Supply chain workflows are 'very close' to pre-pandemic levels: DHL CEO

DHL CEO Scott Sureddin sits down with Yahoo Finance Live to talk about the state of the supply chain, progress made in hiring and automation, and inventory in warehouses and ports.

Video transcript

- Well, the supply chain could be facing new concerns as retail warehouses fill up with excess product and consumer demand falls. We have Scott Sureddin-- he's DHL's supply chain CEO-- here with us. And, Scott, let's just first talk about what's going on in the supply chain landscape because we are still seeing some congestion. We do have trade tensions. There are labor talks with workers at some of the nation's biggest ports that still have yet to be resolved. What's your assessment just of the current environment?

SCOTT SUREDDIN: Well, it's definitely stable. I mean, besides those things right there, we are actually moving volume very, very well. But I will say inventory levels are really building. So we're kind of seeing pre-pandemic levels of inventory build so it'll be interesting during the peak season, especially with customers that are-- I would say consumer packaging goods and fashion, apparel e-comm, how they get their inventory out, how they're going to discount, how they're gonna do promotional strategies.

I will tell you our plan is being the largest supply chain company in the world by 2x, in North America by 2x. We will add 12,000 associates just in the fourth quarter to handle the volume and to move volume out. And that's about what we added last year. We also added about 1,500 collaborative robots last year along with 12,000 people. And we'll add about 2,000 collaborative robots this year along with the 12,000 seasonal associates to handle the volume.

- In terms of the flow of goods globally, how close are we to pre-pandemic levels?

SCOTT SUREDDIN: We're very close. Especially in certain categories. When you talk about the automotive, there's still a chip issue there. But we are talking about with inflation and everything going on, people are getting back to the basics and buying consumer packaged goods, buying e-commerce items that are needed. So a lot of volume is going in those sectors or those industries.

- And, Scott, what about some of these retail inventories that were sort of stuck in this bottleneck and then suddenly came into play? We're seeing this buildup of them in US warehouses. How is that affecting business?

SCOTT SUREDDIN: I mean, well, our revenue [INAUDIBLE] because of that, once again, being the largest. And we have 497 operating sites in North America and 151 million square feet. I'm investing over $400 million this year into 5 million more square feet. Plus, we will lease buildings too. But it comes back to my point earlier around we're working with our customers now and what their strategy is to unload the inventory during the peak season holiday season and what their promotion strategy is going to be because, to your point, the inventory is here now. It has built up. And now it needs to get out to the end users.

- Scott, what about the demand side of the equation, right, because there are some fears-- although the economy remains very strong. That was evident in the latest jobs report. But there are some fears that we could see a significant slowdown or just a slowdown in general over the next couple of months heading into that holiday season. Are you starting to see any evidence of that just yet?

SCOTT SUREDDIN: Everyone's talking about the demand headwinds. And I'm not seeing it yet. I mean, just to give you an example, we have 45,000 associates in North America. That's 10 and 1/2% up from where it was December of 2021. So we're still adding people, shipping volume. I'm with you. I think there will be movement in certain categories because of inflationary pressures. But we've not seen any major slowdown at this point with our growth in the supply chain industry.

- The massive backlogs at LA and Long Beach ports have now been cleared. But there is still concern about dockworkers continuing to work without a new contract. How big a concern is that? And if they were to strike, how debilitating would it be?

SCOTT SUREDDIN: It would hurt the entire North America. It would hurt the world economy. I mean, it would be bad. So the good thing is they did agree on the health care piece of that. But, yes, there is-- even though we said we've cleared a lot of backlog, we've built up our inventory, there's still backlog. There's still a lot of inventory sitting in warehouses in the ports, sitting on rail yards trying to get moved.

So we've not cleared it all. But it's better than what it was. And, yes, we need to make sure that not only their contract gets done, but also we do more automation in areas like that because automation will help us in the future of handling the volume. Today, you can't get enough employees to move the volumes. You need some sort of automation to help offset with the labor.

- And to that point, Scott, what sort of investments are you making in innovation? Obviously, this direct to consumer model isn't going anywhere. A lot of people still-- that's how they're going to be purchasing their goods in the future. What does that mean for the investments that you're making there?

SCOTT SUREDDIN: So as I mentioned, we have 2,000 collaborative robots just in our warehouses. We're doing autonomous forklifts. So we have a big accelerated digitalization agenda. A lot of that's around, first, robotics. And the second piece is around data and how are you using data to be more efficient and making sure that we're looking at the right things.

So we are making big investments in that. I can't give you an exact number. I don't know exactly off the top of my head. But it's several hundred millions we do make investments in robotics and automation. And it's really getting better. It's really going to help us out in the future. DHL is one of the biggest leaders in putting in automated solutions in our warehouses.

- All right, Scott. Appreciat it. Good stuff. Thank you, sir.