Welcome From CSCMP Edge

Intro & Outro 0:00

Welcome to Tennessee on Supply Chain Management, where we unpack the drivers shaping today's global supply chains. From innovative ideas to real-world solutions, each episode brings you insights from the leaders charting the course for our discipline. Now here are your hosts.

Tom Goldsby 0:19

Hello and welcome. You have arrived at the Tennessee on Supply Chain Management Podcast. I am Professor Tom Goldsby, joined by my dear friend, colleague, collaborator, Dr. Ted Stank. Hey Ted. Hey Thomas, what's going on? Well, uh, we are gathered here in Nashville, Tennessee at the Gaylord Opry Lynn Resort at CSCMP Edge. We're closing out season four, hoping to get a season five.

Ted Stank 0:46

Yeah. Right?

Tom Goldsby 0:47

Yeah.

Ted Stank 0:48

But uh it all depends on our listeners, everybody. You need to listen to the stuff. So let us know you're out there. But I think the guest that we have this time is going to put us over the edge big time.

Tom Goldsby 0:58

Who's our guest tonight?

Honoring Kate Vitasek’s Career

Ted Stank 0:59

Well, my understanding is Kate Vitasek, this year's Distinguished Service Award winner and supply chain management hall of fame nominee at CSCMP. Wow. And our listeners might know Kate. She also is our most frequent guest. She is the Alec Baldwin of our Tennessee on Supply Chain Management podcast. Kate, you're here with us. So good as always to have you with us.

Kate Vitasek 1:25

Well, what a treat. You know, especially for CSCMP to come to the home of Tennessee. Come on, natural fit here. So I'm glad, always glad to see CSCMP showing up in Nashville. Trevor Burrus, Jr.

Ted Stank 1:36

Jim Heskett um was awarded yesterday with a distinguished fellow. You know, it's a scholar award, and he spoke for a little bit. He's 93.

Tom Goldsby 1:46

93 years old, yeah.

Ted Stank 1:47

And he remembers 1964, the second meeting of NCPDLM, and he said that there were five university representatives and 14 business people. And the five university representatives were Michigan State, Ohio State, Penn State, Tennessee, and Oklahoma. That's right. So we've been in this from the start.

Tom Goldsby 2:11

I again I'm sitting with such esteemed colleagues because, of course, Ted won the DSA. Was it three years ago? Three years ago, yeah. Yeah. And in fact, we were seated in this spot, I think, celebrating your entry. And Kate was our guest?

Ted Stank 2:26

No, I wasn't I was in Kissimmee. So I must have been two years ago.

Tom Goldsby 2:30

Okay, just two years ago. But also Time All Runs Together. It does.

Ted Stank 2:34

When you're a distinguished service award winner, it's all the time just runs together.

Tom Goldsby 2:38

It does. James Heskett, DSA winner, 1974 as well, right? So again, esteemed presence here. And Kate, congratulations. We're so proud. You always carry the orange with you wherever you go.

Kate Vitasek 2:52

I know. And for those listeners out there, they can't see this cool orange jacket.

Tom Goldsby 2:57

It is cool. It's very cool, Jacket.

Orange As The Color Of Change

Tom Goldsby 2:59

Trevor Burrus, Jr.

Kate Vitasek 2:59

You know, so I try to represent because orange is the color of change. And what an amazing profession to be in because it's always changing.

Tom Goldsby 3:09

Wow. I had never thought of orange as the color of change. Is that why those cones out there on the highway are orange and jumpsuits are orange? Where does orange?

Kate Vitasek 3:20

I don't know. You know, I gave a keynote once, and this woman comes up to me, she goes, you know, I'm a colorologist. Did you even know this existed? Wow. So there's actually a career you can have in colors. And she said, You wear that color well because you talk positive change. So red is like angry angry, and different colors have different vibes. And orange is the color of like a positive change. Wow. I think that's really cool.

Ted Stank 3:47

Guys, we need to look into that. You know that? We need to plumb that out and use that. Yeah, that's great.

