July 18, 2024 • 38 mins
For our July episode, co-hosts Ted Stank and Tom Goldsby speak with Dave Clark, former CEO of worldwide consumer business for Amazon.
In two decades at Amazon, Clark, a graduate of UT’s MBA program, helped build one of the most extensive supply chain operations in the world, with hundreds of fulfillment centers and transportation facilities, a fleet of several dozen dedicated aircraft, 100,000 delivery vans, and more than 1.5 million employees. Clark is a member of the American Red Cross Board of Governors and served as CEO of Flexport from 2022 to 2023. He is regularly sought out for his expertise in tackling logistics issues related to national security and global affairs.
Don’t miss this exciting discussion on the evolution of Amazon’s consumer business as well as current warehousing trends, the state of the economy, retail consumer habits and expectations, and much more.
The episode was recorded virtually on July 8, 2024.
Related links:
- How consumer demands drive warehousing trends
- Ocean freight rates are spiking again
- Inflation continues to slow in the U.S. opening door to Fed rate cut
- U.S. labor market adds 206,000 jobs, unemployment rises to 4.1%
- Amazon plans to launch discount store to fend off Temu and Shein
- Gartner ranks UT’s graduate SCM programs No. 1 in North America
- Read/watch Dave Clark’s fireside chat at UT’s Haslam College in April
- Become a Supply Chain Forum member
- Subscribe to GSCI’s monthly newsletter
- Read the latest news and insights from GSCI
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Introduction (00:00):
Welcome to the Tennessee on Supply Chain
Management podcast.
Listen in as co-hosts Ted Stankand Tom Goldsby set sail into
the world of end-to-end supplychain management, diving deep
into today's most relevantbusiness topics.
They'll share insights inpressing industry issues and
tackle the challenges keepingsupply chain professionals up at
night.
If you're enjoying the ride,download and subscribe to
(00:22):
Tennessee on Supply ChainManagement on your favorite
podcast platform now.
Tom Goldsby (00:28):
Hello and welcome to another edition of Tennessee
on Supply Chain Management,coming to you from Rocky Top,
knoxville, tennessee, the campusof the University of Tennessee,
tom Goldsby, here pleased to bejoined by my good friend,
colleague and collaborator, drTed Stank.
Hey, ted, how you doing.
Ted Stank (00:44):
Hey Thomas, how you doing man Good to be with you.
Tom Goldsby (00:47):
You know we're coming off the July 4 holiday.
You know a lot of peopleconsider that like the beginning
of summer, but really it's likethe middle of summer for those
of us in academia.
So I'm starting to get a littlebit nervous that we're on the
far side of summer.
I got to get the syllabus ready.
How about you?
Ted Stank (01:02):
Yeah, I'm actually teaching an online class this
summer, so this is about halfwaythrough that course.
So, yeah, we're pushing throughthe end of summer.
I think people that say that4th of July is the beginning of
summer must be people who livein like Saskatchewan or
something where the waters arefinally getting to be warm
enough to dip a toe into orsomething.
Tom Goldsby (01:21):
You're right.
But yeah, I get a little bitnervous when the calendar turns
to July because you know Augustis close at hand.
But hey, we do have some reallyexciting news to share with the
audience.
Every two years, gartner, thesupply chain consultants, the
advisory group out ofConnecticut they do rankings of
(01:41):
supply chain companies, for sure, every year, but every two
years they unveil rankings ofsupply chain programs in North
America.
And hey, ted you up for thetask of sharing with our
audience how we did.
Ted Stank (01:54):
Absolutely.
You know you always hold yourbreath when these come out
because if you all remember whenwe didn't have a college
football playoff and media votedfor the number one team, this
is kind of like that.
But for the second ranking in arow, we were number one in
North American graduate programsand number two in undergraduate
programs.
Cue the applause.
(02:14):
Yeah, so we've been in the topthree the last several times.
Tom Goldsby (02:19):
That's right, and you know our friends down in
northwest Arkansas continue tohold number one spot, which just
keeps us hungry, Right?
You know they came in numbertwo in graduate programs, so I
feel like we're in good company,certainly in that list.
Ted Stank (02:35):
Absolutely.
I had a dean one time say thatrankings matter to the degree of
the company you keep who'saround you.
There you go.
Tom Goldsby (02:43):
We're in good company.
So congratulations certainly toour team for coming out on top
Number one graduate, number twoundergraduate program, and also
to those other programsrecognized in the top 25.
We've got a lot of good friendsout there who are competing and
providing us with some good,stiff competition.
But hey, let's jump into somenews and notes just to kick
(03:05):
things off, because we're reallyexcited to have a special guest
with us in Mr Dave Clark, andwe'll bring Dave into the
conversation in a bit, althoughhe did threaten to maybe
interrupt us during this openingsegment, which would be really
cool.
I don't know if anyone's everjumped in midstream, but let's
break the ice with somethingthat's been actually probably
near and dear to Dave'sexperiences at Amazon, which is
(03:29):
the US warehouse worker count.
I'm always keen to point outthat the number of warehouse
workers we had working in theUnited States more than doubled
from 2010 to 2020 and approachednearly 2 million, I think, last
year, but it seems like maybeit's kind of peaked or leveled
off and, in fact, maybe thedemand for warehouse workers is
(03:53):
leveling off.
Do you make much of that news,ted?
Ted Stank (03:56):
Yeah, I was noting from the jobs report last week
that warehouse jobs, I think,are down about 170,000 from the
peak in May of 22.
I mean, I think it's areflection of, you know, general
cooling off in the economy.
You saw what our GDP was firstquarter.
When people are buying lessstuff, then we don't need as
(04:16):
much stuff being shipped tostores or people's homes.
So of course we're going tohave some softening in that
market, but that was a red hotmarket.
That couldn't have continuedthat way.
It wasn't too long ago thatcompanies were offering like
crazy bonuses for people to comeand workers were working for
two months and then quitting andgo and taking another job with
another bonus.
Tom Goldsby (04:40):
You know I mean more power to them 50% from
pre-pandemic rates in thatsector to where the hourly wage
is about $24 an hour now up 8%just in the last few years and,
as you pointed out, signingbonuses and just all kinds of
accoutrements to kind of drawthat supply.
(05:00):
And a lot of that is attributedto the growth in e-commerce
which is still going strong.
It's about 16% of all retail inthe United States.
Surpassed a trillion dollars ofspend in the US last year.
But certainly the rate ofgrowth is leveling off.
But we always kind of makereference to that old notion of
it takes a lot more hands tomove each than it does pallets.
(05:22):
It takes about twice the numberof hands and also about three
times as much space once youbreak down that pallet.
So that all kind of explainedwhy we saw such a surge.
But it's interesting to seeit's cooling off a little bit
now.
Ted Stank (05:35):
I mean, I just feel like all these signs are
indications that we're gettingback to a kind of a steady state
after the pandemic.
Tom Goldsby (05:42):
Yeah, fair enough.
Well, hey, something that isalso on the march though ocean
rates, and this is kind ofinteresting because it's a
little bit early in the seasonto be seeing this kind of surge
in ocean container rates.
I was looking at the DruryComposite World Index, which is
kind of the sum of all thefreight flowing around the
(06:04):
world's oceans, and it was about$2,800 to move a 40-foot
container as an average abouttwo months ago, and that's now
$5,900.
And just increased 10% weekover week.
Now that's nowhere near wherewe were, like September 2021,
when we were talking about the$10,000 container, but it's
(06:25):
still about 4x where we werepre-pandemic.
We're getting close.
Ted Stank (06:29):
Shanghai, la, the end of last week was 7,000 or just
over 7,000.
Shanghai, new York, was justover 8,000.
So yeah, it's doubled sinceJanuary.
And there's just a lot thereTalking about steady state.
I think, well, that's an areathat there's not a steady state.
There's a lot of uncertaintyabout what the holiday season is
going to be, what kind ofcapacity is available.
(06:50):
You know, one of the things Ilove I hope I don't piss off any
ocean carrier folks but I lovethe word blank or the phrase
blank sailing.
How would you feel if you werein an airport and they came out
and they said, oh, your flightisn't going to take off, it's
been blanked.
It's like, what does that mean?
Does that mean canceled?
Yes, you know.
I mean the number of blanksailings is way up.
(07:10):
You know what's still happeningin the Red Sea is adding a lot
of time an average of about twoweeks time of sailings eastbound
from Asia Pacific, which ofcourse increases fuel prices and
ties up capacity.
So you know, there's just allkinds of wrinkles that are going
on there and as we approachholiday season, I think people
(07:31):
are willing to pay the bucks tolock in capacity and that's
what's driving things up.
Tom Goldsby (07:40):
Well, by its very nature, ocean freight involves
the globe right, and that thenbrings in geopolitics and
vagaries happening all aroundthe world Right, and that then
brings in geopolitics andvagaries happening all around
the world.
