The Impact Of Onshoring On Wholesale Distributors

[00:00:00] Sponsored each week by Lead Smart Technologies, Tom Kevin and their guests review the news of the week and dive deep into the topics impacting manufacturers, the whole-sale distribution, independent sales agents, and the global wholesale supply chain.

[00:00:25] Whether it's M&A, Sass and Cloud Computing, B2BE Commerce or Supply Chain Issues, we peel back the onion with our guests into the topics that impact your business the most. How are you this morning, John? Doing okay. Doing okay.

[00:00:41] We're a good cloudy day in Santa Barbara, Prism. I know. Sunny, but cold. Oh, Sunny, but cold. Yeah. Good. Rain at the end of the weekend, I think. Supposedably yes, supposedly. Very good. Well, hey, good morning everybody.

[00:00:55] Kevin Brown here with Life Long Friend and Business Partner Tom Burton. We get together every Friday morning here alive on LinkedIn, live Facebook Live and YouTube Live. And we discuss kind of the news of the week and what's going on and a little bit about the economy.

[00:01:15] Sometimes like today, we're going to talk about regulations related to AI, talking about technology, mergers and acquisitions. And so forth. What we do is we try and unpack all of that data and bring that back to how that impacts wholesale distribution and manufacturing.

[00:01:30] And you know, day in and day out, we see these changes. There's things that go on in the news and we kind of bypass them pretty quickly, but they get out of significant or major impact on what's going on within the markets that we work with,

[00:01:43] which is again, wholesale distribution and manufacturing. So our show each week is based around a newsletter that we send out on Friday mornings. It's called Around the Horn in wholesale distribution, shocking.

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[00:02:02] If you're live with us, if you're listening on the podcast that goes live later in the day, you can just pop us a note two different ways you can do that. One is at our website for the podcast, which is www.aroundthehornpod.com.

[00:02:17] You can see all of our previous episodes there as well as a register to get the newsletter or simply just send us a simple email to helloatleadsmarttech.com. And we'll get you on that list right away.

[00:02:32] So as we go through the day and day, we're going to be looking through some articles that we curated from throughout the week. We're going to talk about that. We'll look forward to comments from folks that may be joining us live.

[00:02:43] So if you're out there live with us today, I know we had, I think just from the small LinkedIn audience that registered to come. We've got three or four countries represented there at least.

[00:02:54] And historically we get five to seven countries and I don't know, three, four hundred people on the live show each week. So we enjoy that. Share some comments and thoughts even if you just say hello and where you're from.

[00:03:06] So last part of this time, I guess we should talk about who sponsors this, which is leads smart technologies.

[00:03:14] It's the company that Tom and I co-founded and work for and leads smart puts the dollars behind us so we can produce this each week when we get done with this live session this morning. And editor takes it and he costs money and so forth.

[00:03:27] So if a good folks at leads smart do that. Lead smart is a AI enabled CRM and customer intelligence solution. It's built solely for wholesale distribution and manufacturing. We don't work with companies outside of that arena and that scope.

[00:03:42] We bring my 35 years of experience in wholesale distribution in Tom's 30 plus years in technology together to bring a solution that works great to accelerate growth. So Tom, I've spewed enough. You want ready to get us rolling? Let's get on with the news here. All right.

[00:03:59] So for months, maybe maybe close to a year. We've popped a little article in like we do this particular one is from CNBC that we're posting here that is talking about. Dows rally up almost 100 points after a little bit of a Fed announcement.

[00:04:18] We've been talking about us simmering kind of. We've got a lot of, uh, the farjick economy that we've had for quite some time. What are your thoughts on the Fed the other day? Well, you know, I mean, they were definitely more accommodative in their messaging.

[00:04:36] A little bit of a different part. I've said a great term. Yeah, I and definitely a different tone. Obviously, you know, the market's been going crazy up even before that sort of expecting. I think of that at this.

[00:04:51] I think they even exceeded expectations a little bit, which then drove the market up. What 600 points the first day and I think that's our crazy. So it's a little bit. I don't know.

[00:05:03] It's it's it seems a little bit upset excessive, I guess, but the fact is as they yeah, I think for sure we will have interest rates being cut next year. So we'll get to three times possibly even more, depending upon what happens.

[00:05:18] But I think three is what everybody's expecting. So they hinted at right? You know, if I found that particular point of it kind of interesting because I'd have to go back and look in research.

[00:05:29] But I don't think they've kind of forecast and had some ideas when they were looking to start raising interest rates and they accelerated that pretty quickly. And we'll see if they if they do just that small small number of three or if it's maybe a little bit more.

[00:05:48] Yeah, I don't know. But anyway, they're they're hinting at three and in the market certainly seems to like that. I think it's more than just that the number is that okay, we've reached the summit now we're on our way back now.

[00:06:01] I'll just share though real quickly, you know, we've talked a lot about over the last few weeks about just the economy and the consumer and all of that.

[00:06:09] We get a little exercise at home and we use quick and to track all of our expenses and everything, you know, our household expenses.

[00:06:18] And so we went back to Q3 of 2019 right before COVID and we looked at all of our household expenses groceries, you know, rent whatever all the different things that just day to day living not actually trims or anything like that.

[00:06:33] And then compared it to 2023 Q3 so right now and basically everything to live the way basically the same way we were living in 2019 was about 28% more. So inflation in our in the Burton house is 28% over three years or cost of living is 28% over three years.

[00:06:58] Now it was by far the biggest one, it was up almost 40% of compared to where it was then but you know yeah the fact is is that.

[00:07:09] Even though we're now going to see interest rate cut prices I think for the average person are obviously significantly higher for the cost of living unless you're a united auto worker employee that got a big raise right most people aren't getting those types of raises so.

