Transcript: What the Duck?! Episode 2

What the Duck?! Episode 2 Transcript

‘Tis the Season! Colby Young on How to Manage Seasonal Supply Chain

Welcome to What the Duck?! Another Supply Chain Podcast, a podcast with real experts talking about real issues in direct spend supply chain. And now, here’s your host, SourceDay’s very own Supply Chain Maven, Sarah Scudder. Thanks for joining me for the What the Duck?! Another Supply Chain Podcast, brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of supply chain. Today, I’m going to be joined by Colby Young, and we’re going to explore how to prepare your supply chain for the holiday season. If you work in supply chain for a retailer and are overwhelmed with where to even start to ensure you have enough product to fulfill orders, then this episode is for you. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content. Today, I’m excited to be joined by Colby Young. He runs the NetSuite practice here at SourceDay and works with direct spend supply chain leaders at retailers and e-commerce brands. He helps companies get more visibility into the first mile of their supply chains to prevent late shipments from suppliers. Welcome to the show, Colby.

Thanks for having me, Sarah. Excited to join you today.

Working in supply chain is not a career path you planned. Many of us, I actually don’t think planned to go into supply chain. How did you wind up in our industry?

Yeah, great question. Yes, I don’t think most people dream as a kid to end up in supply chain for their career, I certainly did not. My path to end up where I am today is a bit unique but fortuitous and has prepared me really well to do what I do today.

Out of college, I actually worked in financial consulting for about six years, which was a great job out of college, and I learned a lot. It was very analytical and got me to think from a very analytical mindset, but it was extremely corporate, it was kind of repetitive, and it was not what I wanted to do for the rest of my life. So, I actually transitioned and went back and got my MBA here at UT (University of Texas). Awesome hook’em horns. My focus in business school, I found myself gravitating towards all of the case studies and projects that were, you know, quote-unquote “unsexy,” not your social medias, not your branding, not your things that a lot of people loved and were very exciting, but really the big global impact problems and a lot of more centered around supply chain and how items were moved around the world.

So, I was very gravitated towards that in the early days of business school, and I actually spent my time focused on corporate growth and supply chain and the intersection of those two concentrations. And so, that really prepared me well to do what I do today.

When I left business school, I was fortunate enough to find SourceDay in the early stages of this company. We were putting together the business model and go-to-market strategy, and I was able to take my analytical skills from financial consulting, my MBA education, and my focus on supply chain and growth to help put a strategy together to help product companies, manufacturing distributors, and retailers utilize the right technology to navigate what is so difficult, which is to move product around the world. Ultimately, what makes the world go around is direct spend supply chain. As consumers, if you don’t get what you need, you will be frustrated. From a business standpoint, if businesses don’t get what they need, then they can’t fulfill medical devices that are saving lives or food distribution around the world that is feeding countries. When you think about how important direct spend supply chain is, it’s much more focused on what people need rather than what people want in the world. So, it’s an exciting place to work day-to-day to help implement more efficient global supply chains.

What types of companies do you work with?

I work only first and foremost with folks that run the NetSuite ERP. As you mentioned, I run our NetSuite practice, so anyone that is running NetSuite is my team’s focus. We work with only product companies. I say product companies in that you are either buying widgets to manufacture a product or you are buying finished goods to resell a product. So, to get even more granular, it’s who has cost of goods. As a software company at SourceDay, we don’t really have cost of goods. We have a lot of expenses. We’re buying monitors, tables, chairs, and sticky pads. That’s all that goes on the balance sheet under expenses. Cost of goods is all your direct spend supply chain. That’s exactly who I work with, and they’re the ones that have, again, the global distribution of inventory issues that’s not only affecting global supply chains but is affecting 80 to 90 percent of what they’re actually buying for a product company.

Why is the first mile so critical for retailers and e-commerce brands?

Yeah, so the first mile of the supply chain certainly traditionally has been overlooked. So I’ve been with SourceDay for coming up on seven years and pre-COVID, let’s talk about 2017 when I first joined SourceDay. First mile was a complete afterthought. It was thought of as really just tactical and not strategic. Go cut your POs, get your inventory – very tactical job. All the focus over the last kind of decade, 15 years has been all kind of e-commerce, omni-channel sales, global marketing, how do we get our brand out to the entire world to sell a product. And there are amazing e-commerce platforms, there’s amazing global marketing platforms, and you know, we’re in this digital transformation age where you have access to anything you want right from your phone, click of a button. Consumers are kind of trained to be able to get what they want when they want it, or at least order it straight from their phone.