And, as you point out, you know,red Sea crises and Houthi
attacks are still very much inthe picture, which calls for
longer lead times.
You point out longer sailingsand more capacity being
introduced, and you know there'salso some suggestion that folks
are trying to get ahead.
We just talked about, you know,warehousing kind of cooling off
(08:02):
.
Just talked about you know,warehousing kind of cooling off.
Maybe there's some warehousespace and it's okay to kind of
front end load those warehousesmaybe a little bit sooner than
they might traditionally.
And then we still got theissues with the East Coast Gulf
Coast negotiations and you knowwe're just now about two months
out, two and a half months out,from that agreement expiring and
(08:22):
it looks like the East Coastworkers are certainly going for
the same sort of bump that theWest Coast workers sealed late
last year.
So I do pick up that some ofthe market share gains that the
East and Gulf Coast ports pickedup in the last few years might
be shifting back a little bit tothe West Coast to avoid some of
those uncertainties.
Dave Clark (08:43):
Well, you guys are stressing me out having to be
quiet in this whole warehouseand ocean rage conversation.
It's killing me over here.
Ted Stank (08:51):
Dave Clark is our guest.
Dave does not need anintroduction, but I'm going to
do a quick one.
Dave's former CEO of Amazon,1999 graduate of Tennessee's MBA
program.
He had many leadership jobs atAmazon, over 20 years,
ultimately leading Amazon'sconsumer business and for a long
time led their global supplychain operations and technology
group.
(09:12):
During his tenure at Amazon, hebuilt one of the planet's most
extensive supply chainoperations, with hundreds of
fulfillment centers andtransportation facilities, a
fleet of 80 plus aircraft, ahuge army of delivery vans
including probably being a firstmover on electric vans and a
group of over 2 millionemployees and contractors.
Dave's a member of the AmericanRed Cross Board of Governors, a
(09:34):
longtime advocate of the RedCross.
He's also got a bachelor'sdegree in music education from
Auburn One of those programsthat's in that top 25 with
Gartner and we have some goodfriends down there and again his
MBA from UT.
Dave, welcome, sorry, you knowwhat?
We should never keep a guestlike you.
Dave Clark (09:51):
I mean it really is.
I mean you should leave inthere.
I'm impatient and have a hardtime shutting up.
Ted Stank (09:56):
So, dave, stand there at the plate.
Let me toss you this softball.
What do you think's going on?
What's your take on some ofthis stuff?
Dave Clark (10:04):
Part of it, I think, the warehousing.
So the BLS numbers and the waythey track it don't really
capture all the categoriesanymore.
Right, there's way more than 2million people operating in the
e-commerce fulfillment andgeneral warehousing space, I
think, just in Amazon alone.
I don't know how many they havetoday, but probably half that
number floating around somewherein that space.
It kind of depends how youcount it.
(10:24):
I a day, but probably half thatnumber floating around
somewhere in that space.
It kind of depends how youcount it.
I agree with you, though.
I mean I think the economy issort of settling down a bit.
The inflation piece has tocatch up at some point.
Credit card spending going up.
I'm personally an optimist.
I think it's going to be a goodholiday season.
I think deals are still big forpeople.
Some of the ocean traffic overthe last couple of months has
been.
A lot of people have the summersale now driven by Prime Day
deals going on.
(10:44):
You see Target following that,walmart, a lot of other people
copying that too, and so thatsurge is a bunch of retail in.
But I think the economy isstill in real good shape.
But it's leveling out to yourpoint.
I don't think it's on fireanymore.
But all the deal seasons, Iwould expect to be quite good
this year.
Tom Goldsby (11:00):
Yeah, you're right.
Ordinarily in retail this is aquiet time, but Amazon really
changed all that.
Prime Basin said, hey, allright, let's pick it up and, as
you point out, others havefollowed suit, and those were
peak days.
Can you share with us a littlebit about what it was like to
kind of feed that beast to solvethe needs that before they were
even obvious to us?
(11:21):
I refer to the Americanconsumer, particularly the
online consumers, beingdiabolical and so demanding in
every aspect of the customerexperience.
But I've got to admit, amazoncreated the beast that is the
diabolical consumer.
Folks like Ted and me here thatyou know wanted an incredible
assortment of products atcompetitive prices.
(11:43):
We wanted to be able to trackour order from the minute we
submitted the order until itarrived at the door.
We wanted to have theopportunity to question things
and to return it without hassle.
All that.
Dave Clark (11:56):
Well, nobody ever wants less selection at higher
prices and slower delivery.
The consumer has always beendiabolical.
That's not new.
Just maybe what's new is peopleare actually meeting the
consumer needs, are working muchmore aggressively to meet
consumer needs.
I think that was one of thetruly special things about
(12:17):
Amazon was it is customer firstin the approach to the way the
business goes and everything'soptimized around.
How do you give customers moreselection, lower prices, better
delivery, putting conveniencedeeper and deeper into what they
do?
And it's not just an Amazonthing.
What you've seen in the lastdecade or decade and a half of
retail is retailers who have metthose needs and who have
(12:42):
invested in and improved thecustomer experience have
succeeded and excelled, and theones who haven't have gone away.
And so retail hasn't gottensmaller and e-commerce certainly
hasn't eaten all of retail.
But retail is consolidatinginto the players who are really
aggressive about meetingconsumer need.
(13:03):
Walmart is a fantastic meter ofconsumer needs and they do it
more offline than online, but itis a phenomenal retailer and so
they continue to thrive.
The same thing what happenedwith Jolly and Best Buy over a
decade in there, of convertingthat into a new experience and
something that met consumerneeds in a different way for
(13:25):
electronics than what they couldfind in most other venues, and
so I think the unique aspect ofAmazon and the specialness of
Amazon was really just that.
It said consumers, to use yourword, diabolical.
But they are never satisfiedand you need to wake up every
day trying to invent a new wayto meet their needs.
(13:46):
That's why it'scustomer-focused versus
competitor-focused, because thecustomer is always going to be
tougher than the competitor.
Always.
They always want more than whatsome competitor is going to be
willing to provide, and usuallyif a competitor has beaten you
on something, it's because theyfigured out something the
consumer wanted that you didn't.
That's really the reason tolook at competitors is to make
sure you didn't miss some vectorof customer need.
(14:08):
I'm shocked today I still getinto these conversations with
CEOs and board members at somecompanies that want to debate
whether or not customers reallywant faster delivery and whether
that really sells more goods,and I feel like debating is the
earth round, like debating isthe earth round.
Tom Goldsby (14:24):
Now, dave, just as you say that you know Amazon's
made news in the last few weeksfor again innovating with the
consumer but also trying to keepup with competition, namely the
Chinese suppliers Xian Taimou,ali and these folks that are
selling direct into the US, andI guess what Amazon announced is
(14:47):
that Chinese vendors can bypassthe FBA fulfilled by Amazon
service and get inducted directinto the delivery network, and
there we're talking like sevento like 12 days delivery, as we
see this pivot from kind of fastfashion to what they're calling
on-demand fashion.
You know what's hot andhappening on TikTok is getting
(15:10):
into production, maybe you know,later today, and then delivered
to the US for again maybe10-day delivery.
What's your kind of reaction towhat you're seeing there in
terms of a little bit of a shift, at least in that maybe that
younger segment, the TikTokersout there that are willing to
maybe wait a little bit longerto get maybe the absolute
(15:32):
hottest item out there?
Dave Clark (15:34):
You know I think I'd redefine it slightly which is
for fast fashion, it's notwaiting longer.
It's actually the contrary,which is you're creating
visibility for the product atthe point of manufacture.
Right, this is the classic.
Go back to the early days ofjust-in-time or make-on-demand
(15:54):
for apparel.
Somebody comes up with a designidea, they surface that to
customers immediately.
Customers give a buy signal andthen they produce.
It is less in that supply chainthan it would be for
(16:16):
manufacturing that item,delivering that item to a
fulfillment or distributioncenter of a retailer in country,
and then listing that item andthen delivering it, and so just
most of that supply chain isinvisible to the customer.
They're unaware that they'rewaiting.
Ted Stank (16:27):
Right.
Dave Clark (16:28):
And so you just made it visible.
So they're aware now thatthey're waiting, but they have
no path to get it faster.
I think those are reallyinteresting and it's probably an
important piece of the businessto be connected to,
particularly in fast fashion,but it's still a sliver of the
business.
I think when you talk about Xiand Teemu and Wish had the same
(16:49):
problem, or Wish had the samekind of concept, but it wasn't
just fast fashion.
I think people are not aswilling broadly to wait for
things that are readilyavailable.
They are willing to have alonger shipping time for
something that is new and uniqueand not readily available.
That's a selection expansion.
Ted Stank (17:10):
And Dave correct me if I'm wrong, but the typical
marketplace lead time was about10 to 14 days, right, if you
ordered from Amazon Marketplacewhen it flowed.