[00:07:24] I think you're what's what I was saying when you were away I was wondering if you've got a raise that I'm not aware of.

[00:07:29] I wish I wish yeah I did I didn't notice that so and that's probably not tied to you switching from central coast, peanut or no, to French border. That's 20% right no we're still doing Charles shots so everything still the same very good.

[00:07:48] I think that would be a very dangerous exercise to do in our house, but it is it's intriguing you know but you live there in Santa Barbara by the Hollywood stars and so forth so.

[00:07:58] But probably relative right because you know incomes are tied typically the whereas if codes are.

[00:08:04] So we probably see some similar across the board but I think you know looking at this right is there's a risk to all this you know frothyness that we're probably seeing I think the market's up right now.

[00:08:17] And things are you know doing well day after day interest rates or mortgage mortgage rates were below. 7% yesterday for the first time and certainly I think this year right and we'll see what there's an easing on consumer credit and so forth coming but.

[00:08:38] I think we talked a little bit before we got together today about the I'll just call the potential boomerang effect right because we could find ourselves in just another pickle again if we go back to you know very quickly and I don't think we're going to see you know 2.8% mortgage rates or or free money like we did in a lot of places but you know I think it's interesting too is kind of almost ties back to covid times with you know government.

[00:09:07] And people started spending and you know. You never saw the Amazon truck as much as they did during the you know heat of covid through the neighborhood.

[00:09:18] And I think those spending things are interesting but I think there's a risk right now right that we go into a into a little boomerang effect that we get.

[00:09:26] Right start to drop people start to buy people start to spend too much again and we get hot and heavy and we've got to get some adjustments. So hopefully there's some cooler heads that prevail through this.

[00:09:39] Yeah and if and again if companies are forced to increase salaries right to keep up with our. But the fact that everything is 28% more expensive that's also going to put so yeah there is a lot of.

[00:09:52] I mean, I mean, I first of all, I want to it's I think it's obviously good news that. That the tightening process I believe has come to a close and we're going to get a bit towards normal.

[00:10:05] I think the key is is looking at this more towards normal and not looking at it is okay party time. Right but I do think that all said I think we are going to see a lot of party time over the next 12 months.

[00:10:17] And because of this, you know, just and there has been a lot of money on the sideline in the stock market and as they start cutting more rates I think you're going to see more more money going in and prices going up.

[00:10:29] So I think it's going to be interesting. I think we need to kind of roll this back to you know the audience that we look to address here by the way, good morning Mike from looks like it's snowing in Minnesota this morning so.

[00:10:41] We say, out there and but as we tie this back to wholesale distribution what's it going to be interesting to see and. I'm going to look at some chats later in the day and early in the week with a few different distributors and I'm going to.

[00:10:55] Chat with them about this you know we've talked about this we've had comments from distributors on the show recently about you know they had a lot of inventory coming out of COVID because they bought so much because you know if they're depending on what commodity they sell is products they sell.

[00:11:09] But you know it really ramped up inventories and then we hit this spot where money got really expensive.

[00:11:16] But a lot of folks had plenty of inventory so I'm wondering if what we'll see at it is is the high cost of money has an impact it also distribution nearly as much as we might think it would.

[00:11:28] Or has another sectors because those high inventory rates have been bleeding those off and I think we talked with Paul Kennedy about this few weeks ago. You know and getting inventory's balanced a little bit better now and then cost of money now.

[00:11:42] Should be balancing out here pretty quickly. That maybe maybe we see some almost minimal impact out of all of this could be. And maybe that's a good way to bridge into this next article about the on showering and the.

[00:11:57] Yeah, yeah I think that said you know we've talked about this quite a bit I thought this was it just again if you're if you're listening to the recorded podcast on.

[00:12:05] Apple or Spotify or any other podcast formats later on we have a newsletter that we have up on our screen on the live broadcast today that we're looking at we show some articles that we post in our newsletter each week but this is from more of an investor standpoint and.

[00:12:24] This is from seeking alpha and they talk about on showering it's impact on US center companies and they talked about this very quickly about the feds you know actions raising interest rates and tightening lending what that would do.

[00:12:39] And putting pressure on economic growth so in capital spending and that's on showing in the short term.

[00:12:46] Well now I think we're going to see this opportunity with easier to build right if we've got more interest rates coming down and and long rates coming down easier to build new facilities easier to make investments and so forth I think we're going to see the ramp of this going up.

[00:13:02] Well there was a graph in that article that showed the I mean literally straight up. Yeah, the number of companies that are either considering discussing or planning to do move things on short. Yep and.

[00:13:15] And that by itself economically could have a major impact right because now look at the jobs look at the things that are granted you know you can talk about AI and other things optimizing it but it's still things are happening here versus there.

[00:13:28] There is going to be a positive impact from that. Well I think you're absolutely right, you know there's a jobs impact there's all the things that go with that right where the way your construction trades or you're working in a warehouse or whatever it might be.

[00:13:40] But what would intrigued me is they talked a little bit about even this you know kind of starting pre COVID but I think COVID was really that I mean it just the world had to see it right. Yeah, you know it grabbed your nose into the problem.

[00:13:54] I think that's exactly right when all of a sudden you're realizing you know pre holiday times that you've got all these backlogs of ships in in the ports and throughout China you know trying to get stuff.

[00:14:07] Just ports are shut down factories are have your shut down goods aren't being produced.

[00:14:12] We'll talk because we look later in this article about you know some of the geopolitical stuff that goes with that but just in general right we saw what what people that were watching it closely were seeing.

