January 23, 2025 • 35 mins
For the first episode of 2025, co-hosts Ted Stank and Tom Goldsby spoke with UT Knoxville experts Huseyn Abdulla and Seongkyoon Jeong about their research in the areas of returns management and supply chain cybersecurity.
Assistant professors and esteemed scholars in their disciplines, Abdulla and Jeong’s insights are a deep dive into the challenges and innovations shaping supply chain management. Among other points, Abdulla explains how retailers balance the growing demand for customer-friendly return policies with environmental and financial sustainability, while Jeong discusses the rising risk of cyberattacks in an increasingly data-driven world.
Listen in as our hosts also delve into consumer sentiment, holiday spending, the trade implications of the new Trump administration, collaborations between Hyundai and Amazon, and much more.
The episode was recorded virtually on January 17, 2025.
Related links:
- U.S. shoppers set record for holiday spending in 2024
- Logistics industry growth slowed in December, per Logistics Managers Index report
- Trump orders trade review ahead of potential tariffs on Canada, Mexico, and China
- Hyundai begins selling vehicles on Amazon Autos
- U.S. consumers ‘resilient and strong’ in face of high prices and interest rates
- Read Huseyn Abdulla’s article in The Conversation about consumer backlash when retailers change their return policies, and his study published in the Journal of Operations Management
- Read Seongkyoon Jeong’s blogs on cybersecurity risks and three types of cyberattacks affecting supply chains
- Register for SCM Academies in Leadership, Finance, and Planning
- Read our latest white paper, “Unlocking the Potential of the Gen XYZ Labor Force”
- Register for the Supply Chain Forum, April 8–10 in Knoxville
- 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.
Intro/Outro (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 the Tennessee on Supply Chain
Management podcast.
Great to be with you, the firstpodcast of 2025.
And I kind of had to checkmyself mentally there to make
sure I got the year right.
It's kind of like when we usedto write those checks and for
the first six, seven weeks, theyear right.
It's kind of like when we usedto write those checks and, for
(00:49):
the first six, seven weeks, gladto be with you and thrilled to
be joined not only by my goodfriend and colleague, dr Ted
Stank, but we've got a couple ofgreat junior colleagues joining
us on this broadcast today too.
But hey, ted, happy new year.
Ted Stank (00:58):
Happy new year, Tom 2025,.
How is that possible?
I?
Remember a time thinking thatlet's see if I could live long
enough, I might see the year2000 and I'd be 40.
And now it's 2025.
I can't believe it.
Tom Goldsby (01:10):
And we're a full quarter century past Y2K, right,
none of us thought we're goingto survive that.
Yeah Well, hey, ted, I teasethat we're going to be joined
today by some of our faculty inthe Haslam College of Business
Supply Chain ManagementDepartment.
Why don't we go ahead andintroduce those fine folks?
Ted Stank (01:26):
Yeah, I'd be happy to do that, tom.
You know, any greatorganization is only as good as
the new people that you continueto bring in to innovate and
bring their new ideas andthoughts.
And we have been really, really, really lucky at University of
Tennessee, supply ChainManagement, to have just a
phenomenal group of faculty Twoof our newest faculty your guys
(01:46):
are not our newest facultyanymore, but two of our newest
faculty are joining us today.
I'd really love to welcome bothof them.
Intro/Outro (01:53):
Hussein.
Ted Stank (01:54):
Abdullah is the Jim Bennett Fellow and Assistant
Professor of Supply ChainManagement with us, and SK Jong
is CSX Corporation Scholar andAssistant Professor in Supply
Chain Management.
They are both.
I know that commercial sayswe're not supposed to say this
because we're not really rockstars, but they're rock stars.
Hopefully Billy Idol doesn'tshow up and tell us we can't be
(02:15):
rock stars, but these guys arerock stars folks.
You're going to hear it fromthe kind of things they're
working on and couldn't be moredelighted to have them with us
on faculty at University ofTennessee Supply Chain
Management and as guests with uson the podcast today.
Guys, welcome.
Huseyn Abdulla (02:30):
Happy New Year, tom Tate.
Thank you for having us.
Seongkyoon Jeong (02:33):
Yeah, happy new year.
Thanks for having us today.
Tom Goldsby (02:35):
I will say that I chaired the search committee in
the fall of 2022, when we hadtwo faculty lines open and when
we had the interest of Husseinand SK and we thought if we
could just secure one of them itwould be a big win.
And, lo and behold, they bothdecided to join us and the rest
is history.
But, listeners, you're gonnaget a sense for why we're so
thrilled to have them on ourfaculty here momentarily.
(02:58):
But, ted, why don't we do alittle bit of a roundup, catch
up to look back as we close out2024.
We start the year 2025 and justtremendous happenings,
obviously in world matters, inbusiness and supply chain.
I've been out and abouttraveling over these last couple
of weeks.
I was with the supply chainleaders in action last week as
(03:20):
we planned our 2025 engagement75 senior supply chain
executives around a massiveU-shaped table and we talked for
a day and a half about theissues that were on their minds.
And then I just came backyesterday from Sunland Logistics
, a great partner organizationof ours.
I convened with their voice ofthe customer endeavor in
(03:41):
Greenville, south Carolina.
Again, a lot of great minds inone room talking about matters
of supply chain.
And hey, this will surprise noone out there, but the word
uncertainty continues to be thedominant theme out there.
A lot of that aroundgeopolitics and world matters
and general business, but ofcourse we can't talk long
(04:02):
without talking about a changeof administration.
Donald Trump gets sworn in onthe other side of the weekend
and you know there are a lot ofdiscussion as to what's kind of
bluster or negotiating tacticsand what's going to become
policy in a matter of days.
Ted Stank (04:16):
Geez, Tom, you've been out and about.
I've been ensconced over at ourbeach house on the coast of
North Carolina for this holidayseason.
I didn't realize any of thiswas going on.
I thought everything was justsmooth sailing, no turkeys.
Tom Goldsby (04:27):
Everything's hunky-dory on the coast.
Ted Stank (04:29):
Yeah.
Yeah, I didn't know any.
I'm really, really intrigued tohear what you're going to have
to say about what's going on.
I just going to climb out of myhole and think everything is
going on as always.
No, I'm kidding.
Tom Goldsby (04:41):
A lot of craziness.
Before all that, I was out onthe West Coast, out in LA, and
right before the wildfires Geez,actually, there were already
starting to be some fires inMalibu, as they're around the
Christmas holiday, but had noidea what was brewing Global
warming and climate change andeverything it brings with it.
And, of course, getting toGreenville.
Yesterday I had to take apretty roundabout way to get
(05:04):
there, just as you routinely dowhen you're heading to North
Carolina.
Ted Stank (05:07):
Yeah, why don't you kick us off, tom?
What do you think is yourbiggest?
I'm glad you confirmed thatuncertainty is the biggest issue
.
I did a podcast last week withone of our great partners,
project 44, and they asked mewhat is your one thing on top of
your list?
And I said uncertainty.
So why don't you dive into that?
What are some of the big?
(05:28):
Issues related to uncertaintythat you're hearing.
Tom Goldsby (05:30):
Yeah, I mentioned the change in administration and
I think we try to hold thingsin pretty close confidence with
the SCLA, just as we do with ourGSCI.
But I will share with you thatthere was some speculation on
the bluster slash rhetoric topolicy kind of ratio.
You know a lot of talk,certainly throughout the
(05:50):
campaign season and as itrelates to you know that
beautiful word, as Trump callsit tariffs and how that could
impact trade.
Also a lot of talk ofimmigration policy and how that
can impact business tax policy,immigration policy and how that
can impact business tax policy.
But I will say that the SCLAgroup came down somehow with
this 60-40 ratio that it was 60%fiction, 40% fact, of course.
(06:15):
Then you got to figure out well, which 40%, what's going to be
fact?
Is it going to be those 25%tariffs on Canada and Mexico and
10% incremental tariff on China, or is it going to be something
presumably less than that?
Also, in immigration, as ourguest Marian Wanamaker has
(06:36):
pointed out, all net growth inlabor has come from immigration
in recent years.
So this talk of rounding upillegal immigrants and
constraining legal immigrationis something that has a lot of
businesses very concerned.