Why Vested Exists In Practice

Ted Stank 3:54

So speaking of change, I've known Kate for over 20 years. I remember when Kate first was a participant in a research program we did at University of Tennessee with the United States Air Force, and it was around service-based logistics. And I remember her very excitedly talking to me about how she thought that the things they learned with this service-based performance, service-based logistics could apply in private industry, and how she was so passionate about it that she was going to make it her career. Kate put everything on the line, did a lot of research to back up what she's done, fought a lot of fights with people who didn't think what she was talking about really had legs in industry. And today she has so many great case studies of working with companies that have really gained tremendous performance benefit from what she's now calling the vested way. So, Kate, for those who are not familiar with you and what you've done, just give us a real short primer about the vested way and maybe some of your greatest examples of how that's been successful.

Kate Vitasek 5:01

Yeah, I think you've got to go back to the backstory just a little bit. Like, why was I so passionate? It's because I, before being at the University of Tennessee now for 20 years, I was a practitioner. So I've been on the buy side. I worked for Microsoft, leading a lot of their early outsourcing deals. I've been Microsoft's largest supplier. You know, worked on that side. I've been on the consulting side. And so I still remember to this day getting the phone call from Alex Miller, who was then associate dean for graduate in executive education, and I had the research funds for this project. He goes, I've got this project and no one wants to work on it. It's outsourcing and it's, you know, no one wants to work on outsourcing. And I, it was almost like a drop mic moment. And I said, Alex, I've lived this. And if we can put some real research around this, this will change the industry of how buyers and sellers come together to create strategic value. Because we say strategic partner, and then we turn around and we have a contract that's full of, you know, a termination for convenience, or, you know, you want your supplier to innovate, hmm. And you can fire them in 90 days and you own all the intellectual property. Why would they innovate? Right? Or you want them to, you know, be highly efficient and you're going to take all the efficiency gains. Why would they do that?

Ted Stank 6:28

Early on in my time at Tennessee, I was able to sit at a table with a large computer hardware manufacturer and one of their big service providers. And the conversation was, well, we'd really like you to be more of a strategic innovator and to invest in processes and technologies that would benefit us with our customers. And the pushback was, well, yeah, and we do that, and then you would bid out every dollar every year of our contract. So, you know, why would we're not incentivized to invest in you?

Kate Vitasek 7:00

Yeah, exactly. And so that's why I'm so passionate. But you ask, you know, I mean, to share what vested is. And so I always like to say, well, when I say the word vested, what's it mean to you? You know, what what's that evoke? Investment kind of, you know, long-term. I have a vested interest in your success. And that's really the essence of what a vested relationship is, is we want to bring together the trading partners. It could be often most of the time just two, but it could be multiple, and create this win-win type of situation. So there are five rules to vested. And I remember senior vice president of supply chain said, Kate, the rules are radical common sense, we just don't do them. And that's, I think, the beauty of the research that we've done logging the hours, is showing people what is intuitive we don't do, and then when you do it, how magic it can become. And so it's a lot of what we do is spend time untraining people how to buy and sell and use their power. Right? If you've got power and you don't, then you automatically aren't probably going to give it your all.

Tom Goldsby 8:13

Yeah. Just common sense. But meanwhile, again, putting in that time, that effort to codify it, to study it, to bring forward those principles, and critically to find the value. So while the principles might be, dare say, obvious, uh again, not always observed, we don't have the wherewithal, the discipline, the focus to execute, you have had that focus to go out, do the homework, codify the findings, demonstrate the value. Take us on that journey a little bit, because you know, I I think something that's been really great is to see how you've applied it in one sector, logistics services is where you have tremendous following, and yet you've applied it in so many different settings. These principles seem to have some legs to them.