[00:14:24] Pre COVID and now are seen that are watching things within within specifically China a little bit more southeast Asia but mostly China in the setting is.

[00:14:34] You know to your point right we got a rep nose rub didn't right when I could see tankers backed up are not takers but container ships backed up I live about 40 miles south of the.

[00:14:45] L.A. Long Beach Harvours here in Southern California and there were tankers backed up as far as in in container ships backed up as far as where I let waiting to get up there so interesting pressure there but you know and then we you mentioned earlier briefly Tom it's.

[00:15:01] I think we have a lot of people who are working on the rightfully from a standpoint of we have all these whether it's AI or just general commercial tracking tools and so forth for manufacturers and suppliers.

[00:15:13] And and distributors to track JIT inventories it's just so much easier to manage things at this stage of the game and it's just going to get better.

[00:15:22] And as we technology grows AI grows and so forth but I think the big thing people are really looking at is the geopolitical tension. You know and it's it's a whole lot easier to get goods out of Mexico.

[00:15:37] If there's geopolitical issues in Mexico or somewhere else in Latin America then there is coming across the Pacific. So yeah I mean it's it that article to me was very literally the graph was like straight up and.

[00:15:53] Yeah, so certainly this is not something that we've seen the last of. Well I mean you just you see there's you know whether it's.

[00:16:02] You know G7 getting together and you know you've got China flexing their muscles or potentially you know supporting Russians and things that are counter to what the US is trying to accomplish and. I think if you were had an opportunity to sit into some board rooms.

[00:16:18] And listen to some of these discussions you really hear what's going on with all this but. But it'll be interesting the other part of it too is a the historical talk that I hadn't been thinking about.

[00:16:29] Is energy costs and energy costs here are so much lower than in a lot of parts of the world I didn't speak to to China but it talked to Europe about Europe.

[00:16:39] And about how high energy costs are and we just you know what is a you know 1000 British their B to use British thermal units cost. In gas to run a plant it was dramatically less here so a lot of things going on with that.

[00:16:53] All right so she will move on to the. Let's keep yeah let's keep talking about manufacturing because. But I'm going to I'm going to bend this article this next article about digital twins. A little bit both for manufacturing and distribution the articles from facility executive magazine and newsletter.

[00:17:15] To the talks about will digital twins revolutionized manufacturing you know we've talked about. The industrial revolution for we've talked about web for we've talked about we've talked regularly about AI.

[00:17:28] Tom before we dive too far into this one and ask you give us the readers digest quick view of what is a digital twin for those that haven't been with us before when we've talked about that.

[00:17:39] Well I think obviously the term is using a lot of different ways and a lot of different places but as we're relates to manufacturing think of it as a clone. I don't know if I'm going to be able to do that.

[00:17:49] I'm cloning something that I can then test run through do things with. Outside of I guess my production environment right so it might production manufacturing process structure facility all of that stuff clone it digitally and then be able to.

[00:18:06] Look at how it's going to operate and so forth digitally before I put it into actual production physically. So I think that's the simple answer to it and obviously with AI piece right the it allows you to.

[00:18:22] Continually be get closer and closer to the scenarios and situations that you would have in a real physical operation. You know right that are sometimes you know what if what if five people don't show up for work one day or what happens if.

[00:18:36] You know everybody gets COVID or whatever the case right all of these different scenarios that can be modeled and emulated digitally.

[00:18:43] That's essentially what we're talking about here so we go back from 10 to what one you're saying right is historically we get a bunch people sitting around my engineers right we're sitting sitting around a room with spreadsheets and.

[00:18:56] And design drawings white boards of all information we're trying to replicate what should happen if we do A B and C will it create X Y and Z force. And instead of making assumptions we take large data sets from within the organization.

[00:19:15] We put all of those things together to create a digital twin of what happens in that setting in this manufacturing line if we do these things. We're actually visually replicating it through real data versus what we think might happen talking in a room.

[00:19:32] And I'll give you I mean one of the things that we've been working on at lead smart and something that I'm finding as we do our. And I'm seeing that we're in some ways being able to do a digital twin of the sales organization.

[00:19:47] And look at how a sales you know sales organizations or revenue operations whatever you want to call it.

[00:19:53] Have a similar thing right you have processes you have objectives you have goals you have people you have all of those things so yeah manufacturing or the manufacturing floor is one piece of it.

[00:20:03] But the ability to take in clone digitally what's going on physically or in the analog world and then run and analyze that and then optimize.

[00:20:13] I you know I just been testing it more from the sales perspective but man there's some interesting things that pop up and it's almost impossible for you know what you were saying to somebody going a white board or a spreadsheet or a bunch of people to do that all manually and figure out what can be done.

[00:20:31] And you know digitally and through AI and in seconds or minutes you just never see it. Yep well you know where we're running real models against it versus plugging some data into you know we've heard the the term right forever.

[00:20:47] You know space race and things like that of you know running models right well this is just taking that from you know.

[00:20:55] All whole exponentially different different level and what's intriguing about that you started it you alluded this earlier with what you're seeing from the product development side with our team at Leedsmark is.

[00:21:05] You know where the where else does this go because this article is about manufacturing sure you know the other side of it is hey you know what what what if you could.

[00:21:15] Take a picture of your warehouse with your smartphone and the palette racks that you have right that will automatically and this is I think I picked maybe a good analogy.

[00:21:27] Um that says it already knows right you can figure out what the dimensions of the warehouse are ceiling heights right what what's your racking look like and look at the things that you have an inventory.

[00:21:40] Also look at models of what you should have an inventory or might want to. Take a picture of the big rack or stack of pipes that just got delivered that's outside use AI from your smartphone camera to count that stack.