So we had this kind of technology imbalance of all this, what I’ll call last mile. Right, how do we get sales and final delivery to those customers? And the first mile was kind of overlooked again. It was just tactical. Well, we had a global pandemic and the shift kind of adjusted to, we have all these sales, we can’t even deliver upon, we can’t recognize the revenue. So that’s a critical point there, is recognizing revenue. You cannot recognize revenue a company until you deliver those goods. So you can make all the sales you want and book that revenue, but until you get the inventory from your vendors in and deliver upon those sales orders, it’s unrecognized.

So we had COVID hit, global pandemic, global supply chain disruption, and the strategy kind of shifted from, this is no longer tactical, this is now strategic. So unfortunately, it took a global catastrophic disruptive event to really get the big bright spotlight put on the first mile. When you think about it, nothing happens in the supply chain without an efficient first mile. And again, just a defined first mile meaning goods are purchased from your vendors and getting them in your center so you can deliver on those sales.

So, there has certainly been a pendulum swing of strategy to say, “alright, we need to figure out the first mile and make sure that this becomes a competitive advantage instead of a hindrance to our business.” And there’s no way that this growth trajectory is going to sustain with all this ecommerce and omni-channels and being able to sell your product around the world at the click of a button. But the first mile sticks and stones, emails and phone calls, so it’s an exciting place to be again with this first mile to help catch up this technology and balance that has occurred over the last 10-15 years.

So, given that the first mile according to you and your experience is essential, so important for retailers and e-commerce brands, why do some of these companies shy away from using software to get their first mile in order?

I first think it’s change. We’re all humans, change is scary. We all have relationships with people and companies, and implementing technology, and those relationships can be scary. So, I think it’s first and foremost, it’s change, and every successful technology went through change and working through the change management. So, I think that’s the first, “hey, we’re going to change the way we communicate and manage our first mile with technology,” and you know, I think any organization, it’s the first reaction is, “yeah, this can be a little scary,” but the successful innovative ones are going to be able to sustain that growth are embracing technology.

The other thing is hiring buyers, supply chain folks right now is very difficult. It’s a stressful environment, and a lot of folks are choosing to do different things. So, embracing technology to fill some of those voids, to one make sure that you can continue to scale your organization without needing to add difficult defined headcount and costly headcount, and also make sure that your current staff has the technology that they need to not burn out and the technology they need to be successful at their job. So, I think it’s really a change management and people’s risk tolerance to change, but what we’re seeing more and more organizations embracing the change for all those reasons I just said, mainly because, again, in the world we live in right now, to sustain hyper growth in a disruptive supply chain world, technology has to be used. So, they are embracing that change, providing their employees technology on the first mile that is getting caught up with that last mile so they’re not in the sticks and stones of emails and spreadsheets. They’re now caught up in the digital transformation age, seeing massive, massive success. Organizations are growing, being able to scale without adding headcount. I’ll give you an example; one is Winky Lux. Winky Lux is a cosmetic brand, and they launched in Target big box retailer, and their CEO quoted saying, “we’re in a position to double our business with the technology we have in place, which is NetSuite and SourceDay, without adding any more headcount.” So, being able to literally 100x your business without adding headcount.