Kate Vitasek 8:58

Yeah, and and actually that's what's so fun is it is cross-industry, cross-sector. The rules to trading partner relationships are ubiquitous. You know, we all, no matter what industry we're in, we all need partners. We all need suppliers. And so the difference is how you treat those suppliers. You know, one of my case studies is McDonald's, and that became from my early research when I was just studying. But I wrote a chapter in one of my books called Vested How PG, McDonald's, and Microsoft are redefining winning and business relationships. And I remember writing the case study and giving it over because it has excruciating detail from the PR people to get something signed off from PG or McDonald's. And the the head supply chain guy came back, he goes, Kate, you missed something here. The secret sauce to our supply chain success isn't our suppliers, it's how we treat our suppliers because they have the same suppliers that their competitors have. So how are they able to bring out the best from their suppliers? And again, it is creating that environment and all the way down in the contract. Because if I say you're a strategic partner and then I turn around and my contract is a transactional contract, it's rigid. I want flexibility, but look at the contract. You didn't buy flexibility. I want innovation, but the supplier has no motivation to give you innovation because you're gonna bid me out or have a termination for convenience or own all my IP. So the number one message I deliver, which is really sad, is I'm sorry, you didn't get what you wanted because you got what you paid for.

Ted Stank 10:42

Well

The Five Rules Of Vested

Ted Stank 10:43

said. So d do we have time for you to give a really high-level primer on what the five pillars are?

Kate Vitasek 10:49

Yeah, I call them rules.

Ted Stank 10:51

Rules, okay.

Kate Vitasek 10:52

Because, you know, if you're not following the rules, you're cheating. And in you know, school, we don't like our kids to cheat, right? And uh so rule number one is outcomes. We live in a world of transactions, you know, it dates back to hundreds of years where we've tried to perfect the art of the transaction. We do so now, even more so with automation and AI and somebody I'm familiar with wrote a book called The Art of the Deal. Yes, exactly. And so you have a choice in how you work. You can show up and have power and buy a transaction, or you can show up without power and with collaboration and buy business outcomes. So I like to think of rule number one is like going to Mount Everest. You're the climber, if you're the buyer, and the supplier's a CERPA. In some relationships, you need them and they need you. And so in many cases, you don't need the supplier. You have commodities. Um, PNG has 60,000 suppliers, the vast majority should be transactional. But there are many that you can create a true competitive advantage, create value instead of exchanging value. And so when you're in those situations where the supplier has the ability to drive amazing competitive advantage for you, don't just buy a transaction. You actually water everything down. So, rule one, buy outcomes. And you heard that from the keynote speaker today from Schneider Electric. He said, You know, my team doesn't always like this answer, but start at the end and work your way backwards. It's exactly what we do. What are you trying to achieve? What's your Mount Everest? And so now let's work backwards and craft the deal. So then, rule number two, three, and four are the traditional guts of the deal. So your work, um, the scope, the metrics, and money. So rule two is focus on the what, not the how. If you have a strategic partnership, think about in outsourcing. You've outsourced to the expert. Don't tell the expert how to do the work, which is counterintuitive to the traditional statement of work philosophy. You know, you you have your experts write the statement of work, and then I contract that for you, and then I sit around and micromanage that statement of work. Well, what you really wanted was to change the work to drive the innovation. So don't contract to be at the bottom of Mount Everest, contract for the future. So I have to be able to do that.

Ted Stank 13:10

We want you to innovate as long as you do it our way.

Kate Vitasek 13:12

Exactly. Right? I call it the outsourcing paradox. And so rule number three is in the metrics. Same thing follows. So don't have transactional metrics, instead, have outcome-based metrics. So that means fewer measures and boundary spanning end-to-end metrics. We have a common goal, a common objective. And usually we would have a rule of thumb of five or less desired outcomes, no more than 12 to 15 metrics. And I've seen contracts, I'm not kidding, that have an 800-page statement of work and 550 metrics. It's insane, right? Absolutely insane. So focus on the what, not the how, and then clearly define and measurable desired outcomes. Measure those outcomes. Rule number four gets to the money. It's the hardest part to get right. We spend all our time negotiating a price. And I always tell people that if you have a price, then tomorrow it's going to be out of whack because business is dynamic. So that price, depending on the economy, someone's a winner or loser. So it's already pitted us against each other. So instead, we teach a transparent pricing model that's win-win and lose-lose. We win together, we lose together. Embrace the fact that business is dynamic. So when tariffs happen, don't try to just shift that onto the supplier because they're going to try to shift it back and sit say, well, golly gee, life sucks. Business it snowed on our Mount Everest. How do we work to mitigate? Where can we change? How can we do things? So you have to have that flexibility built into the economics of the deal. You need win-win-loses.