Dave Clark (17:18):
If you're a, seller and it's not an FBA.
That ranges but yeah, I thinkmemory serves it's in that sort
of seven to 10 days for a lot ofsellers.
Amazon can leverage theirlogistics platform to be likely
faster on that arrival deliveryinto the US than perhaps she and
her team who could be on that.
If they try to use the sort ofde minimis work it's a little
(17:41):
bit different deal.
You know you don't get quite asmuch the combinatorial benefit
out of it.
Ted Stank (17:47):
Well, hey, let's pivot to some bigger, broader
issues.
Okay, we could talk to you allday about this stuff, but I also
, since we have you here, wouldlove to have many, many
discussions with you over theyears about things that are
going on in the broader worldthat impact us in business and
impact us in supply chain.
Would love to get your take onsome of this.
So let's start with the turmoilthat we're in with the 2024
(18:10):
presidential election.
I mean, so many things aregoing to be predicated on who
wins in November.
What's your take on?
I'm not asking you to pick awinner or anything like that,
but what's your take on where weare in terms of the choice and
how this is going to impactbusiness come 2025?
Dave Clark (18:26):
Well, if I just take it from a business standpoint,
I think the status quocontinuing to sort of divided
government or you have analigned government.
It's either going to be statusquo in the sense that you have a
Democratic president and Ithink the Republicans keep House
and Senate one or the other.
You end up divided governmentand things are fine for business
(18:48):
.
The only real chance I thinkyou have at a unified government
would be is if you have aRepublican president and the
Republicans take House andSenate, which is the way things
are.
Tracking is certainly a realpossibility, in which case I
think a relatively high numberof things that are priorities on
the business front have a paththrough legislation and to make
(19:10):
it into the legislative agenda,through legislation and to make
it into the legislative agenda.
So, from a business standpoint,I think worst case is basically
status quo and best case issome form of more
business-friendly approach tothe legislative agenda over the
next couple of years.
I don't actually, from abusiness standpoint, don't see a
particularly negative outcome,no matter how you slice it from
(19:32):
what could happen withlegislation negative outcome, no
matter how you slice it fromwhat could happen with
legislation.
Ted Stank (19:38):
Both parties have talked pretty strongly about
tariffs that will probably heatup after the election,
particularly tariffs on productcoming from China.
What's your take on the impactof those?
Dave Clark (19:44):
I'm certainly a free trade oriented kind of person.
My bias is towards free trademakes things better for the
world and has lifted millions ofpeople out of poverty.
I do think former PresidentTrump's tariff approach is more
negotiation-based than it isactually tariffs per se stances.
(20:15):
Then you often don't get veryfavorable terms, and so if you
want to negotiate something withChina, that is a more equalized
win for both kind of scenario,because I do believe China
having growth is important froma US defense initiative as well.
A failing China is not good foranyone.
So I think it needs to bewin-win.
But I think to get to win-winprobably requires some fairly
(20:36):
punitive-oriented negotiationtactics.
I would say so.
I tend to think it's morenegotiation tactic than anything
else, but we'll see.
That's just my opinion.
Ted Stank (20:47):
Yeah, interesting Tom .
What else are you going tothrow at them?
Tom Goldsby (20:50):
Well, you know, something I'm always keen to
pick up is what took day onefrom being a music education
major at Auburn to pursuing anMBA at the University of
Tennessee and then going to workfor this outfit that.
I have to admit.
I've been an Amazon membersince 1997, I think, when I was
(21:14):
buying books and CDs becausethat's all Amazon sold at the
time as a big connoisseur ofbooks and CDs.
But I'm just kind of curiousabout Dave's journey, if you'd
be willing to share that withour listeners about what took
him from music education and Ido believe that you practiced
that for a short time beforepursuing the MBA.
(21:34):
Can you take us back to thosedays, dave?
Dave Clark (21:36):
Yeah, I taught school for a year.
Let's just say I was not theworld's most motivated student
over my academic career for alot of different reasons, but
was much more interested inworking most of my time in high
school and college and learnedto drive on a forklift.
My parents owned a carpet storewhen I was growing up, and so
I'm going to come by the supplychain bug, naturally a little
(21:56):
bit.
And I really love teaching,though.
I really love working withpeople.
I love teaching and it wasreally that I was a great
musician, but I really enjoyedbeing in band and being with a
group of people and workingtogether to achieve an outcome
as part of a group, but I foundthat very satisfying.
What I didn't find satisfyingwas the $20,500 that was my
(22:16):
annual paycheck when I was ateacher.
Everything else about being ateacher was fantastic, other
than I really thought it wasgoing to be sort of the same
type of experience over the nexthowever many years and, as Ted
knows well, I get bored easilyand have trouble sitting still.
But I wanted to do somethingthat had a lot of diversity to
it and I had a family friendthat suggested Tennessee.
(22:37):
What was the logistics andtransportation program at the
time and I went and checked itout and fell in love and the
rest is history.
But it sort of blended all thethings that I really liked,
which was working with groups ofpeople on a shared mission,
working with things that aretangible and real in the
physical world and getting towork with cutting-edge
(22:58):
technology on the edge ofinnovation, of what people were
doing in the space.
And that's also what drew me toAmazon.
Amazon was working withTennessee at the time on network
optimization for that firsttranche of FCs that they came
out and expanded in 99 and 2000.
And I got to meet Jimmy Wright,who was the head of operations
at the time, when he came toTennessee and went and visited
(23:20):
the company Again fell in lovewith just the incredible mission
orientation of the people thatwere there.
He was pretty clear that theyhad big aspirations of changing
the world and the way peoplebought and sold and experienced
consumerism.
And they also were a littlerebellious and I like that.
I enjoy the fight, if you will.
(23:40):
So it was a great fit for meand graduated on Friday, started
on Monday and spent a littleover 23 years there.
Loved all of it.
Tom Goldsby (23:47):
The build-out of the Amazon network that you not
only witnessed but wereinstrumental.
I mean, I think it's one of theincredible stories of supply
chain ever told, right, and thetime that you joined in 1999,
they were pretty muchdistributing out of Kentucky,
right, that was about the extentof it.
Dave Clark (24:05):
When I joined we hadn't opened Kentucky yet.
We had.
Seattle was the primary andthere was a site that had opened
in Delaware and then there wasa site that opened shortly after
in London that we part of anacquisition did, but it was
really Philly and Seattle Wow.
Tom Goldsby (24:22):
One of my favorite slides to share in class is to
show that mushrooming year overyear and again in the early days
of Amazon.
I use five-year incrementsright, because there just wasn't
a lot of build-out from, youknow, 95 to 2000, 2000 to 05, 05
to 2010.
And then things get reallyinteresting around 2016.
(24:47):
And I was living in Ohio at thetime and I point out AWS, you
know, had a data center maybe inColumbus, but other than that
there was no FC in all of Ohio.
And then, lo and behold, 18months later we've got three,
four, five.
Something very interestinghappened there about 2016.
(25:08):
Can you kind of explain wasthat when the pursuit of the
two-day delivery was reallybeing built out.
I think there were someregulatory changes also about
then.
Can you kind of explain whatthat trajectory was all about?
Dave Clark (25:22):
Yeah, you could kind of plot Amazon's expansion over
time kind of where they started.
The first big tranche was that99 build out the five big fcs
that got launched in that yearand we lived off of that
capacity to optimization,software build and everything
else because we basically nobodyhad done custom direct consumer
(25:44):
fulfillment at that point.
You couldn't buy anything.
So you had like, if anybodyremembers, bushman like you know
, I had like old you know, andchris plants you know, and stuff
in these sites and it was alldesigned to move cases.
And to your point, back in thewarehouse section, it was all
designed to move in cases andpallets, not moving in each, and
Jeff Wilkie was driving the busthen and did this phenomenal
job of implanting this cultureof Six Sigma and lean into the
(26:09):
organization and applyingsoftware into continuous flow
environment for warehouse directconsumer fulfillment and we
lived off of that till probably2006.
We started selling a lot of thenew thing like toys and
hardware and all these things.
They had a lot of bigger items.
So we did a big non what we callnon-sort or this big item build
(26:30):
outs over a couple of years inthere and Prime launched
somewhere in there I forget theexact year, 2005 or 2006 or
somewhere along the line, andthen in 2008 or 2009, the big
pivot happened, which wassellers on Amazon.
That's really what drove thenext big wave, once you started
(26:51):
bringing sellers on, is thisprocess of bringing incremental
inventory in, and so if you lookat Amazon today, over half the
business that gets fulfilled tocustomers is seller inventory,
not Amazon first party, and soall of that is business that
came in in that post-2008-9timeframe, and so we built the
(27:12):
first multi-story new sortablebox in 2010 or 11, right after
that.
And then we acquired Kiva in2012.
And then it took us about ayear and a half to redo all the
code and set there, to get it togo multi-story and to work with
the other solutions we put inplace.
