next few weeks. And just to give our listeners a little background, we've spoken about them before, but Women In Trucking is a nonprofit association that was founded, and I'm quoting from their mission, "to encourage the employment of women in the trucking industry, promote their accomplishments, and minimize obstacles faced by women working in trucking." We've talked quite a bit here on the podcast about the need to recruit more people to work in trucking in general, and Women in Trucking is one group that has been dedicated to that cause for more than 10 years.
David Maloney, Editorial Director, DC Velocity 21:29
Yeah, you're right. They're a great organization. So what are the details and the deadlines for the awards?
Victoria Kickham, Senior Editor, DC Velocity 21:35
Great question. So, the Driver of the Year Award, which is the first one I mentioned, recognizes — and again, I'm quoting — "exceptional female professional drivers who lead the industry in safety standards while actively working to enhance the public image of the trucking industry." The application is open to any female driver who has demonstrated safety on the road and a positive contribution to the trucking industry and their community. The nominations for that are due January 29 — so, coming up pretty quick. Finalists and the overall winner will be recognized during the Mid-America Trucking Show, which will be held in Louisville, Kentucky, March 22. The second award I mentioned, the Distinguished Woman in Logistics Award, recognizes exceptional individuals for their achievements and leadership in logistics. That one's open to women professionals in any field related to logistics, and that includes supply chain management, third-party logistics, and trucking. The award is given annually during the Transportation Intermediar[ies] Association's Capital Ideas Conference and Exhibition, which will be held April 10th to 13th in Phoenix. Nominations for this award are due by February 12 — so, a little bit longer to get those in. Details and nomination forms can be found at WomenInTrucking.org, and our listeners can also find direct links in the story that I wrote on this, which is posted to DCvelocity.com.
David Maloney, Editorial Director, DC Velocity 23:00
Okay, great. That's WomenInTrucking.org, and hopefully our listeners will go there to make their nominations.
Victoria Kickham, Senior Editor, DC Velocity 23:02
That sounds great, yep.
David Maloney, Editorial Director, DC Velocity 23:02
Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 23:03
You're welcome.
David Maloney, Editorial Director, DC Velocity 23:04
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories, and also check out the podcast Notes section for some direct links to read more about the topics that we discussed today.
And we'd like to thank Jason Schenker of Prestige Economics for being our guest. We welcome your comments on this topic and our other stories. You can email us a podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded on Fridays.
And a reminder the Logistics Matters is sponsored by Aptean. Forged from decades of industry experience, Aptean proof of delivery supports global delivery fulfillment operations with the tools they need to increase efficiencies, gain real-time visibility, automate communications, and enhance the delivery experience for customers. Your delivery operation can be a powerful vehicle to deliver game-changing customer service, reduce costs, and drive growth. Aptean proof of delivery can help. Visit Aptean.com and discover how now.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.