[00:21:56] And let that data go in against all of your existing inventory historical sales every piece of data against that to say here's exactly what goes where in the warehouse and how much of it should we have and it's doing that in moments.

[00:22:11] We're going to talk about the speed of AI a little bit later today, but I mean those are real world examples of where we're very very close to.

[00:22:20] Well and again if you just take a step back right business as an especially in this world manufacturing and distribution businesses are run by systems right so whether it's a sales system a marketing system a manufacturing system a distribution system.

[00:22:35] A financial system right we're run where at least we attempt to run our business as best that we can through systems. Yep and.

[00:22:44] By taking a whatever systems you have in your business if you can create a digital twin of that system and then use AI and data and all that stuff to then optimize it like they said here your system inherently is going to run much much much better and much much more efficiently and.

[00:23:04] I think that it one of the things I have seen just as I go through these sales systems is just the amount of lost opportunity that or I guess camouflage opportunity because it's people don't know right this is we're too busy we don't see all that and I assume this is going to be true and manufacturing is places where.

[00:23:23] So you don't even know there's an opportunity and then through the process you're going to see wow we could do this and this could accomplish these things just because we haven't been able to see the data right so it's really intriguing.

[00:23:33] Yeah, when we look at so many of these things historically right is this is either one this is the way we've done it or.

[00:23:39] You know Joe's been here forever and he's tried every different way that the warehouse can be configured and you know this no disrespect to Joe but Joe doesn't have the computing power that we can use all of his data.

[00:23:52] You brought this back though a couple of different times that the data that's available. You know both to manufacturers and distributors you know we were talking with a gentleman yesterday on the phone we're both on the zoom call and we were talking about.

[00:24:06] What what could a distributor do if they had a digital twin model that said I can buy using AI tools to look at my open quotes right what what does this do to my business if I quote closed.

[00:24:21] 5% more of the open quotes that I have well what is that you know what what is the growth factor in the company okay well let's put that time and energy and use the right technology to manage that.

[00:24:32] And quoting is a system right there's the most companies have to do quotes the problem is the systems very the system is quite inefficient and there's a lot of camouflage.

[00:24:42] Opportunity there along the way but yeah quotes are easy to understand because clearly if I close more quotes or if I get more out of the quotes that I do close that.

[00:24:52] Can can definitely obviously make a huge impact so yeah it's really all about optimization at the end of the day.

[00:24:58] Yeah so before we jump ahead I did a little something last night I didn't tell you about this but I was reading this all on my iPad and I clicked on the chat GPT app and I went to.

[00:25:10] I just asked it and and said how will this will digital twins work well with sales and marketing. And it was great I'll tell you about a share with you a little bit about what it said it said.

[00:25:27] This was great it says yes digital twins can be used to replicate and test sales models and methods. A digital twin virtual model designed to act where you're elected physical object your system.

[00:25:37] And the context of sales digital twins can simulate various aspects of sales processes to your point including customer interactions market dynamics and product performance.

[00:25:46] This allows businesses to experiment with different sales strategies forecast outcomes and optimize their approaches without the risks and costs associated with real real world testing.

[00:25:58] Well historically that's what we used to right is well let's give it a try with this division of the company or let's try it with these four people or that branch right now we can do this with a digital twin scenario and it talked about.

[00:26:11] Four key factors risk reduction right testing new sales models and a virtual environment reduces negative impacts on actual sales or customer relationships.

[00:26:21] Right I mean how often have we looked at something and we've said hey you know what should we raise our prices or not well let's see what the data says about those things and it just talks about data driven in voice insights cost of efficiency.

[00:26:35] Right virtual was less expensive than real world experiments and then speed and flexibility because if we could start testing models on sales and marketing is an example right how do we expect our our customers will respond based upon historical data that we have to a new marketing effort by doing that with digital twins rather than going and giving it a try it's game change.

[00:26:58] And the key to be able to do all this more less in real time by the the guy on the street right not having to do all this have this all done in an ivory tower every day in a company.

[00:27:07] But how do I optimize just day to day by the things that I'm already doing right and making that so no it's your right on track and.

[00:27:16] I am amazed we're going to I will talk a little bit about some AI tools here in a minute, but I'm amazed at the depth I'm every day I'm a more and more amazed at the depth of the insights that I'm getting back in this testing that.

[00:27:31] There's just no way anybody looking at a spreadsheet or a dashboard or a bunch of spreadsheets and a bunch of dashboards whatever see or figure out. Especially when you're dealing with large amounts of data and you know the.

[00:27:46] The one company we are dealing with the us stay in the last 10 years have done 1.2 million million quotes right how you ever go. And that again.

[00:27:54] One company million quotes not dollars no physical quotes quotes quotes they issued 1.2 million quotes in the last 10 years right which on average is about 120,000 quotes a year or 10,000 quotes a month.

[00:28:07] How do you keep up with that there's no there's no way you're going to keep up with that without having the right systems and the right pieces in place to analyze and and then provide that guide so anyway. No, that's it that's it's powerful so you know that.

[00:28:21] The key thing is going to be how do we take advantage of these things and so it's going to be an exciting 2,000 24 that that goes along with all of this right I mean to see that the things are unique.

[00:28:32] I'm just not why we're here is to talk about and promote what we're doing a lead so we're put the things that you and your team are building just.

[00:28:40] Just a town me and I get to see more of it at just before lunchtime today which I'm pretty darn excited about so.

[00:28:49] Very good should we move on to AI regulations yeah well you know what we were as we were talking last week they were taking a break from the in the EU and trying to pull their their guidance together.