Ted Stank 14:49

Is it often like a cost plus scenario?

Kate Vitasek 14:52

I can go on for days on this. We have old white paper on pricing models. I like to use a cost pass-through. A cost plus creates an inherent perverse incentive that the supplier wants more cost. Yeah. So a price creates, you know, I don't have the transparency because the margin's not there, and it creates its own perverse incentives, but a cost plus is equally evil in that it drives complacency to drive cost down. So we like what's called a cost pass-through. The cost of the cost of the cost, it's fully transparent. And then the supplier's margin and is tied to incentives to the outcomes.

Tom Goldsby 15:34

Okay, so negotiate the margin, arrive at that.

Kate Vitasek 15:37

Yeah, and the rule of thumb invested is that the supplier's margin is half of market margin. So if market margin's 10%, we're going to create a true long-term strategic partner, have true visibility on the cost. And so when that supplier helps you climb your Mount Everest, better, faster, cheaper, safer, more sustainable, fill in the outcome, they're rewarded with incentives. And those incentives should be three times market margin. So in a 10% buy-sell business where you're negotiating a price and the margins hidden in there and we're back and forth, right? Now we have full transparency, a win-win model, and the supplier is highly compensated for climbing your Mount Everest, driving innovation, creating value, sustainability, whatever it is. One of my case studies is Procter Gamble and Jones Lingasaw, and I have an audio clip from a presentation that I did with them. And the procurement guy goes, You know, you get it right when you like to write the supplier a really big check. And he says, you know, it's counterintuitive. Like, why would I want my write my supplier a really big check? Well, because they're creating value for you. You create value, you share value.

Ted Stank 16:54

Trevor Burrus, Jr.: Because you're writing the check out of what you've just benefited, right? Exactly. It's not like you're writing it out of nothing. It's like, well, I just got 10 and I'm going to give you three or one.

Kate Vitasek 17:02

Trevor Burrus, Jr.: Exactly. So you would craft that pricing model. Business is a flexible around you, which people now love in this time of dynamic world we live in. The flexibility is really good. And then the fifth rule is governance. So insight versus oversight governance. One of the common mistakes people make is they put a shadow organization in. You're managing the supplier instead of managing the business with the supplier. Now it's going to enable us to be able to use this data together. Don't use the data against the other party. Use the data together to create value.

Tom Goldsby 17:45

There's a lot there, right? And now I can understand where you've made a career of this, right? But each one of those rules makes so much sense. I think we can agree with that, right? And we've been teaching systems thinking ad nauseum for decades. And it takes me back to I think one of the expressions that we can find throughout your career, throughout your books, you know, what's in it for we. But I I think also about just the rate of change that we're going through right now.

Making Partnerships Work In Chaos

Tom Goldsby 18:16

You know, dare I say chaos, VUCA environment. I can understand where the value of these relationships would be greater, but it does seem like it'd be difficult to implement these kind of high potential relationships when things are just coming at you in a fast and furious manner, and you're just trying to get through the day. So do you have to kind of call timeout, prioritize? How do you go about this? Can I throw something in here?

Ted Stank 18:39

And then I want Kate to kind of react on it. My take is it's easier in a time.

Tom Goldsby 18:45

Well, you can sell it probably more.

Ted Stank 18:47

I think during the early days of COVID, I was able to sit in on war rooms with some companies, specifically pharmaceutical companies. And the things that they were doing with their top suppliers were absolutely spectacular.

Kate Vitasek 19:04

Yeah, I would agree with that. You know, as much as I I hate to admit it, the majority of people who come and take our courses and adopt the vested way of working are doing so because they're stuck. They either are in a a relationship and it's not working but they can't get out of it, or they just know it could create more value and or they've switched suppliers. I have a a video from Intel way back, and he goes, you know, there's only five suppliers that can do what we need to do in this industry because they have some complex things and we've gone through all five of them. So you're our last hope. Right? Um, because what do you do? Go back to the one you fired. And so I do think that sadly when we're pressed up against a wall, that's when we change. I mean, people who study change management will say a sense of urgency can get people to do things they might not do otherwise.