(27:33):
And so then you really start tosee that build out, blow up in
like 2014-ish, 2013-2014, andthen it goes crazy, and so by
the time you get to 16, you'recranking out 15 new boxes a year
of these really big footprintsites.
And then you get around to 2017, 2018, and delivery is not
going to expand to meet ourneeds, and so we start building
(27:56):
out the delivery network, and sothe network basically doubled
every two years, from 2010 on.
It's sort of the generalprofile was, I know I got to
double the size of our networkand the leadership team and our
capabilities every 24 months andthat was the cadence we were on
until we got to COVID and thenit was, you know, every year
(28:17):
instead of every two years.
Tom Goldsby (28:19):
And finally, lo and behold, in East Tennessee we
finally have a fulfillmentcenter in our neighborhood.
They're everywhere.
Ted Stank (28:26):
Hey, dave, you told me one time that you would
define the Amazon consumerbusiness as a supply chain
company married to a technologycompany, and I think certainly,
over the storyline that you justtalked about, you could see
where that's true.
Where do you see it going?
Not just with Amazon, but withsupply chain in general, with
technology?
What's next?
What's the next big thing?
You know the buzzword today,just like blockchain five years
(28:50):
ago, buzzword today isgenerative AI.
Where do you see all this going?
Dave Clark (28:55):
Honestly, much of supply chain needs to catch up
with the last wave.
Still Supply chain tech tendsto be I mean, it's not very good
across the board.
You know there's a lot of goodsegments as pieces of tech
that's good, but there's verylittle end to end.
That's good, but there's verylittle end-to-end.
Unless you're Walmart or Amazon, you don't really have internal
true end-to-end capabilities.
(29:15):
In most respects you patchwork,quilting stuff together.
Generative AI as you see fromall the stuff that's constantly
broadcast about it is only asgood as the quality and
consistency of the data thatfeeds it, and most organizations
aren't prepared to leverage AIin an effective way because they
neither have consistency ofdata nor a key that would enable
(29:36):
them to create consistency ofdata across these multiple
platforms.
So they're trying to leverageit, but they're leveraging in
spots as opposed to across thetotal.
Unbelievable unlock in bothcost savings, efficiency and
environmental footprintreduction through end-to-end
optimization across supplychains, and we barely scratched
(29:59):
the surface on it.
I think one of the gifts that Ihope we're able to take out of
COVID is that a bunch of peoplewho did not know what supply
chain was suddenly were expertsin supply chain and were very
passionate about it and supplychain technology suddenly hit
the C-suite in an investmentcategory that it wasn't getting
(30:20):
before, because most companieslike Amazon, they're not
inventing the next shoe like aNike or Adidas or somebody, so
they're not trading off theproduct development for supply
chain.
Supply chain is the productdevelopment, advertising is the
product development.
It's a marketplace more than itis a pure retailer, at least
from my opinion and so youreally get into this place where
(30:42):
that was an investment focus,but most companies are really
trading off.
Do I want to invest in the nextgeneration of shoe or celebrity
endorsement or marketing, or doI want to invest in this supply
chain technology?
That's a tough place to sit formost CEOs unless you have a lot
of scale, and the market Idon't think has really produced
a great alternative for them.
(31:04):
People have segment solutions,but again, nobody's really
offering a way to stitch thesethings together.
So I still think that's a big.
This sort of who's going to bethe sales force of supply chain,
you know, I think is still abig opportunity space for
someone out there that nobodyseems to have been able to got
to it.
But if I've had the mostthematic thing, I would say
(31:26):
getting to a place of dataconsistency, less for generative
AI and more for classic AI.
You know, sort of ML neuralnetwork.
Like you know, true high-endanalytic calculation and
optimization performance, Ithink is a huge impact available
.
And then robotics is the nextbig unlock.
You know robotics is just goingto be such an influence and you
(31:49):
know I've seen it in theinvestments we made over the
decade and a half or so atAmazon, that we were working on
it and you start to see it inthe marketplace in a big way.
I think there's a bunch of oddfocus on humanoid, but the idea
of robotics, I think over thenext 10 or 20 years, is truly
one of the more foundationalchanges in the way we experience
(32:11):
the world.
Tom Goldsby (32:12):
And Dave, while we've got you.
You know, ted and I are in thebusiness of producing a product
which is the next generation ofsupply chain talent and, given
the rapid technological changesthat you speak of given again in
the earlier in the podcast,we're talking about geopolitical
issues and uncertainty and,dare I say, maybe even chaos out
(32:33):
there what advice would youdirect to the likes of Ted and
me and other academics in termsof preparing that next
generation of workforce?
Dave Clark (32:43):
I certainly don't think chaos is going to be
reduced over time.
I mean you could argue that wehad like a 20 or 30 year period
in there.
There was probably the leastamount of supply chain chaos in
the history of supply chains.
That sort of 80s, 90s, early2000s was a pretty sweet time.
I think we're back to a placeof lots of things happening,
which I personally is.
(33:04):
I think one of the more maybethis is Damascus to me is the
thing that makes me love supplychain Is that every day you wake
up it's a new something on fire, you know, and I think that's a
big deal in the profession.
And so I think building leaderswho are dynamic, who are
resilient, I think the numberone skill I used to say software
is probably the number oneskill.
(33:25):
I think just mathematics youknow, math generally, is
probably the number one baseskill.
It's like getting a languageyou know or historical
background to go be a lawyer, Ithink be a supply chain
professional.
The background is probablygoing to be some sort of deep
math basis is really your youknow OR some version of
something in that nature,because speaking the language of
(33:46):
code is going to be aboutoptimization models more so than
sort of maybe what it's beenhistorically, and so I think
that's where people are going tospend their time.
And then generalized leadershiphow do you lead people?
Because leading people in aworld filled with AI and
(34:08):
robotics and the kinds ofchallenges and things people are
going to be working on andfacing will be very different,
and so people expect differentthings from leaders than they
did 20 years ago, and so peopleexpect different things from
leaders than they did 20 yearsago, and so I think generalized
leadership, in broad math, areprobably the two of the most
important aspects for people inbeing successful.
I don't know how you teachresilience other than just lock
them out of the building once aweek and figure it out.
Ted Stank (34:25):
I had an engineering professor friend that said his
final exam, he wanted his finalexam.
He was a mechanical engineer.
He wanted to parachute hisclass out with a 20-foot
container filled with a bunch ofrandom junk and give them like
10 days to find their way out ofthe jungle, or something Sounds
fun.
Tom Goldsby (34:43):
Be the way to build resilience, but we can do the
same thing in the Smokies nowfar away.
Hey, Dave, I wanted to ask you,as we've got time maybe for one
more big question and somethingthat Ted mentioned in your
introduction was your service tothe Red Cross and the Board of
Governors, and we talk aboutkind of chaos and managing
(35:05):
through chaos, helping navigatecrises, the leadership that you
bring of having, as you pointout, a million associates and
getting folks to kind of getconcerted and focused and
solving a problem.
I'm just curious maybe I'manswering your question for you
but what business sense do youbring to the American Red Cross,
Maybe?
What challenge and joy do youfind in that work?
Dave Clark (35:28):
Look, those folks are amazing people and I would
say I get way more than I giveout of that experience.
Maybe the most interesting thingfor me is, you know, having
grown up at Amazon, seeing theRed Cross is seeing a very
different kind of organizationwith a very different kind of
mission and a really interestingand eclectic group of board
members, and what you start tolearn is that there are a lot of
(35:51):
ways to be successful andAmazon has one culture and one
approach that's been verysuccessful to Amazon and to
developing the company.
But the Red Cross has aradically different culture,
like the level of broad empathyacross the Red Cross, at all
levels and at the board at theRed Cross is really phenomenal.
(36:12):
And to produce the level ofoutcomes and the exceptional
results that they produce forthose affected by disaster and
for the people who arerecipients of blood that the Red
Cross generates and deliversevery day, to see them be able
to have that kind of successwith a very radically different
and empathetic type of cultureis very instructive and I've
(36:37):
learned a lot from that and I'vetried to help where I can with
the expertise that I have insupply chain and delivery in
those places and with just sortof managing issues, but I've
learned a lot about the waydifferent people approach
achieving success and positiveoutcomes in different leadership
frameworks.
That's awesome.
Ted Stank (36:57):
I'm sure that organization appreciates your
expertise and insights too, dave, as do we.
It's always a joy to speak withyou, dave.
I always love to have you withus.
Thank you so much for spendingthe last 45 minutes or so with
us.
We are going to wrap this andask anyone that has any comments
or questions to send us at gsciat utkedu.
Dave Clark (37:19):
Come to UTK, the greatest supply chain school in
the world.
Ted Stank (37:22):
By the way, national baseball champions as well.
Tom Goldsby (37:26):
That's right.
We failed to touch on thatRight, so I just learned that 14
of the baseball players areHaslam College of Business
students.
So that's got to be about halfthe team, right.
