AI, Trade Wars & Supply Chain Resilience with Nick Vyas | Fashion Made S4E4

We're looking at close to $100 billion of merchandise being created under this premise called the knockoffs. How do we actually at least prevent most of it, if not all of it? In luxurious goods, it's about the authenticity. Is it real or is it a fake? Is it a knockoff? Right? Blockchain, we can actually create a tamper-proof digital record to prevent the counterfeit.

Hi there, welcome to this episode of Fashion Made. I'm with Nik Vyas. Really pleased to have you this evening, this morning your time. Nik, you wear quite a few different hats. So you're founding director of the Randall R. Kendall Global Supply Chain Institute. You're a professor at the University of Southern California. It would be great just for you to give a bit of an introduction as to kind of who you are and what you do.

Absolutely. Good to be with you. So I'm— you're right, I do wear multiple hats. I mean, 3 in specific. So one of which is I'm the founding executive director for Kendrick Global Supply Chain Institute. I'm also the academic director for our Master of Science in Global Supply Chain Management. Program, which is 16-month master's program that takes students through very comprehensive end-to-end supply chain journey. What I call this program to be, you give us 16 months and we'll give you 16 years worth of learnings in that span of time and make you a global leader. And then the last but not the least, professor in data science and operations at a business school known as Marshall Business School at University of Southern California.

Amazing, amazing. And I know that you recently joined us at our events in LA, Pi Apparel LA. So I know that the team on site was speaking very highly. I think what I'd love to talk to you about, Nick, and I think this is something that the fashion industry is acutely aware of, It's been an interesting few months in North America, to say the least. And I think that fashion is already— was facing challenges when it comes to tariffs and when it comes to losing customers and when it comes to trade with China. And I would love to get your perspective on what a Trump administration means for fashion and for the retail sector at large. What your predictions are for the following years to come.

Yeah, so I think we have to sort of, when we talk about the tariffs and talk about the fashion industries, I think it has to go beyond even Trump 1.0. So let's start with sort of a decade and a half journey on these things, right? So the trade deficit has been a biggest thorn, if you will, in US, especially during the election years. It's been 20-plus years in making where we talk about during the election cycles about the trade deficits, and then we would come up with some short-term remedies, and then election's over, and then we kick the can down the road. And that cycle continued all the way from Clinton's Trump 1.0, where Trump sees the trade deficit as that America has been taken advantage of. So his views are very cemented in this belief that those countries that they are trade surplus at the cost of creating a trade deficit in America are taking advantage of America. So he He has a very simplistic view on this subject. He carried this thought in Trump 1.0. However, he feels much more vindicated through the mandate on this outright election win that he has all three houses—Judiciary, Senate, and the House—as well as people's mandate to reaffirm his belief and then double down on this. So what does that mean? Well, the Trump 2.0, as you have seen, He's very strong in a position to sort of create this issue of trade deficit to somehow come to the neutral, if not at least shrink what appears to be over a trillion-dollar in trade deficit. That's really interesting.

And in terms of how you think that that's going to affect supply chains, I mean, obviously the FMCG and fashion industry need to move quickly. And need to be agile. And how do you see that having an impact in the immediate term on supply chains?

So, I think when we think about supply chains, what I often talk about is the network, right? And the network is the system. It's not like pitching a tent when we're camping and we feel like, "Hey, let's just move on to the next spot," and you wrap up your tent and move on and pitch the tent the next day somewhere else. Supply chains don't work that way. It takes years in making, building those network nodes from acquisition of raw material to the manufacturing and the first, middle, and last mile deliveries. I mean, this is years in making. So what has changed in today's environment is the sudden abrupt decision through the executive orders in which one would inject The policy guidance through the tariffs makes it really hard, especially FMCG companies and the fashion industry in specific, is that you have to pivot very quick on a moment of notice and change your sourcing location, change your raw material acquisition locations. And all of a sudden, you're talking about figuring it out, all your cost. And you hope that your margins will be there for you to do business.

Yeah. Now, one of the things that I watched a couple of videos with you, Nick, and I know that you are, I think you're very tech savvy, we would say here in the UK. And I noticed that you speak quite a lot about blockchain, which is an area that I'm very interested in, the world of decentralized delivery and products and services, right? And which is obviously the antithesis of the fashion industry. It's not decentralized at all. But I'm interested to get your take on— I want to talk about AI as well, but initially about blockchain and where you see it being used, a decentralized solution being used in an industry like fashion. Do you even think it's going to be possible?