Ted Stank (06:46):
Yeah, love him or hate him, donald Trump is a
disruptor, right.
I mean, that's what he's beenknown for his entire
professional career.
What he likes to do is to causeuncertainty and set a lot of
(07:07):
interesting positions that areat extremes, so that he can try
to find some middle ground onthings.
And so I kind of agree withthat maybe 60-40 approach.
That I think that we willdefinitely see changes in all
those areas you talked about.
Approach that I think that wewill definitely see changes in
all those areas you talked about.
But I think it's kind of astarting point for a lot of
discussions around tariffs,around immigration.
I mean, for one thing, some ofthe things just aren't
physically possible, like someof the immigration issues he was
talking about.
So now you're hearing morethings like, well, immigrants
(07:29):
with criminal records are goingto be the first to be deported,
that kind of thing.
I think in a lot of areas, it'sjust going to be wait and see.
The interesting thing we live ina time where there's so much
I'm not going to call itinformation, I'm going to call
it data being thrown at us fromso many different sources that I
think that most of us perceivethat we're in this crazy world
(07:52):
of turbulence and when you getbeneath those clouds of
craziness and you look on what'sgoing on on the ground, there's
certainly some changes on thehorizon, but things seem to be
going pretty well.
You know, I mean I think thatif you look at where we were in
this podcast a year ago, twoyears ago, talking about what
was happening with inflation andare we going to have a soft
(08:14):
landing, and the numbers thatcame out this week about
inflation, everybody said it wasgoing to show this huge
increase in inflation and guesswhat, it didn't.
So what's the Fed going to do?
Are we going to have moreinflation cuts this year or not?
And you get underneath all thatturbulence and guess what
Business is doing.
Pretty well, you know, tom, youoften talk about what happens
(08:35):
with retail sales over theholiday season as a real
bellwether for what's happeningwith consumer confidence, etc.
Retail sales during the holidayseason November and December
actually kicked up.
They were 4% over 2023.
Holiday sales.
Online sales were up 8.6%,right in line with predictions.
The inventory to sales ratiosomething you and I have talked
(08:57):
about a lot everybody wasworried it was going to be
really high because of all thestocking that retailers did
during the summer because of thefear of the the east coast port
strike, fear of tariffs thatare going to happen potentially
this winter.
Guess what?
Inventory to sales ratio hasbeen steady since the summertime
.
So I mean, partly we got toparse out all the stuff that's
(09:21):
being put out there in so manydifferent media formats from
what's really happening on theground, and that's hard to do,
you know.
Tom Goldsby (09:30):
Yeah, no, I agree, you know, as I was with our
friends at Sunland the lastcouple of days, I was kind of
setting the table and looking atsome of the barometer indices.
Certainly, you know inventoryto sales, holiday sales and
those things I'm on and, as youknow, I pay so much more
attention to consumer actions,sentiment I don't think
sentiment amounts to much thesedays, but global supply chain
(09:53):
pressure index from the New YorkFed continues to be below zero.
So that means minimalvolatility and global
transportation rates,manufacturing indices,
purchasing indices and so forth.
Also, we're seeing, as youpointed out, inventories in
check, inflation up a tad.
Bls data from the Fed showedthat unemployment continues to
(10:14):
be quite low and very much incheck.
So you're right, I mean thefundamentals are good.
And what I'll say, you know,having spent a lot of time with
some industry leaders the lastfew weeks, people are generally
bullish.
You know the term uncertaintydid come up quite a bit.
You know there's some anxietiesfor sure out there, but
meanwhile I think there'sgenerally a bullish outlook.
And you're right, I mean thefundamentals remain very strong.
(10:36):
And hey, somehow we did survivethat campaign and election
season.
There's no insurrection.
We've got a clean transition ofpower that looks to be
happening next week, so a lot ofreasons to be feeling pretty
confident.
Ted Stank (10:50):
Yeah, you know there was a title story, a cover story
, from the Economist back Ithink it was in December of the
American economy is the envy ofthe world.
I always like to read theEconomist because it's an
offshore perspective of what'shappening here in the United
States.
The US economy is the envy ofthe world.
Yet if you were to go out andask the person on the street
about the US economy and maybelet's push this back to October,
(11:12):
november, during the electioncampaign the person on the
street would say, oh no, we'rein a mess and one of the things
that I have had to reallyrecorrect.
So I'm an old dude.
I grew up watching people likeWalter Cronkite on the news, and
Walter Cronkite was the voiceof fact, right Whether it was or
not, we all believed everythingWalter Cronkite said as truth.
(11:33):
And now there's so manydefinitions of truth and one of
the things that I think we allhave to reset our dials on is
that the media, even themainstream news media, is viewed
as an entertainment industrynow, I think.
And to come out on the nightlynews and say, hey, everything's
cool, the economy's clickingalong the nightly news and say,
(11:56):
hey, everything's cool, theeconomy's clicking along, we're
all good Doesn't get people totune in, and so what we get is
everything's really bad.
You better go hide under yourbed and put your money in your
mattress, because the world isfalling and I think we just need
to reset our can I say our BSdials, to kind of go through the
BS.
Tom Goldsby (12:14):
You have given me an idea, though.
Ted.
I think maybe in the future, weneed to deliver this podcast
with that Walter Cronkite voice,or maybe you hey, I'm Dan
Rather, you're Walter Cronkite,something along those lines.
Ted Stank (12:26):
Huntley Brinkley.
My parents were HuntleyBrinkley.
Report people.
Tom Goldsby (12:30):
Now you're dating yourself, Ted.
Yeah, I'm definitely datingmyself.
Ted Stank (12:33):
But hey, you know what, tom?
You and I could go on talkingforever, but one of the things
we really touted with thispodcast today was the guest that
we have with us.
Let's start with Hussein.
Hussein does a lot of work onreturns management, works with a
(12:55):
number of our partners, does aproject in our advanced supply
chain collaborative on returnsmanagement, and I mentioned how
we had a really strong holidayseason with retail growth, a lot
of that coming from onlinebuying, and we all know that
that's a perfect world whereeverybody that buys something
online keeps that product andnever sends it back.
So let's get Hussein's take onthis.
Hussein, tell us some of thethings you're working on and
your perspective on both retailsales and the impact it's having
(13:17):
on returns management.
Huseyn Abdulla (13:18):
Yeah, first of all, I'm always impressed by the
resilience of retail industryin the US, and this goes way
back even during World War I andWorld War II.
We can see the traces of retailindustry showing extreme
resilience and sales increasingor keeping steady pace.
But one thing is also certainis that more sales means more
(13:39):
returns, and according to thelatest estimates by National
Retail Federation, we'reexpecting more than $800 billion
worth of products, which isabout 16.6% of entire retail
sales in the US, to be returnedto retailers this year.
And what this really means fora lot of the retailers is that
(14:00):
they will have to continuerethinking extremely generous
return policies that have beenoffered for decades now, things
that have become such a norm forconsumers that they take those
lenient return policies forgranted.
They feel entitled to thosepolicies and increasingly,
retailers realize that thosepolicies are no longer
(14:21):
sustainable.
They are not sustainable fromfinancial point of view and
they're also not sustainablefrom the environmental
sustainability point of view.
And what we see in this spacetoday is that a lot of the
retailers restrict theirlong-established lenient return
policies.
This is a trend that has beenongoing for the last six, seven
years I would say A prominentexample for this, which really
(14:45):
motivated our recent researchpublished in Journal of
Operations Management LL Bean'scase.
In 2018, LL Bean decided torestrict their 100 years old
return policy, which allowedcustomers lifetime return
windows, no question asked, fullrefund policies when they step
(15:05):
back from this longstandingreturn policy.
There was a lot of negativereactions in media, among
consumers on the forumdiscussions that why retailer
actually made this decision, anda lot of the consumers said
that we're not going to shopfrom LLB in a game and this kind
of sparked a question for usbecause we were kind of
surprised to see, even if thenew policy allowed customers to
(15:27):
return the products within oneyear, which is really a long
time period, we saw thesenegative reactions.
So was it just a few customerswho were extremely unhappy and
talking about it online, or wasthere more systematic reasons
why customers disliked when thisretailer stepped back from
their longstanding lenientreturn policy?
(15:48):
And hence we started ourinvestigation and what we find
was really interesting to us.