[00:29:05] We saw earlier I guess it was later in November late November that the Biden administration came out with some. I'd just say less than well thought out.

[00:29:19] With the call of the presidential order and with no no real teeth to it and it was pretty darn vague and I just I kind of wonder you never know and looking inside these things is you know is that trying to get out in front of what.

[00:29:34] There we're going to be doing in Europe but you know Europe they had the you know main main players in the EU trying to all come together about EU standards much like they did with GDPR right in fact.

[00:29:47] As we talk about this you have more experience with what GDPR did for data security or data privacy. But then I do but I think this is an interesting comparison as we start looking at what they're doing and before we go further and talk about what they did.

[00:30:05] I just I think I sent it to last night after I kind of worked on our articles for today yesterday the pope came out looking for a global set of regulations to keep AI safe for human beings. You know here the pope talk about technology.

[00:30:24] I didn't see that that I have to have to check that out. I sent it to you maybe I didn't think it was in tech crunch.

[00:30:30] But you know obviously there's you know there's a worry about it and it's I think about that you know when you start seeing not just political figures but you know religious leaders and so forth like that getting involved in something.

[00:30:43] There's probably a concern that goes with that way beyond what we talk about day and day out about the advantages of things is that there people get excited and ahead of themselves.

[00:30:55] About the potential doom and gloom and we could have some you know fear or overall of this that people are panicked over something they don't understand.

[00:31:04] So yeah I might too sense first of all we don't know all the details of this so it's we don't we don't know exactly what the specifics are of everything yet but the.

[00:31:15] Well they put some pretty clear guidance into four different areas to start and we can we can talk about it but they haven't released all of it they haven't released everything with all the details so we don't know the details of the of the pieces that are there.

[00:31:29] I think it's still. If in reading this I think what they did on some of the things related to privacy was good like saying you know hey these are some things privacy wise and how you can use the technology.

[00:31:41] You know to kind of protect rights and things like that I think that was good. As far as the actual you know monitoring of models and all of that it's still to me seems a bit vague and a bit unenforceable but.

[00:31:56] Again we don't have all the data but I think it was you know something that they said was definitely beyond the executive order that we had here in the US a few weeks ago right.

[00:32:06] I think that really going to do anything to really other than make maybe people feel like something's being done about it. I'm not I'm not 100% sure.

[00:32:14] I'm actually more sure that it's not really going to do anything really practical other than make people feel like hey I feel better something's being done about it.

[00:32:22] Yeah but well we got to talk about I mean I understand what you're saying and respect that but there's a different factor right and I'm going to I want to talk about a few of these areas briefly but.

[00:32:34] I think that they they have addressed but here's the difference their sanctions for violations in place right so the bigger you are the more your risk because it says depending on the infringement and the size of the company finds will start at seven and a half.

[00:32:50] That seven and a half million euros or eight million dollars or one point five percent of your global annual turnover revenues rising to up to 35 million euros or seven percent of global turnover.

[00:33:04] So if you're a large organization of Microsoft and AWS Amazon the big players in this and you get this wrong. You know and these guys let's let's stop this for just a second time and think about what's real.

[00:33:17] Apple Google Facebook Amazon Microsoft have all had challenges and lawsuits and major problems in Europe over the last five years that have cost them billions of dollars.

[00:33:33] So this is what I think is interesting is these big guys you and I could poo poo this all we want but they're going to have to take note of these things.

[00:33:42] Right because of the risk the bigger you are the higher the risk no no I by no means do I say that they don't have to take note of it in fact the lawyers are the ones who are going to be probably the big winners on earth.

[00:33:52] Is it really going to do anything to accomplish what the purpose of this was which is to act in all that stuff I is there certainly going to be violations or accusations of violations and all absolutely is going to be lawyers trying to prove.

[00:34:08] Just no different than you know the stuff we talked about anti trust and some of the other stuff we've talked about. Good point.

[00:34:14] I don't have any doubt about that I just don't know if it's going to accomplish at all the purpose of why they did this in the first place.

[00:34:21] But I think that's a very reasonable viewpoint the other side of that is you know at some level how do they know until the you know the cows left the barn right is another side of that so a couple of the things that they started with is they look at want to look at high risk systems and what is it so called high risk systems.

[00:34:40] They talk about deemed to have significant potential to harm health safety. Fundamental rights the environment democracy elections in the rule of law so if you're building a smaller business model that's focused on.

[00:34:52] Let's just let's just use leads smart right as an example of you know we have customers using our products throughout Europe and and being in a place where.

[00:35:04] Our focus is on helping wholesale distributors and manufacturers run their business fed right we don't have an impact on the environment or democracy or the rule of law. But there are these models that are being built so they're looking at these different levels right.

[00:35:19] They talked about a lot of which I thought was interesting. And kind of intriguing they talked about the use of AI and law enforcement right where it could be and I thought it was interesting right because they said. You could you know use AI against.

[00:35:37] Kidnapping human trafficking sexual exploitation and to prevent specific and present terrorist threats so they're putting some guide look with some guardrails around what you can call terrorism.

[00:35:48] And thus I'll be permitted an efforts to track down people suspect that terrorism offenses trafficking sexual exploitation murder kidnapping raped armed robbery.

[00:35:57] And criminal organization and environmental crime so you know what rob the rob the the 711 down the street and they can't use the AI cameras against you for that. It's weird that they put these parameters around.

[00:36:14] I think there was some things they tried to do to protect rights if you want to call it that and all of that which is good I mean again I'm not against it I just am not sure.

[00:36:24] Is it really going to accomplish what the whole regulation if you really take a step back why are we regulating is really protect against maybe a catastrophic event or a series of catastrophic events.