Yeah, so I think that's an interesting question, right? So let's frame this up in a context of Trump 2.0. So we talked about the tariffs and how that can actually disrupt your network design and how you actually source all the way to deliver the goods to your consumers. But now let's talk about another dimensions, which is where the blockchain I think will come in. I think there is a moment of time in which government, especially in America, and this is also true for EU, that is likely to impose the traceability and the trade compliance of the product. So it's no longer for you to say, "Well, I am actually buying this fabric from country A." They want to know where did you actually acquire the yarn, where did you actually grow the cotton, And by the way, we want to know the fingerprints all across that. Did you deploy any child labor? Did you do any unethical practices? What was the consumption of the water? Or did it come from some of the conflicted areas where we have a trade ban? Today, those things are very hard to A, enforce, and B, be able to produce the traceability-related compliance issues. In 2026, just to give you an example, there'll be over 400 new regulations. About 50 or 60 of those will be in the fashion industry. How do we create a solution? It's no longer the NIC buyers actually issue the certificate of authenticity and that is an acceptable means of validating that you have ethical practices or you have entire source validated. Those will have to be underpinned by technology, and blockchain has a huge potential to help solve that issue for us. Absolutely. Absolutely.

And in a strange way, whilst blockchain is a decentralized technology, in so much as Bitcoin and that world has come around it, it is still centralized to the point where for authenticity, one can use this as a very effective tool. And it's interesting you talk about sustainability because I think Most people in the fashion industry know that sustainability is almost impossible to achieve when you can't, when it starts at the factory. Well, then that's not sustainability, right? So that first step is actually the most crucial one. Absolutely.

And then you think about, right, when I look at the fashion, it's a spectrum. You have very low-end fast-turn fashion goods to very luxurious brands, right? Each of within the spectrum, there are huge challenges of various different traceability, right? In luxurious goods, it's about the authenticity. Is it a real or is it a fake? Is it a knockoff, right? Blockchain, we can actually create a tamper-proof digital record to prevent the counterfeit. So it solves not only the issues of compliance, but it also solves the issue that most of the retailers, especially higher retailers face all the time, right? We are looking at close to $100 billion of merchandise being created under this premise called the knockoffs, right? How do we actually at least prevent most of it, if not all of it? And I think the technology has a huge opportunity to bring that to translate. Because you look at it, blockchain does not need to be proved as an authentic platform. Today, we have almost trillion dollar on the blockchain currency market valuation. It's working in the fintech side. It's working in other verticals, biosciences and pharmaceutical. Can we adapt this into the fashion? And I believe when the regulatory pressure will sit in, I think we will find that we'll adopt this much more fashion.

Um, yeah, I think, I mean, and already in Europe there, that regulation exists. Um, I think if you're turning over more than $5 billion as a brand, so yeah, it's coming and it's coming quickly for a lot of these brands, and big changes are going to be needed to be made, right? It's, it's not a small, it's not a small undertaking. Um, it's very interesting looking at the world of AI in fashion at the moment because you know, there's a big push towards hyper-personalization and, you know, the product that is designed just for you and sold just to you and design, sell, make fashion principles. But I'd be interested from your perspective, where do you think AI is going to transform the fashion sector? Do you see any signs already that there's going to be some real transformative changes in the way that fashion products are made and sold?

Yeah, so I think I'm an optimist, and especially when it comes to this emerging technology stack, which we talked about the blockchain, but now leading into the AI. I feel this is a once in a century sort of an inflection point in terms of where the humanity will be able to optimize. So when you think about the Industrial Revolution was driven primarily by access to energy sources that created mass manufacturing capabilities. And then you talk about the World Wide Web and telecom and then the broadband. All of a sudden, when we start to get into this spectrum of AI, the inflection point, the reason I say this, is that we are now going into the area in which what we have not been able to solve for centuries, right? The friction of moving goods and services from point A to point B to point C, right? Today we look at the world of supply chain or global trade. My continued research says about 35% of everything we do is waste or the friction. Fashion industry within all of those industries, it's still very manual, very siloed, and very ad hoc, right? So when I look at that amount of friction and all of a sudden you say we have an ability through GenAI to solve some of the day-to-day repetitive task of, hey, where is my PO? Or is this goods have arrived to the factories? Or is there My cutting and sewing operations is on the time. All of this basic task that's done by human trying to chase data, trying to chase information, all of a sudden I can solve that problem relatively easy. Then you start to get into the different strata of our supply chain or the global trade. I can build the AI-based agents and a transformer and train my models to learn the enterprise ecosystem and make both the predictive and prescriptive decisions on my behalf. So now imagine this thought, that if I'm running a business where I'm trying to squeeze few basis points of margins and work so hard to improve the profitability and access to the marketplace, all of a sudden, I'm looking at this bucket that's just bleeding away 30 to 35% of the waste while I work so hard to continue to pour that savings into the bucket while this hole just cannot be plugged. All of a sudden, now I have this technology that's going to help me do that. And I feel so excited about being able to work on these different agents and transformers that can solve this problem that really has been tough to solve in our industry. Amazing.