Tom Goldsby 20:02

Yeah. Get them to see that the cliff we're about to fall off. Trevor Burrus, Jr. And I can identify with that the need, right, is very pressing. But it takes time and effort to implement these relationships. And it probably speaks to maybe some greater selectivity, maybe in terms of with whom you might enter into an a vested arrangement.

Kate Vitasek 20:20

Yeah. So I always pick on Procter and Gamble. They have 60,000 suppliers. You can't all be vested, they can't all be strategic partners. So I look at it as it really is your top five, your top ten suppliers. These are the or top customers. These are the ones that you really can and should be leaning into. And the problem is that we get stuck buying and selling and writing transactional contracts. So these ones that have the most promise, values just being leaked out everywhere. But it does take time, right? And I think that's the number one obstacle that we get. People go, Oh, I love this, but I need to uh be under contract in, you know, 30 days. And I was like, Yeah, sorry. And so I've learned in the early days, I would really, I don't call it try to sell vested, but I was so passionate I would try to convince people. This is, you know. And I've just learned that if they're not ready, like, oh, you need 30 days to get. Yeah, well, go ahead and get under contract. If that doesn't work out for you, I've had the same email address for twenty-two years. Um I'm on my ninth book. I can wait you out, trust me. I think it's Kate at vested.com is Kate at vestedway.com, and of course my university email address, I was like, And that's Kate with a K.

Tom Goldsby 21:43

Kate Kate would hold that up.

Kate Vitasek 21:44

Yeah, Kate with a K. And so I'm just now more patient and you know, I think of myself as just the consummate educator.

Tom Goldsby 21:53

And so if people don't educator, but it seems like you're therapist as well. You know, if you're in a bad relationship. But it's like that could that could be interpersonal. It it sounds like you do a lot of therapy work as well.

Fixing Trust With Alignment Workshops

Kate Vitasek 22:05

Yeah, we actually one of the tools and tricks that we use is called an alignment workshop is three days. And so oftentimes people go, I can't take four months or six months to craft one of these relationships because the contract has to follow it, right? And so we're like, just give us three days, get the right people in the room. And we start with a compatibility and trust assessment, something Carl Manrote, former graduate from the University of Tennessee, and I have been working on. So this compatibility and trust assessment, and it's an anonymous 360 survey of the people in the relationship. And so we'll start out and put the trust elephant in the room, and it's stunning. Because they all know there's a relationship issue, but we quantify it and we qualify it. And so one of my favorite case studies is uh the Canadian government with their doctors, Island Health. We actually have the HBR article, the feature article um features that case study. And toxic, terrible, bullying, adversarial. And they said we knew it was bad, but when you actually spend an hour quantifying and qualifying how bad it was, we all just looked at each other like this is not acceptable. And it's like one thing I really like about some of these complex relationships, sometimes you can't get out of them. Here, the Canadian government's the only place you can go work for if you're a doctor, and if you're a doctor, you know, vice versa. You have to go to the union to get your doctors. And so they were stuck, and they'd been stuck for several years. And so this therapy that you talked about, and we're like, just put the trust elephant in the room. You have a choice. Your behaviors got you to here. The same people can choose to trust. I'm gonna say that again. The same people can choose to trust and create a great relationship, or they can show up and have a toxic, terrible, bullying adversarial relationship. And of course, it's gonna manifest itself to that. So we really want to force people to think how the process for how I get to the contract, the words on the page, the treatment, how I treat you, go back to rule five, insight versus oversight. If I'm constantly standing over you because I don't trust you and have a shadow organization, you're gonna create an untrusting relationship. And so to me, what we've done is codify, as you said, the process for the coming together of these partnerships. So they were always there, they just didn't know how to do it. And so I I think of as we teach through a process the skills of partnering all the way down into the contract.