[00:36:37] I don't know the regulations are going to accomplish that anyway but I don't know if they're going to this is what they anyway it's just. We'll see I mentioned to see more of the details but you're right it's definitely more comprehensive than anything we've had before.

[00:36:50] And so it's absolutely the probably the best thing that exists globally today. Right in that setting so we can jump ahead a little bit what's our next when they were talking about any I tool the upends online product configuration.

[00:37:05] So we only talked a little bit about AI earlier today we talked about it every week. I thought this was kind of an interesting piece though and this this article is about you know a company and a product called.

[00:37:18] It's it's a AI driven tool to help online ordering and the reason I found this unique was you know we talked to a lot of people you know people talk about you know.

[00:37:28] CPU of you know configure price and quote that is oftentimes I certainly don't want to say all the time but oftentimes.

[00:37:36] That's a reason we have a manufacturing client uses leads for it that works a lot with us and it's like hey I have this item and you can configure it with these 17 other things so use this CPU piece to tool the go to do that. They're there.

[00:37:58] They're fairly organic way to say you know you're just saying that you're in your team of worked with that particular customer and they're cumbersome right there's a lot of off the shelf tools.

[00:38:08] The idea behind this when I think is really kind of neat from a standpoint is it allows using generative AI.

[00:38:15] This whole process to take place and I want to translate that over to another type of it's not even CPQ is when we talk to we've got to call next week with a distributor that does a lot of this and the division they're company we talk regularly in fact one of our regular guests on this shows company does this they take.

[00:38:35] Those A from manufacturer a host type B from manufacturer ABC plant component valve fitting from seven different companies they put all that together to put that into one skew.

[00:38:52] Now this is a kind of tool that makes those things happen so much quicker where customers can start saying this system can be configured to say all these items can work together and we can configure and build that for you in our shop right.

[00:39:07] That whole process through these tools using generative AI just happens that much quicker. Even if it's not a if even if it's on an engineered solution though it still could be used right to come up with a.

[00:39:19] 57 50 to 70% faster conventional methods by moving that directly so what I like to talk to. What I like about this was. And this is again something that I'm learning right is they're using AI to configure AI.

[00:39:37] What I mean by that is rather than saying okay we need to build an AI model and an AI solution and we're going to sit down and get programmers and figure out how to do all this.

[00:39:47] They're using AI to help them then build what they need to build. And I'm seeing that as well like I'm and the stuff I'm we're working on.

[00:39:58] Rather than writing code for everything we're telling the AI what we want to do essentially letting the AI write the code of what we need to do and then executing the code against AI. If that makes any sense.

[00:40:11] Well in this case right they talk about you know manufacturers having lots of different databases that they need to work from and people need to go build that database. And so we need to come out to this C.P.Q.

[00:40:24] Right potential system that always has flaws and now what they're saying is they can use a natural language request and have the system generate the rules against the databases.

[00:40:35] And I think that's your point right it's exactly it's a circle right or a loop of I need to do these things to do this and it just keeps building on itself.

[00:40:45] Think about this right you have an idea of what you want to accomplish traditionally right I have an idea then I have to go do the analysis and I didn't have to go do the work and then I get the outcome of that idea.

[00:40:57] Now I can have the idea but the AI figure out the analysis of what needs to be done and have it go do the work and produce the outcome right it's very different and the speed of that is very different than anything that.

[00:41:10] And just in the last six months or so with AI even if you had an idea of what you need to do with AI there was a lot of work and there still is but there was a lot of work to actually implement that in the real world.

[00:41:22] Now you can just and to some degrees say here's what I want to do let the AI figure out what to do and then do it that's a that's a very monumental step.

[00:41:33] I'm looking forward to when I finalize all of that of how to run a tech CEO can do that for all of his day to day roll and I can process that from being out sailing so.

[00:41:48] You know it is crazy as that sounds I actually believe that to a large degree that will be a very.

[00:41:55] Impossible situation here sooner than later. Well, I think I think you're right and I you know I said that kind of tongue and cheek but I then I'm looking at a browser in front of me right in my tabs on my browser are all tied to different pieces of technology that we use right I've got one of them is you know I can get a quick image and view of.

[00:42:15] You know what your development team is working on I've got another piece here that's all of our dashboards for what's going on within the company using our own software right needs more channel cloud.

[00:42:25] I've got another one right next to it that's just a single click that's his end desk that says here's what's going on in the service and client success side of things now of all of that just says has prompts that say.

[00:42:37] I want these alerts right to come to my phone at these times of the day that are only within these parameters do I want to know about it. Can stand top of a lot of things.

[00:42:50] Yeah, and really the responsibility of executives now become really coming up with more clear and concise ideas that are then able to be implemented versus you know so it again the responsibility changes doesn't mean that there's not a responsibility but a lot of the.

[00:43:08] I guess it's just sort of heavy lifting and a lot of the day to day just you know things that we have to deal with I think can be. Well, over time can be improved.

[00:43:17] Well, it's interesting right this is a discussion that I have with senior executives that use our technology in fact I got a text this morning from a gentleman that was you know the CEO of a large customer of ours and and it was going to be joining us today in his comment.

[00:43:33] It should say his comment I remember my conversation with him a couple of years ago and they first implemented our software across their. Their national footprint in their company.

[00:43:42] He was commenting on well maybe he doesn't need you know a log in and I said you know you do need a log in but here's what you need to do you need to look and leads more channel cloud at your homepage.

[00:43:53] Because it's going to show you any anomalies going on sales marketing right any operational functions that we have are the sales numbers offer what we're anticipating.