So is that stuff that you're working on personally? Is that— are you building any foundational models or?

Yeah, so we're working on about 6 use cases in which when we talk about these things, it sounds more theoretical, but we are building the use cases to say, let's talk about from design to delivery and all the steps in between. How does the AI agents or AI transformers that we can build, which can adapt and learning of all of the siloed enterprise systems and data and the market research and then continue to provide an insight in various ways. And the idea here is not to get rid of the people. The idea is how do you drive the insight How do you drive the information-based decision and be ahead of the curve rather than trying to chase it?

It's very interesting because a lot of the brands that I speak to and even on the solution providers and the SaaS guys, etc., everybody, there's a bit of a gold rush at the moment, both in terms of where to put your money and an AI-driven economy and agent-to-agent commerce and all of these backdrops are there, but actually when you look at what needs to happen, I think that, and I think most people in the fashion industry would appreciate this, most, most companies haven't got a clear strategy, and AI is still this enigmatic idea. And actually, the biggest problem with tech adoption and with technology, and it's always been this way with humankind, is our ability to keep up. And so I think that, yeah, I think that A lot of the brands we're working with feel a bit lost at the moment on where to put the time, where to put the money, how to plan for the next 5 years.

Yeah, I agree. But let's look at it. Our psyche has been scarred by this enterprise deployment, which 90% of the time failed miserably, right? Anytime you do the system launch or you adopt a new system, organizations fails miserably, at least for first few years during the transition. And all of a sudden, so you are hesitant to make any major changes. The beauty about what we just talked about is building these agents and the transformers and then having these models learn your culture, your trading practices, your siloed enterprise systems. I don't need you to throw away those things. Maintain that. What we're talking about is a top-layer insight where data is abstracted, data is acquired, an acquisition of market research where I'm getting the sentimental data from the market, consumer trends, the influencer trends. All of a sudden, all of these things rather than being in various universe, I am taking that cosmic data field into this data lake and then running the models to say, give me some of the insight, but either predictively, tell me what is likely to happen, or prescriptively, even tell me what should I be doing and give me 3 options and then I will make the decision which one of those 3 will work if I'm not comfortable having AI just make those decision on my behalf. So, I think this is almost like a Star Trek. Version of global trade and especially in our fashion industries when you start to think about it, how much can we lever on this proposition? So an idea is, you're right, it's a gold rush, but it's a greenfield, right? We have absolutely not even touched the surface just yet.

No, no, I would agree with that. And I just, I find it mind-boggling. Like personally, I find it like it's so seductive, the content that This period of time to be alive is, is really quite, quite a special one because, you know, are we creating something that can tune into consciousness? What is consciousness? What does it mean to be human? What does it mean to have intelligence? Someone said to me that, um, if, if we are a million times more intelligent than a mosquito, AGI will be a billion times more intelligent than all of mankind put together. And so you're right, that inflection point is both scary and incredibly exciting. Um, one thing I'm very interested in, it doesn't really— it's kind of off topic, it doesn't really affect fashion, but is quantum and quantum computing. Uh, and you know the old saying that if you understand what quantum, quantum physics is, if you understand quantum mechanics, you don't get it at all. You know, Schrödinger's cat is both dead and alive. So what's your— I would imagine that you, you're operating in the zeitgeist of these, uh, of these areas. Is quantum computing something that you're investigating? Is this something that you're working on on a personal level?

Well, you know, at University of Southern California, President Folt last year announced we are committing billion dollar for advanced computing as a university. So just put that into perspective. As a university, which we have over 20+ schools, right from medicine to the business to the engineering, computer science, policy, arts and letters. I mean, you should think about, we, the vision is how does this advanced computing can actually bridge across all of these different various disciplines and create a better future. So the idea is yes, absolutely. Think about just in terms of the scale. Apollo 13, when it actually was made back to the Earth in its perilous journey, had less computing power than you and I today carry in our palm through our smartphone. And I'm talking about less in terms of 100,000 times less than we carry in our hand today. And now you start to talk about the next generational chips and two-dimensional versus three-dimensional. All of a sudden, you start to talk about a world which actually can start to get into the spirituality of how human— you talk about the human consciousness and stuff. Will there be some emergence where we become one with information? Right? So, to think about our thoughts, you and I can just, in a blink of a second, imagine us being on Mars. How quickly did we travel that? Can all of a sudden imagine that level of capabilities using the systems and information and then building out what-if models on those things. So, in my view, although this is not my field of expertise in terms of the quantum computing, but my colleagues are working on it. When I look at that power of quantum computing and our ability to manage global trade, I see the world being well-integrated, cohesive, and understanding that human species are no longer the source of a brilliance, but there is a power that actually make us a little bit more humble that it has enough, if not a little bit more nuances on us than we do on each other. And that is probably humbling if we take it in a positive ways, and it could also be scary if we misuse it like we have proven as a human species that every major breakthrough, we find ways to screw things up.