We found that customers reducedtheir trust into retailers'
ability in delivering goodquality service and, in general,
in retailers' goodwill whenretailers restrict their
longstanding reunion returnpolicies.
And, surprisingly enough, thisreally was independent.
(16:10):
This negative reaction wasindependent from the extent to
which customers actually returnproducts.
So even customers who say thatwe don't really return products
very often reacted negatively.
In our experiments with USconsumers to restrictive policy
changes of retailers and tryingto understand why, we revealed
(16:31):
that return policy leniency hasa very strong signal about the
retailer's service quality ingeneral.
It is perceived as an importantelement of the customer value
proposition.
So whenever you take it away,customers react negatively and
they react negatively indifferent ways.
They decrease their purchaseintentions with the retailer,
(16:52):
they reduce their intention tospread positive word of mouth
about the retailer, they reducetheir intention to spread
positive word of mouth about theretailer and they also have
less loyalty intentions.
Ted Stank (17:00):
Hussein, have you looked at actual sales numbers?
Have these retailers that havemade these policy decisions
actually seen a dip inpurchasing?
Because, as we all know that,for consumers, purchase
intentions don't always align100% with their actual behavior,
right?
Huseyn Abdulla (17:16):
This particular research.
We are trying to create a kindof a tightly controlled lab
environment where we candefinitely dig deeper into the
psychological mechanisms ofthese reactions.
But what we know, and accordingto some recent articles by Wall
Street journals, actuallysurveyed retailers report that
they experienced a reduction intheir sales after they imposed
(17:39):
return fees or they restrictedtheir return windows, and our
research really taps into whythis decrease in sales, the
actual decrease happens.
Ted Stank (17:48):
Okay, so the premise is that if you change and
restrict your returns policies,we've seen that it decreases
sales and your exploration iswhy?
Absolutely.
Tom Goldsby (17:59):
Yeah, that's fascinating to hear that.
It's a signal of the servicequality right and the work that
we've done previously in returnswhich, by the way, I will tell
you that we were originallylooking at last mile delivery
from advanced supply chaincollaborative research Alan and
Emily and I undertook and thecompanies with which we were
working some very prominentcompanies said you know, we're
(18:21):
actually getting pretty good atthe last mile delivery.
It's that first mile of returnsthat we're really struggling
with.
And, hussein, I know that whilea great deal of your research
kind of looks at that marketinginterface, I know that you also
have a strong operationsbackground as well.
What's kind of the state of theart in terms of that first mile
(18:41):
of return?
Are we getting any better attaking back that nearly 17% of
stuff that comes back after it'ssold?
Huseyn Abdulla (18:49):
Well, there, are a lot of developments,
especially with the advent ofartificial intelligence and
other technologies that we haveat our discretion.
We're getting increasinglybetter at forecasting returns,
for example, and I think returnpolicies is an important element
here, because return policiesset the stage and dictates to a
large extent the timing, volume,quality of those returns and by
(19:14):
applying this technologyartificial intelligence, for
example, or better machinelearning techniques we can
better predict those inflow andmake accordingly our plans
better in how we're going toacquire those returns, how we're
going to process those returnsand, most importantly, how we're
going to disposition thosereturns after we acquire.
A lot of the retailers havemade significant investments in
(19:37):
those techniques.
Some retailers choose tooutsource this return
acquisition, processing anddisposition processes.
They collaborate withthird-party logistics providers.
Recently, dhl went into thereturns processing industry.
They're planning to open 14returns processing locations and
offer services to a lot of theretailers.
(19:59):
So we do have differentapproaches, centralized and
decentralized, when it comes tomanaging returns, but overall we
increasingly see that retailersrecognize the importance of
returns on their financialbottom lines and try to align
the reverse supply chains withthe forward supply chains better
(20:19):
.
Tom Goldsby (20:20):
Yeah, you mentioned DHL.
I think they made aconsiderable acquisition over
the holiday to buy Happy Returns, one of the foremost players
out in that space, and there'sjust an awful lot of activity
going on out there.
But it's fascinating to hearthat we're getting better at
forecasting returns.
Hey, ted, correct me if I'mwrong, but don't we continue to
struggle with demand forecasting, don't we?
(20:41):
But we're getting better atreturns.
Ted Stank (20:43):
Oh no, no, Forecasting Tom for decades has
been relatively stable andprobably close to 100% accuracy,
I think.
Right, yeah.
By the way, another major focusof our advanced supply chain
collaborative work is to reallyget a laser focus on how to
improve planning.
We've talked in the past abouthow we think that's one of the
last great frontiers ofimprovement in supply chain
(21:03):
management and now, with 16% ofretail sales coming back, we
need to get better about that aswell.
You know, hussein, it alwaysamazes me that there are some
retailers that build theircompetitive advantage, if you
will, on their returns policy.
Ll Bean was one of those, asyou suggested, for 100 years,
and now they're not.
(21:23):
I mean, people always boughtfrom the LL Bean catalog because
you knew that if you bought it,you could return it, and that's
what they were known for.
Tom Goldsby (21:31):
Yeah, that was the premise of Zappos right.
Amazon got tired of competingwith and bought Zappos right.
We can't avoid the Amazoneffect in all of this right.
I mean, it certainly has drawnus in and that kind of guarantee
of great customer experience,hussein, can you kind of speak
to.
What role then that returnspolicy at Amazon has across the
board?
Ted Stank (21:51):
Before Hussein talks to this I don't know if you've
seen commercials over theholiday season.
You can now buy Hyundai cars onAmazon at pretty good prices
and have it delivered to adealership near you.
So what's the returns going tobe like on a Hyundai SUV?
Tom Goldsby (22:07):
Maybe an asterisk on that return policy for that
one, I don't know.
Huseyn Abdulla (22:10):
Yeah, what is unique about Amazon's approach
to returns is that Amazon neveroffered the longest return time
window to their customers.
There are a lot of retailersdepartment stores, big box
retailers who offered likeopen-ended return policies or
return policies of one year, noquestions asked.
But what happened with Amazonis that they were the most
(22:32):
successful in aligning returnswith the rest of their business
model.
For example, they offered trybefore you buy service in 2018,
and they're going to actuallyend that program by the end of
this month.
By the way, they wereessentially capitalizing on
customers buying severalproducts at the same time,
(22:52):
trying at home and returning theunwanted product.
But that was an entryway forthem to sign up for the prime
membership, which was a primarysource of revenue and profit for
Amazon for a long time.
So they do things or they aligntheir customer experience with
their return policies in a waythat allows, for example,
returnless refunds.
(23:12):
So they say keep the product,here's your refund, because
processing that return, theyknow that it's going to cost
even higher.
So this kind of alignmentprocess, policy alignment
determines success when it comesto returns management, I
believe.
Ted Stank (23:28):
So we've touched on a theme here that kind of keeps
emerging about this wholereturns industry, retailers,
clearly and that's aroundplanning, which touches on data
and new techniques like AI, etc.
So increasingly across thesupply chain we are getting new
sources of data, tapping intoconnections with suppliers, with
(23:50):
customers, to get data, all ofwhich makes us much more
interconnected across the supplychain, which is a great thing
for transparency, for planning,for improved operations.
But interconnectivity has adark side, doesn't it?
I have a son who's a computerengineer and he said every time
you guys in supply chain make aconnection with another entity,
(24:11):
it puts us in more danger ofbeing hacked.
Sk Zhang is one of our othernew faculty members with an
expertise in cybersecurity.
Sk, what's your whole take onthis new world, not only in the
retail world but of end-to-endinterconnectivity that we're
rushing headlong into, andwhat's your research telling you
(24:31):
about the big issues and themesin that area into?
Seongkyoon Jeong (24:33):
And what's your research telling you about
the big issues and themes inthat area?
Thanks for a quick summaryabout the change in the
interconnectivity between peopleand companies.
It is very true that afterCOVID-19, everything has changed
a lot, especially theinter-organizational interface
and even interpersonalinterfaces.
So what we saw everybody nowknows this kind of fact that the
number of cyber attacksincreased a lot as we went
(24:57):
through COVID-19.
And then at the same time, sothe term supply chain cyber
attack is emerging too.
Right, many cyber attacksemerged from suppliers.