[00:44:05] Are is our margin off right now and so forth and look at those dashboards and if those dashboards don't have an on release go about your day right and with that how you're going about your day.

[00:44:17] The envisioning the future of your company which what a CEO is supposed to do so back to your model in my example right is if I can be just checking on some things.

[00:44:27] I could be working on the vision of the organization versus the mundane that most executives get wrapped up right. Which which will tie into another one of our.

[00:44:39] Last articles of the day so let's move ahead from a time standpoint but I just thought that was kind of cool. As we look at that so.

[00:44:47] We have a feature every week called tech talk this one this week we talk about jet GPT is showing signs of showing laziness.

[00:44:57] I'm going to let you run with this because I know you got thoughts and so yeah we want to spend a lot of time on this but I noticed this myself Monday.

[00:45:06] So I was in using chat GPT I was asking it actually to write an article that was about a thousand words.

[00:45:14] And it started off and wrote started to write the article got about 300 words into it and kind of just I kind of laughed I mean we've all probably done this when we written the paper.

[00:45:24] A presentation we start off like with a bang and then we get about halfway through when we get tired of doing it and we kind of quickly the last part of it just to get it done.

[00:45:32] It's exactly what it did it kind of like it just kind of just stopped it was doing full speed and then it just kind of said.

[00:45:41] I don't realize at the end like it caught halfway finish and so I said try it again I asked it to try it again and it came back and said you know what if you need this you can do it yourself basically.

[00:45:51] Really yeah, you know I can't you I think it was a little nicer than that but it was like I don't have the capabilities to produce that but here's how you could do it yourself.

[00:46:01] I hadn't seen this before and I just I thought and then the next day I started to see these things so where others were obviously seeing the same situation.

[00:46:10] Yeah, and then open AI came out and said well we don't know why it's happening but we'll we agree that it is happening and we'll work on fixing it.

[00:46:18] Well then all the pundits started on Reddit and everywhere else that's saying that they're throttling the system to save money and doing all kinds of things and I think to your point right is I don't think they know yet right.

[00:46:30] And finish up on this topic because I have a question for you related to this as well.

[00:46:36] As we kind of wind up on this particular article if you want to leave that somewhere someone tuned or trained the model to say optimize right I mean everything that these AI systems do requires energy.

[00:46:51] Whether it's computing energy or whatever or and we know that the systems right now are a bit overloaded so I wouldn't be surprised at all if there was some optimizations that were added to the model to try and get it to optimize energy and to save energy.

[00:47:07] How it's manifesting I'm not sure people fully understood but it's interesting to identify how it it's no different than us as individuals right it's like we run out of steam we just start stop our work out and go home.

[00:47:21] Right is kind of like what it would it did here which was I have seen it much better the last couple days so I'm thinking that whatever came out of this they've done some things to potentially address but I really notice this for like a day or two.

[00:47:35] You work in other models besides chat GPT with what you have going on behind the scenes for for our company have you seen the same thing with other models or.

[00:47:43] Yeah, it's just with open AI that was just an interesting right so that that just kind of just and this is literally just I don't have it in my notes or anything's just triggered for me is you know I think what's interesting and we've been talking to quite a few people most recently about our as an organization our company about the NI roadmap.

[00:48:04] And and working very closely with that.

[00:48:08] And the idea behind where we are today is very different than where people are going to be very shortly and I look at it is you know we talked to people quite regularly who you know there's AI products that have been in the market for a couple years for distribution and manufacturing that are using.

[00:48:31] A different model than generative models generative models are kind of the correct me if I'm running here but more of the where the future is lying in these settings and there's people kind of struggling with.

[00:48:43] The model works, but I'm not getting the optimal results from it right now things are getting better every single day but now I'm also seeing people that you know we would.

[00:48:53] I guess you'd say we might call competitors coming out with some pretty dramatic statements about what they have with some AI capabilities today. And if they're using as an example is to this article perfectly if they've rushed to the market with some things that are using.

[00:49:15] Open AI and the generative model of chat GPT behind that. And they're betting the world on it. They're going through the same learning curve, the same hiccups and the same pieces that could impact their customers.

[00:49:31] I'm not trying to throw rocks or stones at anybody particular but I think the caution that I think people need to have is if I were looking at a vendor and I think you probably do this with our vendors and we use is look at their roadmap.

[00:49:44] Where they're at today, what they're doing but where is their roadmap versus all of the main things they have today because if you've got a lot of things today there may be some challenges that could go with that as we see these types of hiccups.

[00:49:59] It's even more than the hiccups. The product roadmap is more important right now than the product itself because if you're not looking to the future aware of this goalie you're going to engineer yourself you'll corner.

[00:50:13] And there's never been a time I've seen in my engineering 30 years where a poor design engineering decision now can have a huge challenge range ramification because you've engineered yourself into a corner.

[00:50:29] Not only from an engineering perspective but from a customer perspective and from a product perspective so you're roading up in your horizon right now and looking out on that horizon.

[00:50:38] It's in the time you're spending on that and then in backwards and how you architect that is the most important thing right now that in my opinion and engineering or product manager organization do. And that's true.

[00:50:51] And I think that's an IT organization or anything anybody who's looking at a technology road and that we should probably do a whole thing on that because I think it's a real important issue.

[00:51:01] And I do think a lot of companies have either internally or through products made quick decisions to go hey I got you. And then I found themselves a situation where they have engineered themselves into a corner either from a product perspective or engineering productive.

[00:51:17] I had a new link to connect earlier this week that sent me a four paragraph note right after we connected on LinkedIn.

[00:51:28] And it's funny found us through through podcast here and he wrote me four paragraphs about an AI tool that he bought that isn't giving in the results that he was looking for because it doesn't know how to work.