Yeah, very cool.
Ted Stank (37:39):
All right, that's a wrap, everybody, dave.
Thanks again, tom, great to bewith you, as always.
Tom Goldsby (37:43):
All right, let's enjoy the balance of summer.
Thanks everyone for listening.
Introduction (37:48):
Thanks for tuning in to Tennessee on Supply Chain
Management listening.
Thanks for tuning in toTennessee on supply chain
management.
If you enjoyed the episode,subscribe today on your favorite
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Have any questions, thoughts orfeedback?
We'd love to hear from ourlisteners.
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Join us next time as wecontinue pulling back the
(38:11):
curtain on the world of supplychain, educating and
entertaining you along the way.
Until then, listeners.
Welcome to the Tennessee on Supply Chain
Management podcast.
Listen in as co-hosts Ted Stankand Tom Goldsby set sail into
the world of end-to-end supplychain management, diving deep
into today's most relevantbusiness topics.
They'll share insights inpressing industry issues and
tackle the challenges keepingsupply chain professionals up at
night.
If you're enjoying the ride,download and subscribe to
(00:22):
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Tom Goldsby (00:28):
Hello and welcome to another edition of Tennessee
on Supply Chain Management,coming to you from Rocky Top,
knoxville, tennessee, the campusof the University of Tennessee,
tom Goldsby, here pleased to bejoined by my good friend,
colleague and collaborator, drTed Stank.
Hey, ted, how you doing.
Ted Stank (00:44):
Hey Thomas, how you doing man Good to be with you.
Tom Goldsby (00:47):
You know we're coming off the July 4 holiday.
You know a lot of peopleconsider that like the beginning
of summer, but really it's likethe middle of summer for those
of us in academia.
So I'm starting to get a littlebit nervous that we're on the
far side of summer.
I got to get the syllabus ready.
How about you?
Ted Stank (01:02):
Yeah, I'm actually teaching an online class this
summer, so this is about halfwaythrough that course.
So, yeah, we're pushing throughthe end of summer.
I think people that say that4th of July is the beginning of
summer must be people who livein like Saskatchewan or
something where the waters arefinally getting to be warm
enough to dip a toe into orsomething.
Tom Goldsby (01:21):
You're right.
But yeah, I get a little bitnervous when the calendar turns
to July because you know Augustis close at hand.
But hey, we do have some reallyexciting news to share with the
audience.
Every two years, gartner, thesupply chain consultants, the
advisory group out ofConnecticut they do rankings of
(01:41):
supply chain companies, for sure, every year, but every two
years they unveil rankings ofsupply chain programs in North
America.
And hey, ted you up for thetask of sharing with our
audience how we did.
Ted Stank (01:54):
Absolutely.
You know you always hold yourbreath when these come out
because if you all remember whenwe didn't have a college
football playoff and media votedfor the number one team, this
is kind of like that.
But for the second ranking in arow, we were number one in
North American graduate programsand number two in undergraduate
programs.
Cue the applause.
(02:14):
Yeah, so we've been in the topthree the last several times.
Tom Goldsby (02:19):
That's right, and you know our friends down in
northwest Arkansas continue tohold number one spot, which just
keeps us hungry, Right?
You know they came in numbertwo in graduate programs, so I
feel like we're in good company,certainly in that list.
Ted Stank (02:35):
Absolutely.
I had a dean one time say thatrankings matter to the degree of
the company you keep who'saround you.
There you go.
Tom Goldsby (02:43):
We're in good company.
So congratulations certainly toour team for coming out on top
Number one graduate, number twoundergraduate program, and also
to those other programsrecognized in the top 25.
We've got a lot of good friendsout there who are competing and
providing us with some good,stiff competition.
But hey, let's jump into somenews and notes just to kick
(03:05):
things off, because we're reallyexcited to have a special guest
with us in Mr Dave Clark, andwe'll bring Dave into the
conversation in a bit, althoughhe did threaten to maybe
interrupt us during this openingsegment, which would be really
cool.
I don't know if anyone's everjumped in midstream, but let's
break the ice with somethingthat's been actually probably
near and dear to Dave'sexperiences at Amazon, which is
(03:29):
the US warehouse worker count.
I'm always keen to point outthat the number of warehouse
workers we had working in theUnited States more than doubled
from 2010 to 2020 and approachednearly 2 million, I think, last
year, but it seems like maybeit's kind of peaked or leveled
off and, in fact, maybe thedemand for warehouse workers is
(03:53):
leveling off.
Do you make much of that news,ted?
Ted Stank (03:56):
Yeah, I was noting from the jobs report last week
that warehouse jobs, I think,are down about 170,000 from the
peak in May of 22.
I mean, I think it's areflection of, you know, general
cooling off in the economy.
You saw what our GDP was firstquarter.
When people are buying lessstuff, then we don't need as
(04:16):
much stuff being shipped tostores or people's homes.
So of course we're going tohave some softening in that
market, but that was a red hotmarket.
That couldn't have continuedthat way.
It wasn't too long ago thatcompanies were offering like
crazy bonuses for people to comeand workers were working for
two months and then quitting andgo and taking another job with
another bonus.
Tom Goldsby (04:40):
You know I mean more power to them 50% from
pre-pandemic rates in thatsector to where the hourly wage
is about $24 an hour now up 8%just in the last few years and,
as you pointed out, signingbonuses and just all kinds of
accoutrements to kind of drawthat supply.
(05:00):
And a lot of that is attributedto the growth in e-commerce
which is still going strong.
It's about 16% of all retail inthe United States.
Surpassed a trillion dollars ofspend in the US last year.
But certainly the rate ofgrowth is leveling off.
But we always kind of makereference to that old notion of
it takes a lot more hands tomove each than it does pallets.
(05:22):
It takes about twice the numberof hands and also about three
times as much space once youbreak down that pallet.
So that all kind of explainedwhy we saw such a surge.
But it's interesting to seeit's cooling off a little bit
now.
Ted Stank (05:35):
I mean, I just feel like all these signs are
indications that we're gettingback to a kind of a steady state
after the pandemic.
Tom Goldsby (05:42):
Yeah, fair enough.
Well, hey, something that isalso on the march though ocean
rates, and this is kind ofinteresting because it's a
little bit early in the seasonto be seeing this kind of surge
in ocean container rates.
I was looking at the DruryComposite World Index, which is
kind of the sum of all thefreight flowing around the
(06:04):
world's oceans, and it was about$2,800 to move a 40-foot
container as an average abouttwo months ago, and that's now
$5,900.
And just increased 10% weekover week.
Now that's nowhere near wherewe were, like September 2021,
when we were talking about the$10,000 container, but it's
(06:25):
still about 4x where we werepre-pandemic.
We're getting close.
Ted Stank (06:29):
Shanghai, la, the end of last week was 7,000 or just
over 7,000.
Shanghai, new York, was justover 8,000.
So yeah, it's doubled sinceJanuary.
And there's just a lot thereTalking about steady state.
I think, well, that's an areathat there's not a steady state.
There's a lot of uncertaintyabout what the holiday season is
going to be, what kind ofcapacity is available.
(06:50):
You know, one of the things Ilove I hope I don't piss off any
ocean carrier folks but I lovethe word blank or the phrase
blank sailing.
How would you feel if you werein an airport and they came out
and they said, oh, your flightisn't going to take off, it's
been blanked.
It's like, what does that mean?
Does that mean canceled?
Yes, you know.
I mean the number of blanksailings is way up.
(07:10):
You know what's still happeningin the Red Sea is adding a lot
of time an average of about twoweeks time of sailings eastbound
from Asia Pacific, which ofcourse increases fuel prices and
ties up capacity.
So you know, there's just allkinds of wrinkles that are going
on there and as we approachholiday season, I think people
(07:31):
are willing to pay the bucks tolock in capacity and that's
what's driving things up.
Tom Goldsby (07:40):
Well, by its very nature, ocean freight involves
the globe right, and that thenbrings in geopolitics and
vagaries happening all aroundthe world Right, and that then
brings in geopolitics andvagaries happening all around
the world.
And, as you point out, you know,red Sea crises and Houthi
attacks are still very much inthe picture, which calls for
longer lead times.
You point out longer sailingsand more capacity being
introduced, and you know there'salso some suggestion that folks
are trying to get ahead.
We just talked about, you know,warehousing kind of cooling off
(08:02):
.
Just talked about you know,warehousing kind of cooling off.
Maybe there's some warehousespace and it's okay to kind of
front end load those warehousesmaybe a little bit sooner than
they might traditionally.
And then we still got theissues with the East Coast Gulf
Coast negotiations and you knowwe're just now about two months
out, two and a half months out,from that agreement expiring and
(08:22):
it looks like the East Coastworkers are certainly going for
the same sort of bump that theWest Coast workers sealed late
last year.
So I do pick up that some ofthe market share gains that the
East and Gulf Coast ports pickedup in the last few years might
be shifting back a little bit tothe West Coast to avoid some of
those uncertainties.