Basically, suppliers were theroutes of the heck.
What's really interesting isthat many companies, many buyers
, let's say, blame suppliers.
It's not us, it's the suppliersthat didn't keep the compliance
(25:21):
or policy so that we had a hackincident.
So one question is like well,okay, they are rational.
Is that maybe by making thatkind of excuse, they were trying
to avoid that kind of blame,right?
So does that really actuallywork?
So we actually looked at stockmarket reaction.
If they actually say, oh, thisis because supply chain or the
accident that was actuallyoccurred by the supplier's fault
(25:43):
, is there any kind of financialoutcome difference?
And we found that there was nodifference, which means
investors know it's not justsupplier' fault.
It's your fault too, becauseyou didn't manage the supply
chain well right?
At the same time, then, doinvestors penalize the company
for not managing supply chainwell Well, we found that when
(26:07):
the supply chain cyber attackoccurs with data breach or
operational disruption, thepenalization is much harder and
harsher.
So it's not just about makingexcuses.
I mean, companies should reallybe transparent about what they
do and they should beresponsible for supply chain
cyber attack.
Don't just make excuses.
It's also within ourresponsibility domain.
Tom Goldsby (26:29):
Well, that's fascinating to hear and you know
we've been studying supplychain risk now for more than 20
years and, as you kind of paintthe picture, sk cyber is
distinct in the forms it cantake, the threat it can present
and also, as you're suggesting,the fallout that comes with it
when the world does learn of acyber attack.
(26:49):
Now Ted kind of put thispremise out there.
He and I, for nearly threedecades, have been saying manage
business relationships, yes,selectively, but deep
relationships are very valuable,but those deep relationships
have to be supported withinterface and a lot of that is
data.
So what perils do companiesface as they have these close
(27:12):
ties and do manage them on aselective basis, but, to your
point, it presents vulnerability.
So what steps can companiestake to enjoy the upsides of
that engagement without maybesome of the downside potential?
Seongkyoon Jeong (27:25):
Sure, Let me introduce another study of my
research team.
We looked at the digitalizationbenefits and, let's say, perils
as well, by industry.
The pace of digitalizationdiffers, right, and we found
that there is a kind of veryinteresting pattern as
digitalization goes up.
There is evolution pattern ofcyberattacks.
(27:46):
Basically, the firstcyberattack wave is like social
engineering-based cyber attack,so the focal company would be
under attack by scam mails orany kind of social engineering
tactics based cyber attacks.
And then what companies usuallydo is they just increase the
counter measure.
For example, they train theiremployees better, they apply
(28:09):
more tight information policy.
Then what hackers do, as far asI know from the interview with
actual hackers, is that hackersfind out another route.
So suppliers are the weak linkof the cybersecurity.
For example, let's say let'smake this kind of analogy you
are attacking a fortress.
(28:30):
The main door is defended byreally bulky guys.
What are you going to do?
Are you going to fight thoseguys?
Maybe you're going to find theback door right, you're going to
find a channel or mode and youcan fly into the fortress.
For example, suppliers areusually not really cognizant of
the cyber attack issues.
So there was one veryinteresting survey by MSNBC back
(28:52):
in 2020.
Very interestingly enough,suppliers or small firms are
more confident aboutcybersecurity, which is very
weird, right.
Typically, cybersecurity is afunction of investment and
attention.
So, for example, google I'msure they have a fantastic
cybersecurity system, right, butsmall companies they don't have
(29:13):
enough resources to invest incybersecurity systems, so they
are typically weak.
And then hackers usually findout routes through the suppliers
and eventually they get accessto their buyers, which are the
biggest companies of the world,for example.
Ted Stank (29:28):
SK.
To your point, one of the mostnotorious cyber hacks happened I
don't know six, seven years agonow, when Maersk, the big
shipping company, was hacked,and it impacted all of their
customers as well, which aremainly every Fortune 500 company
in the world and everybody else, and that hack came in through
(29:48):
an HVAC maintenance company attheir headquarters in Denmark.
Seongkyoon Jeong (29:54):
Yeah, it's very interesting.
Back in 2013, target was hacked, right For the same reason.
The HVAC company was leaked,basically, and one of the
credentials was hacked and then,using the HVAC company's
credential, the hacker got intoTarget's system and they stole
the personal information of allthe customers, including credit
card information.
(30:14):
Okay, and that was really afiasco for Target.
Tom Goldsby (30:18):
And we just had some HVAC work done here at the
house last week and I didn't domy due diligence.
Now I'm getting a little bitworried about these HVAC vendors
.
But it does speak of an addedvery important criterion to
supplier selection logistic,service provider selection,
customer engagement thathistorically we're concerned
(30:39):
about.
Let's look at the inbound sidethe quality of those inputs, the
assurance around it, theability to meet the quantity
needs, quality of the personneland the relationship potential.
But now we need to add cyberprovisions and protections very
much to that selection portfolio.
Ted Stank (30:57):
Hey SK.
What have you seen in companiesramping up their talent base of
cybersecurity experts in theirIT departments?
Seongkyoon Jeong (31:06):
So let me talk about that issue more deeply.
For example, can there be anyperfect, let's say, panacea for
cyberattacks?
So my answer is well, it'ssomewhat like ever-evolving
fight of the cyber attackspattern, which is ransomware
(31:28):
attack.
Ransomware attack didn't exist10 years ago, and then now it's
really rampage, right, and then,probably from last year, we saw
a lot of AI-based attacks.
Now hackers can make reallyconvincing paragraph to fool
people, right?
What I'm saying is that can wehave a full, perfect system or
(31:49):
perfect supplier selectioncriteria for this kind of issues
?
My answer is probably not.
So what I would rather say iswe may have to have some
perpetual interest in this kindof domain, adapting to any new
emerging patterns.
So I guess you're right thattalent management is one of the
biggest questions in this case.
(32:10):
Who has this good catching uptalent and adapting or adaptive
talent as well?
Some people would say AI mayhelp.
That's true at the same time,not really true.
So one of our other papers ormine actually addresses the
impact of AI or automation invulnerability management, and we
(32:30):
found that that tool helps.
We found from the JavaScriptecosystem that that kind of
automation tool applied byGitHub helps the resolution of
vulnerability maybe two timesbetter than the regular way.
However well, as we saw fromany kind of our personal use of
ChatGDP, you don't actuallyapply all AI suggestions right
(32:53):
away, so there is a complexitywhen you apply the suggested
ways.
So because of this kind ofcomplexity, there is a huge
variance of the resolution time.
My point is like AI may help,yes, at the same time, supply
selection may help, but it'swhat really matters is the
people and our interests.
Supply chain cybersecurityAction may help, but what really
matters is the people and ourinterests supply chain
cybersecurity.
Tom Goldsby (33:12):
Well, it's good to hear that AI has another use
case potential.
Again, that was the hot topicthe last few weeks, as I've been
out on the road engaging withsenior supply chain executives
finding that use case and, dareI say, there was some suggestion
we need to return to small data.
I think, sk, your suggestion isthat maybe that's a good idea
to be more selective in thenature of the engagement and
(33:33):
more focused on the applications, what we're looking for.
But, sk, thank you so much.
We hope that, by virtue ofbringing SK and Hussein onto the
podcast, the chance to showcasethe talent that we have.
We are so fortunate that SKjoined us out of Arizona State
Again, it's such a great programand Hussein out of equally
esteemed Texas A&M back in fall2022.
(33:56):
And it's been our good fortuneto have you.
They're having tremendoussuccess as you can pick up on
the research front, publishingin top tier journals but also
doing that great applicableresearch that we value so much
at UT.
Ted Stank (34:11):
Absolutely, Tom Yep, so proud of you guys.
Our future is very bright withfolks like you on the team.
Before I wrap, I wanted to sayone thing that SK Online.
One day I want to talk to youabout how you were able to find
a database of hackers to be ableto interview.
Tom Goldsby (34:28):
Oh, it got our attention when he was
interviewing with us.
Ted Stank (34:31):
Yeah, I have this picture.
You know how they show peoplelike all, with their silhouettes
all blacked out and their voicemodulated.
That that's how you weretalking to them.
Tom Goldsby (34:41):
Well, I think I see his hoodie hanging in the
background.