Should we be trusted with the keys to AGI? And that pulls another thread, which is who should have access to that? Should it, you know, at the moment there are like 5 tech companies, maybe 1 or 2 nation states that are in a, and that is an arms race to AGI. It is these frontier labs. And how are you and I, How is humanity going to benefit from that? And is there gonna be a centralized benefit that perhaps is a bit more sinister? I don't know. Yeah, yeah.

But I think that's a challenge that we as a humanity have upon us. And I always remind these things every time I talk about the sustainability is that we are stupid if we think that we need to do things right for the planet Earth. I said, no, we as a species could be gone And Mother Earth will actually heal itself in a few hundred thousands of years, and she will be around here much longer than us as a human species. So, let's not do this for Mother Earth, but let's do this for the human species so that we don't become extinct in this area. So, I think that really humbles you that there is a— universal forces are much bigger. And we are just a speck of dust.

I like that philosophy, Nick, because I think that, yeah, that is the point that we've missed is we lose our humanity with fast fashion. We lose our humanity with plastic. And whether you believe or not that that is affecting the warmth of the planet or whether you think that that's just the planet cycle, All of that really is insignificant. It's where's humanity, where are we best, where's the best energy and where can we do the best possible job? And I think without question, it's technology that drives those improvements.

It really is. Absolutely. And then you brought up and you touched on these things and I've written about this, the fast fashion, right? I mean, you think about when we used to design things for hundreds and thousands of years, Our ancestors used that for not only one lifetime, but they actually, in many cases, passed on to it. Today, we're designing things that has 2 or 3 use, and then we throw it away, and it goes right back into the dump, right? And now, you think about the life cycle of all the resources we have consumed and impact we have made on the environment. You just can't keep talking from the one side of your mouth about doing something right, but then the seconds, we should continue to pump this practices of abuse. And we are at the point of sort of a no return in many cases. The scientific data suggests that we need to do some paradigm shift. And I believe that technology is our friend to help us do that.

Yeah, I would agree with that. And there's a humanity's behavior and our psychology and our collective consciousness to care. About each other and to care about how we treat the planet and how we treat each other. And then there's the other side of it, which is the financial impact of improving, right? Because if you improve these systems, it's actually going to work out much, much better for you. So it was really interesting to talk to you, Nick. And I guess one question I would have on a slightly more broader phrase, or a more broader stage would be, In terms of all your years of experience in supply chain and trade, do you have any predictions specifically for the fashion industry over the next, let's say, 5 years?

Great question. So I think I have deep roots from my early entrance into the commercial world, into the fashion. To now, I reflect back on the past as well as look forward. 5 of those 4 years will be determined under Trump 2.0 and some of the political changes we're anticipating in Europe and in other parts of the world. I think one of the big things that I see Actually, I can talk about 3 things. We talked about the AI. That cat is out of the bag. I believe we will look back and see this as one of the most monumental event in our lifetime in terms of what that's going to shape to, right? So, that's one. Second, I think underneath that technology blanket, the traceability and sustainability, although right now we're taking our foot off the pedal, especially in the case of US, we suddenly have sort of lifted the focus off of it. I think this is going to be an ongoing regulatory pressure the fashion industry is going to have to succumb to it. That in the past, you might have gotten away if your goods were manufactured in a factory where you locked up some underage employees and didn't have to report that, and you might have gotten away with just a slap on the wrist. Those days might be over. I think there will be a very stringent, especially Europe-led, EU and led some of the regulatory pressure that's going to come and including adaptiveness into the US and other Western democracies and large economic powers in Asia. So that's number 2. Number 3, I think the trend that we look at it is that as much as there is a conversation and a noise about this, every country— you guys have gone through your Brexit, we're going through under our current administration about America first, and China is focused on China first, and India first. I mean, as you start to see this, there's a tendency that we're becoming much more nationalist, and there appears to be an undercurrent of breaking away from this global thread. My view, that underneath all of this noise, interdependency of each other will continue to stay there. So it is likely to be decoupled economy in a very regional and centric nodes, but the global thread will continue to stay. And I think that's good news for humanity. So between AI transformations, regulatory compliance, and a lot more focus on national and shorter supply chain hubs, and nodes that are regionally dependent but interdependently connected across the continent with the common thread, I think I'm very optimistic about the future.

That's amazing. Listen, Nik, thank you so much for taking the time to talk to us this morning. It was really, really interesting. We hope to see you at some of our events. We've got some— we'll be back in LA a bit later this year. Welcome to join us in New York or Portland, where we can talk about that offline. But yeah, thank you so much for your insights and your time. That was really, really interesting.

Well, great chatting with you and thanks for having me.