Ted Stank 24:54

Have you ever gone back in and talked to the folks at the ground level who are involved in the relationship and see how much I'm gonna use a word that I don't know if we can quantify, but happier they are when they're working in this new environment where it's somebody that I used to dread talking to every day, and now I love talking to you because this whole scenario has changed.

Kate Vitasek 25:17

Yeah. And it's almost like we give people permission that that was the old behaviors. Like that's not who you were. You're not toxic in bullying, right? And we show them that both parties created that relationship. But yeah, Island Health is like literally one of my very favorite case studies. And we measure that. Every two years we measure the relationship health. And there's a number and then qualitative scores. So the qualitative would be the words. In the adjectives that they use to describe the relationship, they have a sliding bar and they can say it's a negative, a neutral, or a positive relationship. So they slide the bar. And so they went from 85% negative words to 86% positive words. Stunning turnaround. Stunning turnaround. And then they've been able to maintain that. And actually, one of our uh certified architect graduates just sent me a note a week ago and said, I was just following up with the island health people. And even though those people who set out the change and restructured their contract to a vested agreement have retired, they still keep up their governance because there's mechanisms that you need to have to make it work. And this is you've got the rules, but below the rules, you've got 10 contractual elements and then design principles. So, for example, in Rule Five under governance, you've got contractual element seven, which is relationship management. There's nine design principles. And you look at it and it's like, oh, those make such good sense. We have to have a cadence. How often are we meeting? We have to have two in a box relationships. Who's going to be meeting? So no individual thing is hard. Right. But go back to systems thinking. You know, we aren't putting it into practice. And so what we've done is just dissect that down so that it's in a hundred little bite-sized things. All right, now we're gonna work on this, and you go and do that thing, and then all of a sudden you've created a vested response.

Ted Stank 27:21

And I just think this goes so much beyond even income statement balance sheet financials, right? I'm not an organizational behavioralist, but I think about how we are increasingly in a world with labor scarcity and you know, and so many people are going from one company to another, it's hard to get good skill sets. Think about if you're going to work in a company where every day you're in a toxic, terrible relationship with your suppliers or your suppliers with your customers, and then you go to work for a company where at least in these five to ten vested relationships, you know, it's hyper productivity, so much better. Um I want to toss something in there.

Kate Vitasek 28:05

Easy to see the toxic turnaround, right? But what is interesting to me is one of my later pieces of work on buyer supplier trading partner trust looked at typical. So we took the same compatibility and trust instrument and we looked at the utility and oil and gas industries, two different industries. We asked the buyers to pick a typical supplier and a great one. And so they got to pick typical, great. It is stunning the difference. So they're not terrible and toxic, right? But they're transactional, stagnant, okay. Reminds me that commercial, okay is not okay. Right. Right. Versus collaborative, innovative, trusting, transparent. And so typical, think about you've lots of suppliers, and if you have a bell curve, and the typical is transactional, stagnant, just okay, you're leaving a lot of value on the table. Yeah. And so that's my hope is that people won't just take the bad relationships and what we call flips, but they will consciously begin to say, you know what, I want to work in this way, the vested way, with more of my suppliers. Right.

Ted Stank 29:21

I was gonna I would think that once you got used to the that behavior, you migrate it to other relationships as well.

Gainsharing That Does Not Break

Tom Goldsby 29:27

Maybe not all the way, but just at least in terms of Hey Kate, I wanted to go back to something it it could be found in the rule around pricing, but it comes back to trust ultimately. The vested way is distinct from gain sharing. There's some gain sharing aspects to it, but something that always seemed to get in the way of gain sharing, fine idea, but it'd be the underlying baseline economics. There'd never be agreement there, and then the delta of the gains would not be agreed upon. What are best practices now to kind of overcome some of those issues that ultimately do come back to trust or lack thereof?