Ted Stank (34:45):
Guys, thanks so much for joining us.
Tom, as always, great to kickoff the new year with you.
We here at University ofTennessee are on the verge of
starting our winter springsemester next week, and so
everything's going to pick upfrom here.
We'll talk to everybody soon atour next podcast coming at you
in a month.
Thanks for joining us, asalways.
(35:06):
First of all, I'd like toinvite anyone who would like to
talk to SK or Hussein abouttheir research and maybe share
data with them.
Please contact us at gsci atutkedu, and with that we'll sign
off and talk to you next month.
Thanks, everybody.
Tom Goldsby (35:24):
Happy New Year Be well.
Intro/Outro (35:26):
Thanks for tuning in to Tennessee on Supply Chain
Management.
If you enjoyed the episode,subscribe today on your favorite
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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
(35:49):
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 the Tennessee on Supply Chain
Management podcast.
Great to be with you, the firstpodcast of 2025.
And I kind of had to checkmyself mentally there to make
sure I got the year right.
It's kind of like when we usedto write those checks and for
the first six, seven weeks, theyear right.
It's kind of like when we usedto write those checks and, for
(00:49):
the first six, seven weeks, gladto be with you and thrilled to
be joined not only by my goodfriend and colleague, dr Ted
Stank, but we've got a couple ofgreat junior colleagues joining
us on this broadcast today too.
But hey, ted, happy new year.
Ted Stank (00:58):
Happy new year, Tom 2025,.
How is that possible?
I?
Remember a time thinking thatlet's see if I could live long
enough, I might see the year2000 and I'd be 40.
And now it's 2025.
I can't believe it.
Tom Goldsby (01:10):
And we're a full quarter century past Y2K, right,
none of us thought we're goingto survive that.
Yeah Well, hey, ted, I teasethat we're going to be joined
today by some of our faculty inthe Haslam College of Business
Supply Chain ManagementDepartment.
Why don't we go ahead andintroduce those fine folks?
Ted Stank (01:26):
Yeah, I'd be happy to do that, tom.
You know, any greatorganization is only as good as
the new people that you continueto bring in to innovate and
bring their new ideas andthoughts.
And we have been really, really, really lucky at University of
Tennessee, supply ChainManagement, to have just a
phenomenal group of faculty Twoof our newest faculty your guys
(01:46):
are not our newest facultyanymore, but two of our newest
faculty are joining us today.
I'd really love to welcome bothof them.
Intro/Outro (01:53):
Hussein.
Ted Stank (01:54):
Abdullah is the Jim Bennett Fellow and Assistant
Professor of Supply ChainManagement with us, and SK Jong
is CSX Corporation Scholar andAssistant Professor in Supply
Chain Management.
They are both.
I know that commercial sayswe're not supposed to say this
because we're not really rockstars, but they're rock stars.
Hopefully Billy Idol doesn'tshow up and tell us we can't be
(02:15):
rock stars, but these guys arerock stars folks.
You're going to hear it fromthe kind of things they're
working on and couldn't be moredelighted to have them with us
on faculty at University ofTennessee Supply Chain
Management and as guests with uson the podcast today.
Guys, welcome.
Huseyn Abdulla (02:30):
Happy New Year, tom Tate.
Thank you for having us.
Seongkyoon Jeong (02:33):
Yeah, happy new year.
Thanks for having us today.
Tom Goldsby (02:35):
I will say that I chaired the search committee in
the fall of 2022, when we hadtwo faculty lines open and when
we had the interest of Husseinand SK and we thought if we
could just secure one of them itwould be a big win.
And, lo and behold, they bothdecided to join us and the rest
is history.
But, listeners, you're gonnaget a sense for why we're so
thrilled to have them on ourfaculty here momentarily.
(02:58):
But, ted, why don't we do alittle bit of a roundup, catch
up to look back as we close out2024.
We start the year 2025 and justtremendous happenings,
obviously in world matters, inbusiness and supply chain.
I've been out and abouttraveling over these last couple
of weeks.
I was with the supply chainleaders in action last week as
(03:20):
we planned our 2025 engagement75 senior supply chain
executives around a massiveU-shaped table and we talked for
a day and a half about theissues that were on their minds.
And then I just came backyesterday from Sunland Logistics
, a great partner organizationof ours.
I convened with their voice ofthe customer endeavor in
(03:41):
Greenville, south Carolina.
Again, a lot of great minds inone room talking about matters
of supply chain.
And hey, this will surprise noone out there, but the word
uncertainty continues to be thedominant theme out there.
A lot of that aroundgeopolitics and world matters
and general business, but ofcourse we can't talk long
(04:02):
without talking about a changeof administration.
Donald Trump gets sworn in onthe other side of the weekend
and you know there are a lot ofdiscussion as to what's kind of
bluster or negotiating tacticsand what's going to become
policy in a matter of days.
Ted Stank (04:16):
Geez, Tom, you've been out and about.
I've been ensconced over at ourbeach house on the coast of
North Carolina for this holidayseason.
I didn't realize any of thiswas going on.
I thought everything was justsmooth sailing, no turkeys.
Tom Goldsby (04:27):
Everything's hunky-dory on the coast.
Ted Stank (04:29):
Yeah.
Yeah, I didn't know any.
I'm really, really intrigued tohear what you're going to have
to say about what's going on.
I just going to climb out of myhole and think everything is
going on as always.
No, I'm kidding.
Tom Goldsby (04:41):
A lot of craziness.
Before all that, I was out onthe West Coast, out in LA, and
right before the wildfires Geez,actually, there were already
starting to be some fires inMalibu, as they're around the
Christmas holiday, but had noidea what was brewing Global
warming and climate change andeverything it brings with it.
And, of course, getting toGreenville.
Yesterday I had to take apretty roundabout way to get
(05:04):
there, just as you routinely dowhen you're heading to North
Carolina.
Ted Stank (05:07):
Yeah, why don't you kick us off, tom?
What do you think is yourbiggest?
I'm glad you confirmed thatuncertainty is the biggest issue
.
I did a podcast last week withone of our great partners,
project 44, and they asked mewhat is your one thing on top of
your list?
And I said uncertainty.
So why don't you dive into that?
What are some of the big?
(05:28):
Issues related to uncertaintythat you're hearing.
Tom Goldsby (05:30):
Yeah, I mentioned the change in administration and
I think we try to hold thingsin pretty close confidence with
the SCLA, just as we do with ourGSCI.
But I will share with you thatthere was some speculation on
the bluster slash rhetoric topolicy kind of ratio.
You know a lot of talk,certainly throughout the
(05:50):
campaign season and as itrelates to you know that
beautiful word, as Trump callsit tariffs and how that could
impact trade.
Also a lot of talk ofimmigration policy and how that
can impact business tax policy,immigration policy and how that
can impact business tax policy.
But I will say that the SCLAgroup came down somehow with
this 60-40 ratio that it was 60%fiction, 40% fact, of course.
(06:15):
Then you got to figure out well, which 40%, what's going to be
fact?
Is it going to be those 25%tariffs on Canada and Mexico and
10% incremental tariff on China, or is it going to be something
presumably less than that?
Also, in immigration, as ourguest Marian Wanamaker has
(06:36):
pointed out, all net growth inlabor has come from immigration
in recent years.
So this talk of rounding upillegal immigrants and
constraining legal immigrationis something that has a lot of
businesses very concerned.
Ted Stank (06:46):
Yeah, love him or hate him, donald Trump is a
disruptor, right.
I mean, that's what he's beenknown for his entire
professional career.
What he likes to do is to causeuncertainty and set a lot of
(07:07):
interesting positions that areat extremes, so that he can try
to find some middle ground onthings.
And so I kind of agree withthat maybe 60-40 approach.
That I think that we willdefinitely see changes in all
those areas you talked about.
Approach that I think that wewill definitely see changes in
all those areas you talked about.
But I think it's kind of astarting point for a lot of
discussions around tariffs,around immigration.
I mean, for one thing, some ofthe things just aren't
physically possible, like someof the immigration issues he was
talking about.
So now you're hearing morethings like, well, immigrants
(07:29):
with criminal records are goingto be the first to be deported,
that kind of thing.
I think in a lot of areas, it'sjust going to be wait and see.