Dave Clark (08:43):
Well, you guys are stressing me out having to be
quiet in this whole warehouseand ocean rage conversation.
It's killing me over here.
Ted Stank (08:51):
Dave Clark is our guest.
Dave does not need anintroduction, but I'm going to
do a quick one.
Dave's former CEO of Amazon,1999 graduate of Tennessee's MBA
program.
He had many leadership jobs atAmazon, over 20 years,
ultimately leading Amazon'sconsumer business and for a long
time led their global supplychain operations and technology
group.
(09:12):
During his tenure at Amazon, hebuilt one of the planet's most
extensive supply chainoperations, with hundreds of
fulfillment centers andtransportation facilities, a
fleet of 80 plus aircraft, ahuge army of delivery vans
including probably being a firstmover on electric vans and a
group of over 2 millionemployees and contractors.
Dave's a member of the AmericanRed Cross Board of Governors, a
(09:34):
longtime advocate of the RedCross.
He's also got a bachelor'sdegree in music education from
Auburn One of those programsthat's in that top 25 with
Gartner and we have some goodfriends down there and again his
MBA from UT.
Dave, welcome, sorry, you knowwhat?
We should never keep a guestlike you.
Dave Clark (09:51):
I mean it really is.
I mean you should leave inthere.
I'm impatient and have a hardtime shutting up.
Ted Stank (09:56):
So, dave, stand there at the plate.
Let me toss you this softball.
What do you think's going on?
What's your take on some ofthis stuff?
Dave Clark (10:04):
Part of it, I think, the warehousing.
So the BLS numbers and the waythey track it don't really
capture all the categoriesanymore.
Right, there's way more than 2million people operating in the
e-commerce fulfillment andgeneral warehousing space, I
think, just in Amazon alone.
I don't know how many they havetoday, but probably half that
number floating around somewherein that space.
It kind of depends how youcount it.
(10:24):
I a day, but probably half thatnumber floating around
somewhere in that space.
It kind of depends how youcount it.
I agree with you, though.
I mean I think the economy issort of settling down a bit.
The inflation piece has tocatch up at some point.
Credit card spending going up.
I'm personally an optimist.
I think it's going to be a goodholiday season.
I think deals are still big forpeople.
Some of the ocean traffic overthe last couple of months has
been.
A lot of people have the summersale now driven by Prime Day
deals going on.
(10:44):
You see Target following that,walmart, a lot of other people
copying that too, and so thatsurge is a bunch of retail in.
But I think the economy isstill in real good shape.
But it's leveling out to yourpoint.
I don't think it's on fireanymore.
But all the deal seasons, Iwould expect to be quite good
this year.
Tom Goldsby (11:00):
Yeah, you're right.
Ordinarily in retail this is aquiet time, but Amazon really
changed all that.
Prime Basin said, hey, allright, let's pick it up and, as
you point out, others havefollowed suit, and those were
peak days.
Can you share with us a littlebit about what it was like to
kind of feed that beast to solvethe needs that before they were
even obvious to us?
(11:21):
I refer to the Americanconsumer, particularly the
online consumers, beingdiabolical and so demanding in
every aspect of the customerexperience.
But I've got to admit, amazoncreated the beast that is the
diabolical consumer.
Folks like Ted and me here thatyou know wanted an incredible
assortment of products atcompetitive prices.
(11:43):
We wanted to be able to trackour order from the minute we
submitted the order until itarrived at the door.
We wanted to have theopportunity to question things
and to return it without hassle.
All that.
Dave Clark (11:56):
Well, nobody ever wants less selection at higher
prices and slower delivery.
The consumer has always beendiabolical.
That's not new.
Just maybe what's new is peopleare actually meeting the
consumer needs, are working muchmore aggressively to meet
consumer needs.
I think that was one of thetruly special things about
(12:17):
Amazon was it is customer firstin the approach to the way the
business goes and everything'soptimized around.
How do you give customers moreselection, lower prices, better
delivery, putting conveniencedeeper and deeper into what they
do?
And it's not just an Amazonthing.
What you've seen in the lastdecade or decade and a half of
retail is retailers who have metthose needs and who have
(12:42):
invested in and improved thecustomer experience have
succeeded and excelled, and theones who haven't have gone away.
And so retail hasn't gottensmaller and e-commerce certainly
hasn't eaten all of retail.
But retail is consolidatinginto the players who are really
aggressive about meetingconsumer need.
(13:03):
Walmart is a fantastic meter ofconsumer needs and they do it
more offline than online, but itis a phenomenal retailer and so
they continue to thrive.
The same thing what happenedwith Jolly and Best Buy over a
decade in there, of convertingthat into a new experience and
something that met consumerneeds in a different way for
(13:25):
electronics than what they couldfind in most other venues, and
so I think the unique aspect ofAmazon and the specialness of
Amazon was really just that.
It said consumers, to use yourword, diabolical.
But they are never satisfiedand you need to wake up every
day trying to invent a new wayto meet their needs.
(13:46):
That's why it'scustomer-focused versus
competitor-focused, because thecustomer is always going to be
tougher than the competitor.
Always.
They always want more than whatsome competitor is going to be
willing to provide, and usuallyif a competitor has beaten you
on something, it's because theyfigured out something the
consumer wanted that you didn't.
That's really the reason tolook at competitors is to make
sure you didn't miss some vectorof customer need.
(14:08):
I'm shocked today I still getinto these conversations with
CEOs and board members at somecompanies that want to debate
whether or not customers reallywant faster delivery and whether
that really sells more goods,and I feel like debating is the
earth round, like debating isthe earth round.
Tom Goldsby (14:24):
Now, dave, just as you say that you know Amazon's
made news in the last few weeksfor again innovating with the
consumer but also trying to keepup with competition, namely the
Chinese suppliers Xian Taimou,ali and these folks that are
selling direct into the US, andI guess what Amazon announced is
(14:47):
that Chinese vendors can bypassthe FBA fulfilled by Amazon
service and get inducted directinto the delivery network, and
there we're talking like sevento like 12 days delivery, as we
see this pivot from kind of fastfashion to what they're calling
on-demand fashion.
You know what's hot andhappening on TikTok is getting
(15:10):
into production, maybe you know,later today, and then delivered
to the US for again maybe10-day delivery.
What's your kind of reaction towhat you're seeing there in
terms of a little bit of a shift, at least in that maybe that
younger segment, the TikTokersout there that are willing to
maybe wait a little bit longerto get maybe the absolute
(15:32):
hottest item out there?
Dave Clark (15:34):
You know I think I'd redefine it slightly which is
for fast fashion, it's notwaiting longer.
It's actually the contrary,which is you're creating
visibility for the product atthe point of manufacture.
Right, this is the classic.
Go back to the early days ofjust-in-time or make-on-demand
(15:54):
for apparel.
Somebody comes up with a designidea, they surface that to
customers immediately.
Customers give a buy signal andthen they produce.
It is less in that supply chainthan it would be for
(16:16):
manufacturing that item,delivering that item to a
fulfillment or distributioncenter of a retailer in country,
and then listing that item andthen delivering it, and so just
most of that supply chain isinvisible to the customer.
They're unaware that they'rewaiting.
Ted Stank (16:27):
Right.
Dave Clark (16:28):
And so you just made it visible.
So they're aware now thatthey're waiting, but they have
no path to get it faster.
I think those are reallyinteresting and it's probably an
important piece of the businessto be connected to,
particularly in fast fashion,but it's still a sliver of the
business.
I think when you talk about Xiand Teemu and Wish had the same
(16:49):
problem, or Wish had the samekind of concept, but it wasn't
just fast fashion.
I think people are not aswilling broadly to wait for
things that are readilyavailable.
They are willing to have alonger shipping time for
something that is new and uniqueand not readily available.
That's a selection expansion.
Ted Stank (17:10):
And Dave correct me if I'm wrong, but the typical
marketplace lead time was about10 to 14 days, right, if you
ordered from Amazon Marketplacewhen it flowed.
Dave Clark (17:18):
If you're a, seller and it's not an FBA.
That ranges but yeah, I thinkmemory serves it's in that sort
of seven to 10 days for a lot ofsellers.
Amazon can leverage theirlogistics platform to be likely
faster on that arrival deliveryinto the US than perhaps she and
her team who could be on that.
If they try to use the sort ofde minimis work it's a little
(17:41):
bit different deal.
You know you don't get quite asmuch the combinatorial benefit
out of it.
Ted Stank (17:47):
Well, hey, let's pivot to some bigger, broader
issues.
Okay, we could talk to you allday about this stuff, but I also
, since we have you here, wouldlove to have many, many
discussions with you over theyears about things that are
going on in the broader worldthat impact us in business and
impact us in supply chain.
Would love to get your take onsome of this.
So let's start with the turmoilthat we're in with the 2024
(18:10):
presidential election.