Kate Vitasek 30:06

Yeah, so there's a couple of things that we do in the vested methodology. So the first thing in rule one is you create a statement of intent. So if you really wanted that innovation or cost savings, then you'd have a gain share associated with that in the economics. You have to put it out there and go, hey, what this is our goal, right? So we want cost savings. 10%, 20%, 30%, whatever. Uh in Dell's one of our case studies, they didn't put out a goal. They said go as much as you can and we will share in an equitable way. So there's a statement of intent about this relationship is not just the transaction. We're doing so with a purpose many, many times to reduce cost. Now, in the economics, you create the model that you win together and lose together. But if you don't have the governance, it won't matter. And so there's a couple factors in governance. One is transformation management. So we have to put in the processes what's a good idea? What would be the baseline? How do we do that? And so there's a whole schedule in the contract around transformation management, both continuous improvement, which we don't need investments, and then investment-based ones where we need more investments or IPs at the play. So your contract has a schedule that's kind of like your playbook. And so now people have a playbook and they go, Oh, I'm supposed to go reduce cost or improve service. Here's our playbook for how we make decisions, how the decisions are made, how the money's being shared. So because you have a playbook, it's exponentially easier to follow. And that's where people fall down. It's not a lack of intent, it's a lack of not knowing how. Yeah. It's the how. And this is why you can't do these in 30 days.

Tom Goldsby 31:52

Right. How

Bringing Attorneys Into The Team

Tom Goldsby 31:54

do you bring the attorneys along? Is that do we need to say that for the next episode? Maybe. But I mean, talk about stalwarts and fixed in their ways. How do you bring them into the vested way?

Kate Vitasek 32:07

Yeah, well, early on, we didn't really pay attention to that. And the first couple of deals we had, it was it was fine. And then we had a deal that it was not fine. And the attorneys can be like, what the heck? Like, you can't do that, and you can't do this. The business wound up winning over the attorneys, but it was painful. So we've become much better teachers at this. And actually, we work with attorneys now. So they go through our class. David Friedlinger is a renowned expert on relational contracts now. And so we actually wrote a whole book designed for attorneys called Contracting in the New Economy. And so it's written, I'm the only non-attorney. And so it's written by attorneys and you know, wacky supply chain professor, um, speaking their language. And so when people do a vested deal and they come and they bring a team, there's always attorneys. And what they come is like, come on, their hands are folded, and then they go, I go, This is cool. And so when you get them in the room with the team, they love it. And the learning that I had is don't just have the team come up with the rules in their playbook and then go, oh, and now let's go sign. Right, right. And have it vetted.

Ted Stank 33:17

They are co-opted into it.

Kate Vitasek 33:19

They are part of the team. And so at first they they're like, Well, I don't need to be in all of these meetings, right? And it was like, no, actually you do, because the paper has to manifest what the decisions were. And this is where you get out of misalignment. You have a good intent to have a partner, and then what you bought, we're we're right back to where we started. Right. Didn't I didn't we say number one thing is like, sorry, you didn't get what you wanted, you got what you paid for. And so we want those attorneys to be on the team. And again, you can't do this with every single supplier. Right. And so your most strategic suppliers, your most strategic customers, you should be moving in this direction. Trevor Burrus, Jr.

Ted Stank 34:01

Kate, we're running a little bit short on time, but I do want to touch on one other area and get your take on

Where AI Helps And Where It Cannot

Ted Stank 34:06

it. It's October of 2026. I don't think we can have any professional supply chain conversation without mentioning AI. So you mentioned AI before and you said you thought it was going to be able to help with the transparency and decision processes. Could you expand on that just a little bit? Yes. Just so we can say we're being thorough and talking about AI.

Kate Vitasek 34:27

Because you know, people think I'm AI averse and I'm actually not. Yeah. I'm like, there's all these transactions have to happen. And so automate the heck out of that. I don't care. Robotics, AI, whatever. The transactions should be just flawless in the background and then take the smartest people working on the relationship, the innovation, the value creation, co-creating those. So I want all of these deals to where the technology and the AI makes the work just super easy.

Ted Stank 35:04

I pointed to you, Tom, because you were talking about value streaming. Yeah, yeah. OpEx comes back to life through AI.