Not only is that an efficient way to grow your business, but also almost a necessary way right now when you can’t necessarily go find five or six buyers in the environment we’re in right now. So, the theme of our conversation today is around holiday prep for brands that have seasonal products, which is a lot of companies. Holiday prep for buyers in e-commerce brands is difficult. Why is this? E-commerce brands that have, you know, are prepping for the holiday hopefully right now. Hopefully, you’ve already started, or you are beginning right now. So, any sort of preparation is more difficult for seasonal business, and we have Halloween coming up, we have Black Friday coming up, we have Christmas, we have New Year’s, we have a lot of holidays coming up that brands play into that seasonality. One of the first most difficult things for any seasonal business is you have a very small window to sell your product, right? It’s not like you’re selling product the entire year, or you have some SKUs that get sold when they get sold for seasonal business specifically over these upcoming holidays. You only have that small holiday window to sell your product. So, there’s a very critical balance of inventory that you’ve got to maintain to make sure you don’t have too much, which, too much inventory for any CFOs or Dead of Finance, that’s a critical carrying cost component when you’re holding too much inventory, and at that small window to sell, you don’t sell at all. Well, now you’re eating holding that inventory until the next year, or you’re having to scrap that inventory. Some inventory goes obsolete. Maybe it’s, you know, you’re in the food and beverage industry. Think about Halloween, right? Those are going to go obsolete, or you have a specific fashion style for an upcoming industry fashion. You know, styles change constantly, so it seasonally just adds a very complex supply chain issue that others don’t have. So, you have to balance the inventory projections, and how do you do that? Again, too much carrying costs, too little stockouts. If you have too little inventory, now you have a stockout, and it reminds me of Glossier. Glossier, a very high-growth recognizable cosmetic brand as well, and they had a stockout on Black Friday, you know, one stock out of one SKU, and a very bad review went viral on social media, and it had a very serious impact on their brand.

So that’s worst-case scenario, having a stock-out, and the other complexity is for a seasonal brand business. It is mostly consumer-facing, and they have spent years and tons of money building up a brand that holds equity to that company. And so, having a bad stock-out, like Glossier said, actually hurt their brand. Making sure that you don’t hurt your brand with stock-outs and bad reviews that go viral or you just lose a customer for life because they can’t go buy something that they wanted to get for that upcoming holiday season. So, everything that I’m talking about with stock-outs and too much inventory, that’s balancing your inventory projections, and for seasonal business, that starts with the data. How do you get the data that you need to run the correct algorithms and make sure you have as close to the right inventory as you can, right? You don’t want to have stock-outs. You don’t want to carry so much that you’re just, you know, eating up your inventory carrying costs. So, you have to have data. Now let’s talk about the data. The data problem right now is very, very difficult because what’s happening today is different than last year, which was different than 2020, which is drastically different than 2019. So, you can’t just necessarily rely on historicals. What we’re relying on right now is real-time data. You know, let’s think about, right, 2019 pre-COVID, things were not as disruptive as they are today. COVID hit, we had a global supply chain disruption, but we also had stimulus into the market. Right, we had the market conditions were going up because of stimulus. Today, we’re having perhaps a market correction. So, there’s all these macroeconomic factors over the last three years that have made historicals be impossible to rely on. So, the only way to even have a fighting chance is to use real-time data. And to use real-time data, that means connectivity to all your appropriate stakeholders, and that includes your suppliers. We need to be able to get real-time data on what are their inventory projections looking at, you know, are we getting put on any sort of allocations, you know, what short shipments can you provide, how do we logistically ship smarter and better before something gets on a boat? Because once it gets on the boat, nothing’s fixing the Long Beach port delays we’re having or the Suez Canal debacle. So, what we can control, let’s focus on that. That’s having open communication with all of our stakeholders, getting all of that communication inside of NetSuite so you can make real-time business decisions as real-time as possible. So, you mentioned a lot of challenges. What do you think is the number one biggest first-mile issue that buyers are going to experience this holiday season in 2022? Just one. Yeah, I would say the number one issue is going to be change.

So, how much change is going to occur from the time a buyer cuts a purchase order in NetSuite or whatever ERP you’re running until you receive those goods in your distribution center? How much change is going to happen? And let’s define change a little bit. So that’s, you know, Sarah, I send you a purchase order. You’re one of my vendors. You need to adjust something on that purchase order, whether it’s a ship date, a delivery date, a quantity, or a price. And one thing we know about first mile direct spend is change is constant. A data point for you is that out of about, I think it’s about 10 million purchase orders that have flown through SourceDay, over half of every purchase order will change. So either the supplier needs to adjust something or I, as the buyer, need to say, “Hey, we now need this sooner because of a change in demand,” or “Hey, we need to cancel an order because of a change in demand.” That’s the change coming from both sides. So over half of every purchase order will change, and that’s just binary. Did it change, yes or no? But how many times will it change? So over the life of a purchase order, let’s call it a two-month lead time, it’s going to change more than once. And if we don’t get all of those changes from your vendors or from you to your vendors in a closed-loop commitment back into NetSuite, now all your systems are off.