I mean, so many things aregoing to be predicated on who
wins in November.
What's your take on?
I'm not asking you to pick awinner or anything like that,
but what's your take on where weare in terms of the choice and
how this is going to impactbusiness come 2025?
Dave Clark (18:26):
Well, if I just take it from a business standpoint,
I think the status quocontinuing to sort of divided
government or you have analigned government.
It's either going to be statusquo in the sense that you have a
Democratic president and Ithink the Republicans keep House
and Senate one or the other.
You end up divided governmentand things are fine for business
(18:48):
.
The only real chance I thinkyou have at a unified government
would be is if you have aRepublican president and the
Republicans take House andSenate, which is the way things
are.
Tracking is certainly a realpossibility, in which case I
think a relatively high numberof things that are priorities on
the business front have a paththrough legislation and to make
(19:10):
it into the legislative agenda,through legislation and to make
it into the legislative agenda.
So, from a business standpoint,I think worst case is basically
status quo and best case issome form of more
business-friendly approach tothe legislative agenda over the
next couple of years.
I don't actually, from abusiness standpoint, don't see a
particularly negative outcome,no matter how you slice it from
(19:32):
what could happen withlegislation negative outcome, no
matter how you slice it fromwhat could happen with
legislation.
Ted Stank (19:38):
Both parties have talked pretty strongly about
tariffs that will probably heatup after the election,
particularly tariffs on productcoming from China.
What's your take on the impactof those?
Dave Clark (19:44):
I'm certainly a free trade oriented kind of person.
My bias is towards free trademakes things better for the
world and has lifted millions ofpeople out of poverty.
I do think former PresidentTrump's tariff approach is more
negotiation-based than it isactually tariffs per se stances.
(20:15):
Then you often don't get veryfavorable terms, and so if you
want to negotiate something withChina, that is a more equalized
win for both kind of scenario,because I do believe China
having growth is important froma US defense initiative as well.
A failing China is not good foranyone.
So I think it needs to bewin-win.
But I think to get to win-winprobably requires some fairly
(20:36):
punitive-oriented negotiationtactics.
I would say so.
I tend to think it's morenegotiation tactic than anything
else, but we'll see.
That's just my opinion.
Ted Stank (20:47):
Yeah, interesting Tom .
What else are you going tothrow at them?
Tom Goldsby (20:50):
Well, you know, something I'm always keen to
pick up is what took day onefrom being a music education
major at Auburn to pursuing anMBA at the University of
Tennessee and then going to workfor this outfit that.
I have to admit.
I've been an Amazon membersince 1997, I think, when I was
(21:14):
buying books and CDs becausethat's all Amazon sold at the
time as a big connoisseur ofbooks and CDs.
But I'm just kind of curiousabout Dave's journey, if you'd
be willing to share that withour listeners about what took
him from music education and Ido believe that you practiced
that for a short time beforepursuing the MBA.
(21:34):
Can you take us back to thosedays, dave?
Dave Clark (21:36):
Yeah, I taught school for a year.
Let's just say I was not theworld's most motivated student
over my academic career for alot of different reasons, but
was much more interested inworking most of my time in high
school and college and learnedto drive on a forklift.
My parents owned a carpet storewhen I was growing up, and so
I'm going to come by the supplychain bug, naturally a little
(21:56):
bit.
And I really love teaching,though.
I really love working withpeople.
I love teaching and it wasreally that I was a great
musician, but I really enjoyedbeing in band and being with a
group of people and workingtogether to achieve an outcome
as part of a group, but I foundthat very satisfying.
What I didn't find satisfyingwas the $20,500 that was my
(22:16):
annual paycheck when I was ateacher.
Everything else about being ateacher was fantastic, other
than I really thought it wasgoing to be sort of the same
type of experience over the nexthowever many years and, as Ted
knows well, I get bored easilyand have trouble sitting still.
But I wanted to do somethingthat had a lot of diversity to
it and I had a family friendthat suggested Tennessee.
(22:37):
What was the logistics andtransportation program at the
time and I went and checked itout and fell in love and the
rest is history.
But it sort of blended all thethings that I really liked,
which was working with groups ofpeople on a shared mission,
working with things that aretangible and real in the
physical world and getting towork with cutting-edge
(22:58):
technology on the edge ofinnovation, of what people were
doing in the space.
And that's also what drew me toAmazon.
Amazon was working withTennessee at the time on network
optimization for that firsttranche of FCs that they came
out and expanded in 99 and 2000.
And I got to meet Jimmy Wright,who was the head of operations
at the time, when he came toTennessee and went and visited
(23:20):
the company Again fell in lovewith just the incredible mission
orientation of the people thatwere there.
He was pretty clear that theyhad big aspirations of changing
the world and the way peoplebought and sold and experienced
consumerism.
And they also were a littlerebellious and I like that.
I enjoy the fight, if you will.
(23:40):
So it was a great fit for meand graduated on Friday, started
on Monday and spent a littleover 23 years there.
Loved all of it.
Tom Goldsby (23:47):
The build-out of the Amazon network that you not
only witnessed but wereinstrumental.
I mean, I think it's one of theincredible stories of supply
chain ever told, right, and thetime that you joined in 1999,
they were pretty muchdistributing out of Kentucky,
right, that was about the extentof it.
Dave Clark (24:05):
When I joined we hadn't opened Kentucky yet.
We had.
Seattle was the primary andthere was a site that had opened
in Delaware and then there wasa site that opened shortly after
in London that we part of anacquisition did, but it was
really Philly and Seattle Wow.
Tom Goldsby (24:22):
One of my favorite slides to share in class is to
show that mushrooming year overyear and again in the early days
of Amazon.
I use five-year incrementsright, because there just wasn't
a lot of build-out from, youknow, 95 to 2000, 2000 to 05, 05
to 2010.
And then things get reallyinteresting around 2016.
(24:47):
And I was living in Ohio at thetime and I point out AWS, you
know, had a data center maybe inColumbus, but other than that
there was no FC in all of Ohio.
And then, lo and behold, 18months later we've got three,
four, five.
Something very interestinghappened there about 2016.
(25:08):
Can you kind of explain wasthat when the pursuit of the
two-day delivery was reallybeing built out.
I think there were someregulatory changes also about
then.
Can you kind of explain whatthat trajectory was all about?
Dave Clark (25:22):
Yeah, you could kind of plot Amazon's expansion over
time kind of where they started.
The first big tranche was that99 build out the five big fcs
that got launched in that yearand we lived off of that
capacity to optimization,software build and everything
else because we basically nobodyhad done custom direct consumer
(25:44):
fulfillment at that point.
You couldn't buy anything.
So you had like, if anybodyremembers, bushman like you know
, I had like old you know, andchris plants you know, and stuff
in these sites and it was alldesigned to move cases.
And to your point, back in thewarehouse section, it was all
designed to move in cases andpallets, not moving in each, and
Jeff Wilkie was driving the busthen and did this phenomenal
job of implanting this cultureof Six Sigma and lean into the
(26:09):
organization and applyingsoftware into continuous flow
environment for warehouse directconsumer fulfillment and we
lived off of that till probably2006.
We started selling a lot of thenew thing like toys and
hardware and all these things.
They had a lot of bigger items.
So we did a big non what we callnon-sort or this big item build
(26:30):
outs over a couple of years inthere and Prime launched
somewhere in there I forget theexact year, 2005 or 2006 or
somewhere along the line, andthen in 2008 or 2009, the big
pivot happened, which wassellers on Amazon.
That's really what drove thenext big wave, once you started
(26:51):
bringing sellers on, is thisprocess of bringing incremental
inventory in, and so if you lookat Amazon today, over half the
business that gets fulfilled tocustomers is seller inventory,
not Amazon first party, and soall of that is business that
came in in that post-2008-9timeframe, and so we built the
(27:12):
first multi-story new sortablebox in 2010 or 11, right after
that.
And then we acquired Kiva in2012.
And then it took us about ayear and a half to redo all the
code and set there, to get it togo multi-story and to work with
the other solutions we put inplace.
(27:33):
And so then you really start tosee that build out, blow up in
like 2014-ish, 2013-2014, andthen it goes crazy, and so by
the time you get to 16, you'recranking out 15 new boxes a year
of these really big footprintsites.
And then you get around to 2017, 2018, and delivery is not
going to expand to meet ourneeds, and so we start building
(27:56):
out the delivery network, and sothe network basically doubled
every two years, from 2010 on.
It's sort of the generalprofile was, I know I got to
double the size of our networkand the leadership team and our
capabilities every 24 months andthat was the cadence we were on
until we got to COVID and thenit was, you know, every year
(28:17):
instead of every two years.
Tom Goldsby (28:19):
And finally, lo and behold, in East Tennessee we
finally have a fulfillmentcenter in our neighborhood.
They're everywhere.