The interesting thing we live ina time where there's so much
I'm not going to call itinformation, I'm going to call
it data being thrown at us fromso many different sources that I
think that most of us perceivethat we're in this crazy world
(07:52):
of turbulence and when you getbeneath those clouds of
craziness and you look on what'sgoing on on the ground, there's
certainly some changes on thehorizon, but things seem to be
going pretty well.
You know, I mean I think thatif you look at where we were in
this podcast a year ago, twoyears ago, talking about what
was happening with inflation andare we going to have a soft
(08:14):
landing, and the numbers thatcame out this week about
inflation, everybody said it wasgoing to show this huge
increase in inflation and guesswhat, it didn't.
So what's the Fed going to do?
Are we going to have moreinflation cuts this year or not?
And you get underneath all thatturbulence and guess what
Business is doing.
Pretty well, you know, tom, youoften talk about what happens
(08:35):
with retail sales over theholiday season as a real
bellwether for what's happeningwith consumer confidence, etc.
Retail sales during the holidayseason November and December
actually kicked up.
They were 4% over 2023.
Holiday sales.
Online sales were up 8.6%,right in line with predictions.
The inventory to sales ratiosomething you and I have talked
(08:57):
about a lot everybody wasworried it was going to be
really high because of all thestocking that retailers did
during the summer because of thefear of the the east coast port
strike, fear of tariffs thatare going to happen potentially
this winter.
Guess what?
Inventory to sales ratio hasbeen steady since the summertime
.
So I mean, partly we got toparse out all the stuff that's
(09:21):
being put out there in so manydifferent media formats from
what's really happening on theground, and that's hard to do,
you know.
Tom Goldsby (09:30):
Yeah, no, I agree, you know, as I was with our
friends at Sunland the lastcouple of days, I was kind of
setting the table and looking atsome of the barometer indices.
Certainly, you know inventoryto sales, holiday sales and
those things I'm on and, as youknow, I pay so much more
attention to consumer actions,sentiment I don't think
sentiment amounts to much thesedays, but global supply chain
(09:53):
pressure index from the New YorkFed continues to be below zero.
So that means minimalvolatility and global
transportation rates,manufacturing indices,
purchasing indices and so forth.
Also, we're seeing, as youpointed out, inventories in
check, inflation up a tad.
Bls data from the Fed showedthat unemployment continues to
(10:14):
be quite low and very much incheck.
So you're right, I mean thefundamentals are good.
And what I'll say, you know,having spent a lot of time with
some industry leaders the lastfew weeks, people are generally
bullish.
You know the term uncertaintydid come up quite a bit.
You know there's some anxietiesfor sure out there, but
meanwhile I think there'sgenerally a bullish outlook.
And you're right, I mean thefundamentals remain very strong.
(10:36):
And hey, somehow we did survivethat campaign and election
season.
There's no insurrection.
We've got a clean transition ofpower that looks to be
happening next week, so a lot ofreasons to be feeling pretty
confident.
Ted Stank (10:50):
Yeah, you know there was a title story, a cover story
, from the Economist back Ithink it was in December of the
American economy is the envy ofthe world.
I always like to read theEconomist because it's an
offshore perspective of what'shappening here in the United
States.
The US economy is the envy ofthe world.
Yet if you were to go out andask the person on the street
about the US economy and maybelet's push this back to October,
(11:12):
november, during the electioncampaign the person on the
street would say, oh no, we'rein a mess and one of the things
that I have had to reallyrecorrect.
So I'm an old dude.
I grew up watching people likeWalter Cronkite on the news, and
Walter Cronkite was the voiceof fact, right Whether it was or
not, we all believed everythingWalter Cronkite said as truth.
(11:33):
And now there's so manydefinitions of truth and one of
the things that I think we allhave to reset our dials on is
that the media, even themainstream news media, is viewed
as an entertainment industrynow, I think.
And to come out on the nightlynews and say, hey, everything's
cool, the economy's clickingalong the nightly news and say,
(11:56):
hey, everything's cool, theeconomy's clicking along, we're
all good Doesn't get people totune in, and so what we get is
everything's really bad.
You better go hide under yourbed and put your money in your
mattress, because the world isfalling and I think we just need
to reset our can I say our BSdials, to kind of go through the
BS.
Tom Goldsby (12:14):
You have given me an idea, though.
Ted.
I think maybe in the future, weneed to deliver this podcast
with that Walter Cronkite voice,or maybe you hey, I'm Dan
Rather, you're Walter Cronkite,something along those lines.
Ted Stank (12:26):
Huntley Brinkley.
My parents were HuntleyBrinkley.
Report people.
Tom Goldsby (12:30):
Now you're dating yourself, Ted.
Yeah, I'm definitely datingmyself.
Ted Stank (12:33):
But hey, you know what, tom?
You and I could go on talkingforever, but one of the things
we really touted with thispodcast today was the guest that
we have with us.
Let's start with Hussein.
Hussein does a lot of work onreturns management, works with a
(12:55):
number of our partners, does aproject in our advanced supply
chain collaborative on returnsmanagement, and I mentioned how
we had a really strong holidayseason with retail growth, a lot
of that coming from onlinebuying, and we all know that
that's a perfect world whereeverybody that buys something
online keeps that product andnever sends it back.
So let's get Hussein's take onthis.
Hussein, tell us some of thethings you're working on and
your perspective on both retailsales and the impact it's having
(13:17):
on returns management.
Huseyn Abdulla (13:18):
Yeah, first of all, I'm always impressed by the
resilience of retail industryin the US, and this goes way
back even during World War I andWorld War II.
We can see the traces of retailindustry showing extreme
resilience and sales increasingor keeping steady pace.
But one thing is also certainis that more sales means more
(13:39):
returns, and according to thelatest estimates by National
Retail Federation, we'reexpecting more than $800 billion
worth of products, which isabout 16.6% of entire retail
sales in the US, to be returnedto retailers this year.
And what this really means fora lot of the retailers is that
(14:00):
they will have to continuerethinking extremely generous
return policies that have beenoffered for decades now, things
that have become such a norm forconsumers that they take those
lenient return policies forgranted.
They feel entitled to thosepolicies and increasingly,
retailers realize that thosepolicies are no longer
(14:21):
sustainable.
They are not sustainable fromfinancial point of view and
they're also not sustainablefrom the environmental
sustainability point of view.
And what we see in this spacetoday is that a lot of the
retailers restrict theirlong-established lenient return
policies.
This is a trend that has beenongoing for the last six, seven
years I would say A prominentexample for this, which really
(14:45):
motivated our recent researchpublished in Journal of
Operations Management LL Bean'scase.
In 2018, LL Bean decided torestrict their 100 years old
return policy, which allowedcustomers lifetime return
windows, no question asked, fullrefund policies when they step
(15:05):
back from this longstandingreturn policy.
There was a lot of negativereactions in media, among
consumers on the forumdiscussions that why retailer
actually made this decision, anda lot of the consumers said
that we're not going to shopfrom LLB in a game and this kind
of sparked a question for usbecause we were kind of
surprised to see, even if thenew policy allowed customers to
(15:27):
return the products within oneyear, which is really a long
time period, we saw thesenegative reactions.
So was it just a few customerswho were extremely unhappy and
talking about it online, or wasthere more systematic reasons
why customers disliked when thisretailer stepped back from
their longstanding lenientreturn policy?
(15:48):
And hence we started ourinvestigation and what we find
was really interesting to us.
We found that customers reducedtheir trust into retailers'
ability in delivering goodquality service and, in general,
in retailers' goodwill whenretailers restrict their
longstanding reunion returnpolicies.
And, surprisingly enough, thisreally was independent.
(16:10):
This negative reaction wasindependent from the extent to
which customers actually returnproducts.
So even customers who say thatwe don't really return products
very often reacted negatively.
In our experiments with USconsumers to restrictive policy
changes of retailers and tryingto understand why, we revealed
(16:31):
that return policy leniency hasa very strong signal about the
retailer's service quality ingeneral.
It is perceived as an importantelement of the customer value
proposition.
So whenever you take it away,customers react negatively and
they react negatively indifferent ways.
They decrease their purchaseintentions with the retailer,
(16:52):
they reduce their intention tospread positive word of mouth
about the retailer, they reducetheir intention to spread
positive word of mouth about theretailer and they also have
less loyalty intentions.