[00:51:46] And I was saying it doesn't know how it struggles to understand how to work at a skew level in context of what somebody's trying to accomplish right so things are be changing quickly.

[00:51:55] I think the in this might be a little bit self serving by me say anyways who you partner with what their understanding of these things are and what the roadmap for AI was and then also the platform right that they're using and working with on these things matters.

[00:52:10] We're going to obviously we'll talk more about everything matters. So yeah, so let's jump ahead. We have a feature every week before we jump into this as a quick reminder if you're listening on the podcast on apple podcasts spotify Odyssey wherever it might be.

[00:52:26] Those that were with us for the live broadcast it's Friday December 15th at 953 a.m. Pacific time those with us live are looking at an email newsletter we send out every week it's called around the horn and wholesale distribution. We talk about. M&A AI. Technology.

[00:52:47] Now related to manufacturing and wholesale distribution. You can use that you can use that if you'd like to use it for the site for the podcast at www on the horn pod.com. And all the previous episodes are there while assigning a few.

[00:53:02] We're sent us an email that's at the address of that. At the smart tech.com we'll get that out of you. So part of what we each week is that we've got a little bit of surprise to me this was great.

[00:53:18] So to private equity for here itself, we've got one of the industrial which the bots early 2000s. Friend of the shows with us often on here is Joe McClusky.

[00:53:32] Joe's a former senior grander executive that ran that company for quite some time and a ping Joe yesterday asked him what's going on and why and you

[00:53:40] With send it a little bit of the thought all I've texted this morning with a handful of other former grander executives and nobody's got any clarity to why this this got sold to private equity but interesting move.

[00:53:52] And so we've got a lot of money made and long since the family that owned in our industrial is back as with another company back in the same market place.

[00:54:02] In fact, we have talked about it in a moment of fili to distributors they're back with another company that's part of the AD. So it's kind of interesting to watch the world spin here a little bit.

[00:54:11] So interesting thing with with Granger net plus alliance that they published regularly. The outlook the sentiment from their members Jennifer Murphy and Dan Judge and his team I think Dan was with us today.

[00:54:27] Optimistic outlook for 2024 this obviously came out even before we had some devilish words from the Fed earlier this week so that kind of comes in in the line with what we talked at the beginning of the show.

[00:54:38] Tom did you have any thoughts on the net plus in fili was there? You know kind of alliance with what we've been hearing so yeah and then another I called it on you know you didn't use the term in here when you put the news letter together.

[00:54:53] I was messaging with a couple of large 80 members yesterday about this and I used the phrase aqua merge because you know other than I think one of these over time just calling us pay to spade right is when a small group joins a large group it's an acquisition.

[00:55:11] But we use the term kind of merger in these things to to keep everybody happy and comfortable while the transition happens a think aqua merge is the right right term here but 80 to another when in a really cool vertical right low voltage.

[00:55:26] And internet cabling type stuff connectors and kind of a new segment for them to bring this group and so I think that was exciting so.

[00:55:37] Quick closing on the day we use a ad each week in article we call it good read this was a kind of cool article from ink magazine talked about 24 years ago Harvard research came up with some tools on productivity and you know expanding productivity by 65% and people still aren't using it.

[00:55:58] And it's a great review of it just look forward and ink as well if you don't get our news letter but you know the comments that they one of the things that came out of that there were just a lot of it is just interruptions right and.

[00:56:10] It's you know slack or zoom email phones text messages we have interruptions all day long and this all the time confetti.

[00:56:23] It was great I thought this article was one of the better ones we've had on the good reads for a while I think it's really got them very good practical things and some eye opening things.

[00:56:31] You catch that on the how many times you average person checks their email a day was a 70 something or whatever. 27 times a day and you know what all this stuff I mean you you and I are on teams messaging all day others in the company.

[00:56:46] We've got their own text messages that are coming in we look at these things the core of it unless we manage these things we don't have the time to do the job for paid to do exactly.

[00:56:54] And I think that's the way we do end up basically interrupt mode all day long and nothing really gets done in its words with all happened. Yeah, it was a great article highly recommended that it was really really kind of off for them.

[00:57:07] Well, that wraps kind of things up for us for this week. Can you submit for the weekend plan. I got to do some. Choppy stuff better. I said you would be working on the next models.

[00:57:21] Yeah, I would be able to get the models to do them for me that's what I'm going to be working on. So again, models to your shopping. That's why I mean yeah, I mean. Okay. Very good. We appreciate everybody being with us.

[00:57:34] It was kind of a quiet number of comments which is kind of surprising but some good articles. Need things happen and out there you know if you're if you're managing technology within your organization. We hope that we bring some value to you on the technology front.

[00:57:48] We try and come together each week and bring all of this information together for wholesale distribution manufacturing again. If you don't get our newsletter and you'd like to get it please let us know. We're here every Friday.

[00:57:59] We've got some downtime coming up because holiday times last thing before we go today. Mark your calendars January 12th will do the announcements. Might not do it till the first week of January, but we have a blockbuster event.

[00:58:13] I think people will be very surprised to see the three people that are guests in the same place at the same time. I'm going to pat myself on the back that I got these guys together and it could be a block.

[00:58:28] Actually, it has the capabilities of being our best show ever or the most. The most. The most. The most. The most. The most. The most. The most. This is the一些 efforts. First, if it's a bit difficult for me to match the calendars for January 12th closing.

[00:58:49] 9.59 and 30 seconds on Friday morning to 15 people friends been with this. Have a fantastic weekend be safe. Be kind and do good things and we'll see you next time have a good week. We hope you enjoy today's episode and our guests each week.

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