Ted Stank (28:26):
Hey, dave, you told me one time that you would
define the Amazon consumerbusiness as a supply chain
company married to a technologycompany, and I think certainly,
over the storyline that you justtalked about, you could see
where that's true.
Where do you see it going?
Not just with Amazon, but withsupply chain in general, with
technology?
What's next?
What's the next big thing?
You know the buzzword today,just like blockchain five years
(28:50):
ago, buzzword today isgenerative AI.
Where do you see all this going?
Dave Clark (28:55):
Honestly, much of supply chain needs to catch up
with the last wave.
Still Supply chain tech tendsto be I mean, it's not very good
across the board.
You know there's a lot of goodsegments as pieces of tech
that's good, but there's verylittle end to end.
That's good, but there's verylittle end-to-end.
Unless you're Walmart or Amazon, you don't really have internal
true end-to-end capabilities.
(29:15):
In most respects you patchwork,quilting stuff together.
Generative AI as you see fromall the stuff that's constantly
broadcast about it is only asgood as the quality and
consistency of the data thatfeeds it, and most organizations
aren't prepared to leverage AIin an effective way because they
neither have consistency ofdata nor a key that would enable
(29:36):
them to create consistency ofdata across these multiple
platforms.
So they're trying to leverageit, but they're leveraging in
spots as opposed to across thetotal.
Unbelievable unlock in bothcost savings, efficiency and
environmental footprintreduction through end-to-end
optimization across supplychains, and we barely scratched
(29:59):
the surface on it.
I think one of the gifts that Ihope we're able to take out of
COVID is that a bunch of peoplewho did not know what supply
chain was suddenly were expertsin supply chain and were very
passionate about it and supplychain technology suddenly hit
the C-suite in an investmentcategory that it wasn't getting
(30:20):
before, because most companieslike Amazon, they're not
inventing the next shoe like aNike or Adidas or somebody, so
they're not trading off theproduct development for supply
chain.
Supply chain is the productdevelopment, advertising is the
product development.
It's a marketplace more than itis a pure retailer, at least
from my opinion and so youreally get into this place where
(30:42):
that was an investment focus,but most companies are really
trading off.
Do I want to invest in the nextgeneration of shoe or celebrity
endorsement or marketing, or doI want to invest in this supply
chain technology?
That's a tough place to sit formost CEOs unless you have a lot
of scale, and the market Idon't think has really produced
a great alternative for them.
(31:04):
People have segment solutions,but again, nobody's really
offering a way to stitch thesethings together.
So I still think that's a big.
This sort of who's going to bethe sales force of supply chain,
you know, I think is still abig opportunity space for
someone out there that nobodyseems to have been able to got
to it.
But if I've had the mostthematic thing, I would say
(31:26):
getting to a place of dataconsistency, less for generative
AI and more for classic AI.
You know, sort of ML neuralnetwork.
Like you know, true high-endanalytic calculation and
optimization performance, Ithink is a huge impact available
.
And then robotics is the nextbig unlock.
You know robotics is just goingto be such an influence and you
(31:49):
know I've seen it in theinvestments we made over the
decade and a half or so atAmazon, that we were working on
it and you start to see it inthe marketplace in a big way.
I think there's a bunch of oddfocus on humanoid, but the idea
of robotics, I think over thenext 10 or 20 years, is truly
one of the more foundationalchanges in the way we experience
(32:11):
the world.
Tom Goldsby (32:12):
And Dave, while we've got you.
You know, ted and I are in thebusiness of producing a product
which is the next generation ofsupply chain talent and, given
the rapid technological changesthat you speak of given again in
the earlier in the podcast,we're talking about geopolitical
issues and uncertainty and,dare I say, maybe even chaos out
(32:33):
there what advice would youdirect to the likes of Ted and
me and other academics in termsof preparing that next
generation of workforce?
Dave Clark (32:43):
I certainly don't think chaos is going to be
reduced over time.
I mean you could argue that wehad like a 20 or 30 year period
in there.
There was probably the leastamount of supply chain chaos in
the history of supply chains.
That sort of 80s, 90s, early2000s was a pretty sweet time.
I think we're back to a placeof lots of things happening,
which I personally is.
(33:04):
I think one of the more maybethis is Damascus to me is the
thing that makes me love supplychain Is that every day you wake
up it's a new something on fire, you know, and I think that's a
big deal in the profession.
And so I think building leaderswho are dynamic, who are
resilient, I think the numberone skill I used to say software
is probably the number oneskill.
(33:25):
I think just mathematics youknow, math generally, is
probably the number one baseskill.
It's like getting a languageyou know or historical
background to go be a lawyer, Ithink be a supply chain
professional.
The background is probablygoing to be some sort of deep
math basis is really your youknow OR some version of
something in that nature,because speaking the language of
(33:46):
code is going to be aboutoptimization models more so than
sort of maybe what it's beenhistorically, and so I think
that's where people are going tospend their time.
And then generalized leadershiphow do you lead people?
Because leading people in aworld filled with AI and
(34:08):
robotics and the kinds ofchallenges and things people are
going to be working on andfacing will be very different,
and so people expect differentthings from leaders than they
did 20 years ago, and so peopleexpect different things from
leaders than they did 20 yearsago, and so I think generalized
leadership, in broad math, areprobably the two of the most
important aspects for people inbeing successful.
I don't know how you teachresilience other than just lock
them out of the building once aweek and figure it out.
Ted Stank (34:25):
I had an engineering professor friend that said his
final exam, he wanted his finalexam.
He was a mechanical engineer.
He wanted to parachute hisclass out with a 20-foot
container filled with a bunch ofrandom junk and give them like
10 days to find their way out ofthe jungle, or something Sounds
fun.
Tom Goldsby (34:43):
Be the way to build resilience, but we can do the
same thing in the Smokies nowfar away.
Hey, Dave, I wanted to ask you,as we've got time maybe for one
more big question and somethingthat Ted mentioned in your
introduction was your service tothe Red Cross and the Board of
Governors, and we talk aboutkind of chaos and managing
(35:05):
through chaos, helping navigatecrises, the leadership that you
bring of having, as you pointout, a million associates and
getting folks to kind of getconcerted and focused and
solving a problem.
I'm just curious maybe I'manswering your question for you
but what business sense do youbring to the American Red Cross,
Maybe?
What challenge and joy do youfind in that work?
Dave Clark (35:28):
Look, those folks are amazing people and I would
say I get way more than I giveout of that experience.
Maybe the most interesting thingfor me is, you know, having
grown up at Amazon, seeing theRed Cross is seeing a very
different kind of organizationwith a very different kind of
mission and a really interestingand eclectic group of board
members, and what you start tolearn is that there are a lot of
(35:51):
ways to be successful andAmazon has one culture and one
approach that's been verysuccessful to Amazon and to
developing the company.
But the Red Cross has aradically different culture,
like the level of broad empathyacross the Red Cross, at all
levels and at the board at theRed Cross is really phenomenal.
(36:12):
And to produce the level ofoutcomes and the exceptional
results that they produce forthose affected by disaster and
for the people who arerecipients of blood that the Red
Cross generates and deliversevery day, to see them be able
to have that kind of successwith a very radically different
and empathetic type of cultureis very instructive and I've
(36:37):
learned a lot from that and I'vetried to help where I can with
the expertise that I have insupply chain and delivery in
those places and with just sortof managing issues, but I've
learned a lot about the waydifferent people approach
achieving success and positiveoutcomes in different leadership
frameworks.
That's awesome.
Ted Stank (36:57):
I'm sure that organization appreciates your
expertise and insights too, dave, as do we.
It's always a joy to speak withyou, dave.
I always love to have you withus.
Thank you so much for spendingthe last 45 minutes or so with
us.
We are going to wrap this andask anyone that has any comments
or questions to send us at gsciat utkedu.
Dave Clark (37:19):
Come to UTK, the greatest supply chain school in
the world.
Ted Stank (37:22):
By the way, national baseball champions as well.
Tom Goldsby (37:26):
That's right.
We failed to touch on thatRight, so I just learned that 14
of the baseball players areHaslam College of Business
students.
So that's got to be about halfthe team, right.
Yeah, very cool.
Ted Stank (37:39):
All right, that's a wrap, everybody, dave.
Thanks again, tom, great to bewith you, as always.
Tom Goldsby (37:43):
All right, let's enjoy the balance of summer.
Thanks everyone for listening.
Introduction (37:48):
Thanks for tuning in to Tennessee on Supply Chain
Management listening.
Thanks for tuning in toTennessee on supply chain
management.
If you enjoyed the episode,subscribe today on your favorite
listening platform to get allof our episodes as soon as they
drop, and don't forget to take amoment to leave us a rating.
Have any questions, thoughts orfeedback?
We'd love to hear from ourlisteners.
Email us at gsci at utkedu.
Join us next time as wecontinue pulling back the
(38:11):
curtain on the world of supplychain, educating and
entertaining you along the way.
Until then, listeners.
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