Ted Stank (17:00):
Hussein, have you looked at actual sales numbers?
Have these retailers that havemade these policy decisions
actually seen a dip inpurchasing?
Because, as we all know that,for consumers, purchase
intentions don't always align100% with their actual behavior,
right?
Huseyn Abdulla (17:16):
This particular research.
We are trying to create a kindof a tightly controlled lab
environment where we candefinitely dig deeper into the
psychological mechanisms ofthese reactions.
But what we know, and accordingto some recent articles by Wall
Street journals, actuallysurveyed retailers report that
they experienced a reduction intheir sales after they imposed
(17:39):
return fees or they restrictedtheir return windows, and our
research really taps into whythis decrease in sales, the
actual decrease happens.
Ted Stank (17:48):
Okay, so the premise is that if you change and
restrict your returns policies,we've seen that it decreases
sales and your exploration iswhy?
Absolutely.
Tom Goldsby (17:59):
Yeah, that's fascinating to hear that.
It's a signal of the servicequality right and the work that
we've done previously in returnswhich, by the way, I will tell
you that we were originallylooking at last mile delivery
from advanced supply chaincollaborative research Alan and
Emily and I undertook and thecompanies with which we were
working some very prominentcompanies said you know, we're
(18:21):
actually getting pretty good atthe last mile delivery.
It's that first mile of returnsthat we're really struggling
with.
And, hussein, I know that whilea great deal of your research
kind of looks at that marketinginterface, I know that you also
have a strong operationsbackground as well.
What's kind of the state of theart in terms of that first mile
(18:41):
of return?
Are we getting any better attaking back that nearly 17% of
stuff that comes back after it'ssold?
Huseyn Abdulla (18:49):
Well, there, are a lot of developments,
especially with the advent ofartificial intelligence and
other technologies that we haveat our discretion.
We're getting increasinglybetter at forecasting returns,
for example, and I think returnpolicies is an important element
here, because return policiesset the stage and dictates to a
large extent the timing, volume,quality of those returns and by
(19:14):
applying this technologyartificial intelligence, for
example, or better machinelearning techniques we can
better predict those inflow andmake accordingly our plans
better in how we're going toacquire those returns, how we're
going to process those returnsand, most importantly, how we're
going to disposition thosereturns after we acquire.
A lot of the retailers havemade significant investments in
(19:37):
those techniques.
Some retailers choose tooutsource this return
acquisition, processing anddisposition processes.
They collaborate withthird-party logistics providers.
Recently, dhl went into thereturns processing industry.
They're planning to open 14returns processing locations and
offer services to a lot of theretailers.
(19:59):
So we do have differentapproaches, centralized and
decentralized, when it comes tomanaging returns, but overall we
increasingly see that retailersrecognize the importance of
returns on their financialbottom lines and try to align
the reverse supply chains withthe forward supply chains better
(20:19):
.
Tom Goldsby (20:20):
Yeah, you mentioned DHL.
I think they made aconsiderable acquisition over
the holiday to buy Happy Returns, one of the foremost players
out in that space, and there'sjust an awful lot of activity
going on out there.
But it's fascinating to hearthat we're getting better at
forecasting returns.
Hey, ted, correct me if I'mwrong, but don't we continue to
struggle with demand forecasting, don't we?
(20:41):
But we're getting better atreturns.
Ted Stank (20:43):
Oh no, no, Forecasting Tom for decades has
been relatively stable andprobably close to 100% accuracy,
I think.
Right, yeah.
By the way, another major focusof our advanced supply chain
collaborative work is to reallyget a laser focus on how to
improve planning.
We've talked in the past abouthow we think that's one of the
last great frontiers ofimprovement in supply chain
(21:03):
management and now, with 16% ofretail sales coming back, we
need to get better about that aswell.
You know, hussein, it alwaysamazes me that there are some
retailers that build theircompetitive advantage, if you
will, on their returns policy.
Ll Bean was one of those, asyou suggested, for 100 years,
and now they're not.
(21:23):
I mean, people always boughtfrom the LL Bean catalog because
you knew that if you bought it,you could return it, and that's
what they were known for.
Tom Goldsby (21:31):
Yeah, that was the premise of Zappos right.
Amazon got tired of competingwith and bought Zappos right.
We can't avoid the Amazoneffect in all of this right.
I mean, it certainly has drawnus in and that kind of guarantee
of great customer experience,hussein, can you kind of speak
to.
What role then that returnspolicy at Amazon has across the
board?
Ted Stank (21:51):
Before Hussein talks to this I don't know if you've
seen commercials over theholiday season.
You can now buy Hyundai cars onAmazon at pretty good prices
and have it delivered to adealership near you.
So what's the returns going tobe like on a Hyundai SUV?
Tom Goldsby (22:07):
Maybe an asterisk on that return policy for that
one, I don't know.
Huseyn Abdulla (22:10):
Yeah, what is unique about Amazon's approach
to returns is that Amazon neveroffered the longest return time
window to their customers.
There are a lot of retailersdepartment stores, big box
retailers who offered likeopen-ended return policies or
return policies of one year, noquestions asked.
But what happened with Amazonis that they were the most
(22:32):
successful in aligning returnswith the rest of their business
model.
For example, they offered trybefore you buy service in 2018,
and they're going to actuallyend that program by the end of
this month.
By the way, they wereessentially capitalizing on
customers buying severalproducts at the same time,
(22:52):
trying at home and returning theunwanted product.
But that was an entryway forthem to sign up for the prime
membership, which was a primarysource of revenue and profit for
Amazon for a long time.
So they do things or they aligntheir customer experience with
their return policies in a waythat allows, for example,
returnless refunds.
(23:12):
So they say keep the product,here's your refund, because
processing that return, theyknow that it's going to cost
even higher.
So this kind of alignmentprocess, policy alignment
determines success when it comesto returns management, I
believe.
Ted Stank (23:28):
So we've touched on a theme here that kind of keeps
emerging about this wholereturns industry, retailers,
clearly and that's aroundplanning, which touches on data
and new techniques like AI, etc.
So increasingly across thesupply chain we are getting new
sources of data, tapping intoconnections with suppliers, with
(23:50):
customers, to get data, all ofwhich makes us much more
interconnected across the supplychain, which is a great thing
for transparency, for planning,for improved operations.
But interconnectivity has adark side, doesn't it?
I have a son who's a computerengineer and he said every time
you guys in supply chain make aconnection with another entity,
(24:11):
it puts us in more danger ofbeing hacked.
Sk Zhang is one of our othernew faculty members with an
expertise in cybersecurity.
Sk, what's your whole take onthis new world, not only in the
retail world but of end-to-endinterconnectivity that we're
rushing headlong into, andwhat's your research telling you
(24:31):
about the big issues and themesin that area into?
Seongkyoon Jeong (24:33):
And what's your research telling you about
the big issues and themes inthat area?
Thanks for a quick summaryabout the change in the
interconnectivity between peopleand companies.
It is very true that afterCOVID-19, everything has changed
a lot, especially theinter-organizational interface
and even interpersonalinterfaces.
So what we saw everybody nowknows this kind of fact that the
number of cyber attacksincreased a lot as we went
(24:57):
through COVID-19.
And then at the same time, sothe term supply chain cyber
attack is emerging too.
Right, many cyber attacksemerged from suppliers.
Basically, suppliers were theroutes of the heck.
What's really interesting isthat many companies, many buyers
, let's say, blame suppliers.
It's not us, it's the suppliersthat didn't keep the compliance
(25:21):
or policy so that we had a hackincident.
So one question is like well,okay, they are rational.
Is that maybe by making thatkind of excuse, they were trying
to avoid that kind of blame,right?
So does that really actuallywork?
So we actually looked at stockmarket reaction.
If they actually say, oh, thisis because supply chain or the
accident that was actuallyoccurred by the supplier's fault
(25:43):
, is there any kind of financialoutcome difference?
And we found that there was nodifference, which means
investors know it's not justsupplier' fault.
It's your fault too, becauseyou didn't manage the supply
chain well right?