Kate Vitasek 35:09

The second thing I want to add is, and I get this question all the time, but AI can just like start to write your contract now and negotiate your contract. And I was like, AI can't create the value. So you bring the parties together to go through a series of a structured decision making. What's our outcomes, right? How do we do this? So I think AI can help us write the contract, but we have to have it in the background. You know, we have to give it the decisions. And we have a great as part of our class, we actually have a template. So the creating invested agreement online class, the buyer and the supplier take the class, their homework is their contract. And we have a template that is, you know, here's the things that go in your contract. And so use AI to sit in all your meetings and then draft that out for you. And then you come back as like, no, that's not what I wanted. So now we're having value in the contract discussions and getting rid of this, I call it red line hell, sometimes it's rainbow hell, it's gone back and forth. You know, you shouldn't have to go back and forth and back and forth. Sit in the room together and do that. And if you can come in, AI's crafted your first draft, and then you're doing the co-creation of the red lines together, super efficient. Okay.

Ted Stank 36:24

There you have it. There you have it. We could talk to you all day, all week. Your knowledge is so deep in this area. Uh it's just always delightful to have you join us as a guest. Delightful to have you join us at our forum as our keynote speaker. Our participants always love it. For those of you who are listening and want to get more information, just Google Kate Vitasic. She has all kinds of information out there.

Kate Vitasek 36:48

And if you can't get the last name right, just go Kate Vested, and I think it'll just show it. Yeah.

Tom Goldsby 36:54

That email was already out there.

Ted Stank 36:55

Kate Kate Vested Way.com. Tom, you want to wrap

Forum Invite And Closing Thanks

Ted Stank 36:59

us up? Bring us up.

Tom Goldsby 37:00

Well, let me just reiterate uh again, Kate, congratulations. We're so proud uh and we're so pleased uh at the way you represent the University of Tennessee around the nation, around the world. I can never go anywhere without what someone's saying, hey, I I just ran into Kate Vitastic.

Ted Stank 37:16

I can't even list all the accolades she's received on the U.S. I know, I know.

Tom Goldsby 37:20

It would have taken our entire time today, but again, we're just so proud of you and proud of the affiliation. Thank you for representing us so well.

Ted Stank 37:26

She's worked with Nobel Prize winners so that's a good thing. And she's working on her own, I think. Maybe one day a Nobel Prize.

Kate Vitasek 37:32

You know, but not just the Nobel Prize winner, but in economics. Does some people know that I can't read those formulas?

Ted Stank 37:39

This is hilarious.

Kate Vitasek 37:40

I was like, Oliver, if you've proved this, this is interesting.

Ted Stank 37:45

Oliver Hart. The other Oliver, the other Oliver.

Kate Vitasek 37:49

No, Hart did. Hart did, yeah. Yeah. So the dueling all Oliver Nobel Prize winners.

Tom Goldsby 37:55

So again, it's great to be with you today on every occasion. And speaking of occasions, we should probably also mention that we're going to be broadcasting next from our supply chain forum, November 10, 11, 12. We've got a great session in store. Dave Clark's going to be a good one.

Ted Stank 38:11

Yeah.

Tom Goldsby 38:13

So look forward to seeing our friends back on Rocky Top for the forum. And you can always reach us on Rocky Top at GSCI at UTK.edu. So with that, we'll close out and uh hope that we see season five. I think it's going to happen.

Ted Stank 38:28

Yeah, yeah, I I've heard it's been picked up. My attorneys have been talking to them. They're trying to negotiate coining.

Tom Goldsby 38:35

That was a new term for me. So put that one to use. I'm sure there's some orange in there somewhere.

Ted Stank 38:39

But uh thanks to our producers, by the way, Josh and Brian here. Thanks, guys.

Tom Goldsby 38:43

Make it all happen. Very good. It's the teamwork that makes the dream work. Till next time, folks.

Intro & Outro 38:51

Thanks for listening to Ted C on Supply Chain Management. Be sure to subscribe on your favorite podcast platform for more conversations with the leaders of framing the path for practitioners, scholars, and students. Have a question or idea? We'd love to hear from you at gscii at utk.edu. Till next time, listeners.