Thank you.

A lot of people say, "Well, AI is gonna be disruptive." If you think about, uh, disruption in the Clayton Christensen disruptive innovation theory, you know, there are a lot of the characteristics on AI systems that make them a candidate for this type of disruptive innovation.

Uh, one of the key features in the disruptive innovation theory is, uh, you see an improvement curve, right? So you see a technology that initially may be, uh, uh, not quite good enough for a lot of applications, okay? But as you go to larger, uh, as you go to larger models, you ingest more data, the systems get, uh, con-continually improve, okay? So you see a lot of these characteristics on systems that employ AI that you would say make them good candidates, uh, for disrupting something, okay? Now, what Clay used to always say is like no technology inherently is disruptive or sustaining.

It depends a lot of, uh, it depends to a large extent on, you know, how it's used, how it's going to be framed, how it's going to impact the business model.

I think what we're seeing is a lot of people using new AI tools in very sustaining ways.

In other words, "I'm going to use this new tool, uh, uh, in my existing processes, but I'm gonna use it to give me more performance, to give me a better product, to, uh, give me more precision, okay? Or to do it less exce-expensively." So I think we're seeing a lot of, uh, productivity-enhancing applications of AI, right? Especially when you look at some of these like- Automated inspection systems and things like that.

It's like, how do I get to a higher yield faster, right? And a lot of that is how do I, um, how do I digest all this information from all these sensors that is coming at me, uh, and then, uh, make a quicker improvement on, uh, my existing process? If you go look at, uh, Toyota's manufacturing line, okay? You know, uh, if you look at the new setup they have in their, uh, factory in Georgetown, Kentucky, okay? They have put in a lot of vision systems, and they're using machine learning, and one of the things they're trying to do is they said, "We wanna present to our workers, uh, more information so they can correct problems more quickly, okay, or they can make improvements more quickly." Right? So I see a lot of people using these tools, uh, in kind of a sustaining way, as like how am I gonna make my existing product better?

Mm-hmm.

So what's the first step that you would recommend for an organization who wants to assess their supply chain, identify their vulnerabilities, and begin to fix them?

Well, I, I, I think the first step obviously is mapping your supply chain.

And while that sounds obvious, it's actually a much harder task than most people appreciate, okay? And the reason is because these days, uh, with kind of the division of labor and specialization of many, uh, firms inside the supply chain, uh, we have many tiers.

So for example, I might be a manufacturer who will rely on 50 or 100 suppliers, okay? And those immediate suppliers are what I think of as my first tier suppliers.

Okay, those first tier suppliers will in turn rely on others, uh, and so on.

So you'll have kind of this layer cake of suppliers.

Uh, the numbers get very large very quickly, uh, for complex products.

That seems to be your favorite solution.

I guess I wonder, as the expert in the field, what you thought, uh, when you read the news the other day.

Well, when we first had some of these shocks, it's like, how do I work my way around some of these things? And now we're into a phase where it's like, I don't know what's gonna happen any given day, but what I have to do is I have to think more about how do I design my supply chains? How do I design my world to be more resilient? 'Cause now, you know, the surprises aren't so much a surprise anymore.

It's like, okay-

Yeah, yeah.

Uh, but then, you know, a lot of these things take a while to work their way through the system, right? So for example, for most of last year when we had imposition of a lot of tariffs, we also had a lot of people front-running and loading up on inventory to try to beat those tariffs, and then, you know, the latter part of last year was the giant de-stocking cycle where people burned off that inventory.

And now it's like, well, how much do I have to restock? Okay.

But it's gonna be at higher prices.

So, you know, it's hard for me to think how we're not gonna see price increases-