At the same time, then, doinvestors penalize the company
for not managing supply chainwell Well, we found that when
(26:07):
the supply chain cyber attackoccurs with data breach or
operational disruption, thepenalization is much harder and
harsher.
So it's not just about makingexcuses.
I mean, companies should reallybe transparent about what they
do and they should beresponsible for supply chain
cyber attack.
Don't just make excuses.
It's also within ourresponsibility domain.
Tom Goldsby (26:29):
Well, that's fascinating to hear and you know
we've been studying supplychain risk now for more than 20
years and, as you kind of paintthe picture, sk cyber is
distinct in the forms it cantake, the threat it can present
and also, as you're suggesting,the fallout that comes with it
when the world does learn of acyber attack.
(26:49):
Now Ted kind of put thispremise out there.
He and I, for nearly threedecades, have been saying manage
business relationships, yes,selectively, but deep
relationships are very valuable,but those deep relationships
have to be supported withinterface and a lot of that is
data.
So what perils do companiesface as they have these close
(27:12):
ties and do manage them on aselective basis, but, to your
point, it presents vulnerability.
So what steps can companiestake to enjoy the upsides of
that engagement without maybesome of the downside potential?
Seongkyoon Jeong (27:25):
Sure, Let me introduce another study of my
research team.
We looked at the digitalizationbenefits and, let's say, perils
as well, by industry.
The pace of digitalizationdiffers, right, and we found
that there is a kind of veryinteresting pattern as
digitalization goes up.
There is evolution pattern ofcyberattacks.
(27:46):
Basically, the firstcyberattack wave is like social
engineering-based cyber attack,so the focal company would be
under attack by scam mails orany kind of social engineering
tactics based cyber attacks.
And then what companies usuallydo is they just increase the
counter measure.
For example, they train theiremployees better, they apply
(28:09):
more tight information policy.
Then what hackers do, as far asI know from the interview with
actual hackers, is that hackersfind out another route.
So suppliers are the weak linkof the cybersecurity.
For example, let's say let'smake this kind of analogy you
are attacking a fortress.
(28:30):
The main door is defended byreally bulky guys.
What are you going to do?
Are you going to fight thoseguys?
Maybe you're going to find theback door right, you're going to
find a channel or mode and youcan fly into the fortress.
For example, suppliers areusually not really cognizant of
the cyber attack issues.
So there was one veryinteresting survey by MSNBC back
(28:52):
in 2020.
Very interestingly enough,suppliers or small firms are
more confident aboutcybersecurity, which is very
weird, right.
Typically, cybersecurity is afunction of investment and
attention.
So, for example, google I'msure they have a fantastic
cybersecurity system, right, butsmall companies they don't have
(29:13):
enough resources to invest incybersecurity systems, so they
are typically weak.
And then hackers usually findout routes through the suppliers
and eventually they get accessto their buyers, which are the
biggest companies of the world,for example.
Ted Stank (29:28):
SK.
To your point, one of the mostnotorious cyber hacks happened I
don't know six, seven years agonow, when Maersk, the big
shipping company, was hacked,and it impacted all of their
customers as well, which aremainly every Fortune 500 company
in the world and everybody else, and that hack came in through
(29:48):
an HVAC maintenance company attheir headquarters in Denmark.
Seongkyoon Jeong (29:54):
Yeah, it's very interesting.
Back in 2013, target was hacked, right For the same reason.
The HVAC company was leaked,basically, and one of the
credentials was hacked and then,using the HVAC company's
credential, the hacker got intoTarget's system and they stole
the personal information of allthe customers, including credit
card information.
(30:14):
Okay, and that was really afiasco for Target.
Tom Goldsby (30:18):
And we just had some HVAC work done here at the
house last week and I didn't domy due diligence.
Now I'm getting a little bitworried about these HVAC vendors
.
But it does speak of an addedvery important criterion to
supplier selection logistic,service provider selection,
customer engagement thathistorically we're concerned
(30:39):
about.
Let's look at the inbound sidethe quality of those inputs, the
assurance around it, theability to meet the quantity
needs, quality of the personneland the relationship potential.
But now we need to add cyberprovisions and protections very
much to that selection portfolio.
Ted Stank (30:57):
Hey SK.
What have you seen in companiesramping up their talent base of
cybersecurity experts in theirIT departments?
Seongkyoon Jeong (31:06):
So let me talk about that issue more deeply.
For example, can there be anyperfect, let's say, panacea for
cyberattacks?
So my answer is well, it'ssomewhat like ever-evolving
fight of the cyber attackspattern, which is ransomware
(31:28):
attack.
Ransomware attack didn't exist10 years ago, and then now it's
really rampage, right, and then,probably from last year, we saw
a lot of AI-based attacks.
Now hackers can make reallyconvincing paragraph to fool
people, right?
What I'm saying is that can wehave a full, perfect system or
(31:49):
perfect supplier selectioncriteria for this kind of issues
?
My answer is probably not.
So what I would rather say iswe may have to have some
perpetual interest in this kindof domain, adapting to any new
emerging patterns.
So I guess you're right thattalent management is one of the
biggest questions in this case.
(32:10):
Who has this good catching uptalent and adapting or adaptive
talent as well?
Some people would say AI mayhelp.
That's true at the same time,not really true.
So one of our other papers ormine actually addresses the
impact of AI or automation invulnerability management, and we
(32:30):
found that that tool helps.
We found from the JavaScriptecosystem that that kind of
automation tool applied byGitHub helps the resolution of
vulnerability maybe two timesbetter than the regular way.
However well, as we saw fromany kind of our personal use of
ChatGDP, you don't actuallyapply all AI suggestions right
(32:53):
away, so there is a complexitywhen you apply the suggested
ways.
So because of this kind ofcomplexity, there is a huge
variance of the resolution time.
My point is like AI may help,yes, at the same time, supply
selection may help, but it'swhat really matters is the
people and our interests.
Supply chain cybersecurityAction may help, but what really
matters is the people and ourinterests supply chain
cybersecurity.
Tom Goldsby (33:12):
Well, it's good to hear that AI has another use
case potential.
Again, that was the hot topicthe last few weeks, as I've been
out on the road engaging withsenior supply chain executives
finding that use case and, dareI say, there was some suggestion
we need to return to small data.
I think, sk, your suggestion isthat maybe that's a good idea
to be more selective in thenature of the engagement and
(33:33):
more focused on the applications, what we're looking for.
But, sk, thank you so much.
We hope that, by virtue ofbringing SK and Hussein onto the
podcast, the chance to showcasethe talent that we have.
We are so fortunate that SKjoined us out of Arizona State
Again, it's such a great programand Hussein out of equally
esteemed Texas A&M back in fall2022.
(33:56):
And it's been our good fortuneto have you.
They're having tremendoussuccess as you can pick up on
the research front, publishingin top tier journals but also
doing that great applicableresearch that we value so much
at UT.
Ted Stank (34:11):
Absolutely, Tom Yep, so proud of you guys.
Our future is very bright withfolks like you on the team.
Before I wrap, I wanted to sayone thing that SK Online.
One day I want to talk to youabout how you were able to find
a database of hackers to be ableto interview.
Tom Goldsby (34:28):
Oh, it got our attention when he was
interviewing with us.
Ted Stank (34:31):
Yeah, I have this picture.
You know how they show peoplelike all, with their silhouettes
all blacked out and their voicemodulated.
That that's how you weretalking to them.
Tom Goldsby (34:41):
Well, I think I see his hoodie hanging in the
background.
Ted Stank (34:45):
Guys, thanks so much for joining us.
Tom, as always, great to kickoff the new year with you.
We here at University ofTennessee are on the verge of
starting our winter springsemester next week, and so
everything's going to pick upfrom here.
We'll talk to everybody soon atour next podcast coming at you
in a month.
Thanks for joining us, asalways.
(35:06):
First of all, I'd like toinvite anyone who would like to
talk to SK or Hussein abouttheir research and maybe share
data with them.
Please contact us at gsci atutkedu, and with that we'll sign
off and talk to you next month.
Thanks, everybody.
Tom Goldsby (35:24):
Happy New Year Be well.
Intro/Outro (35:26):
Thanks for tuning in to Tennessee on Supply Chain
Management.
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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
(35:49):
curtain on the world of supplychain, educating and
entertaining you along the way.
Until then, listeners,
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