If you’re running an MRP, it’s off. Your accounts payable, if it’s a quantity or price change, is gonna be off. Any sort of inventory projections you’re looking at will be off. If you think you’re going to receive inventory in one financial period but it’s the next, now you’re forecasting carrying costs in the wrong financial period. So I think the number one challenge is going to be change that is going to occur this upcoming holiday season between your first-mile supply chain buyers and your first-mile supply chain partners.

So, as a customer, there’s nothing that I hate more if I’m buying something that’s very time-sensitive and I don’t get my product or I get it late. What can buyers do to prevent supply shortages this holiday season? Yeah, great question.

So I wish we could wave a magic wand and make sure everyone was on time. You know that’s not the case, so there are definitely a few things that you should be thinking about now as you’re preparing for the holiday season, and one is supplier diversification. There are times where you have to be single-sourced or you have a contract manufacturer that you are completely tied to, and that can work in certain situations, but I would encourage you to think about supplier diversification, and that means having multiple suppliers for what you need and also having suppliers in different regions of the world.

You know things happen in different parts of the world, and we’re still living in a COVID era, right? There are different strains happening. It’s affecting the world in different ways. We’re living in, again, macroeconomic times that are affecting different parts of the world in different ways with layoffs or labor shortages. Or, it’s difficult. Again in the US, we have a trucking labor shortage right now, which is making it difficult to move items from that Long Beach port around the world, and shortages, excuse me, around North America, shortages at the Long Beach port to get labor to get those items off of the boats in the truck. So you don’t know how things are going to be affected, so making sure you have suppliers in different regions of the world is very important. We’re also seeing a lot of folks think about repatriation of your suppliers so you don’t even necessarily have to deal with the ports all the time.

So, bringing some of your supplier network back to North America if you are a North American-based company selling within North America, to not have to deal with some of those import delays that we’re all experiencing. Another one that we’re seeing a lot are people actually investing in their own trucks, to say, listen, we are going to go pick up inventory, to not rely on the trucking companies and the labor shortages we’re seeing there. So, it’s again going back from thinking about the first mile of your supply chain. It’s not tactical anymore, it’s highly strategic. We need to not only do supplier diversification, think about, do we invest in our own trucks and how do we digitize that first mile to make sure that you and your vendors have the best relationships possible, to give you a fighting chance to make sure that you can set those customer expectations. If there are going to be delays, if you can only get half of what you expected from that vendor, you have other vendors to diversify to. It’s a highly strategic outlook now, and you’ve got to start thinking through that lens.

So, last month, I hosted a panel, all of them were supply chain execs in the manufacturing space, and every single one of them said their biggest challenge this year was single sourcing. I didn’t hear you mention that. What are your thoughts on the challenges with single sourcing and what companies are doing about that?

Yeah, so that’s the back, you know, kind of in line with the diversification of your supplier network. So, having a single source vendor is going to make you rely on, you know, “I’m take it or leave it” from this supplier. And when you’re truly single source, you know, you might as well not even collaborate with your vendor because whatever they do is they’re gonna do. If there’s a delay in date, if there’s a delay in quantity, if there’s a change in price, you have no option. So, you’ve got to know what’s going on, right? You have to have the visibility, you have to be able to try to set expectations with your customer, but the reality is, if you are completely single source, you know you’re gonna have delays that you cannot overcome. And again, in the supply chain world we live in right now, it’s a risky way to run any business, specifically a seasonal business. So, you know, those folks that I remember from that discussion were actively looking at ways to get away from single source, to make sure they had a plan B and a lot of times a plan C. Having just one plan these days for supply chain is extremely risky and probably a recipe for upset customers and some supply chain breakdowns.

So, you’ve mentioned a couple of times in our discussion the thought or the idea of supplier collaboration. What can buyers do to better collaborate with their suppliers?

You know, supplier collaboration again, prior to COVID, it was just tactical, right? So, now we’re looking at collaboration that’s truly strategic and it is making sure, first and foremost, you get purchase order acknowledgements. Did you get my purchase order and are you committing to all the content of that purchase order, dates, quantity, price? But we’re getting into a situation with the disruptions that we’re seeing right now and supplier allocations, people saying, “Hey, we can only give you a certain quantity every month or week or, you know, whatever your cadence is for buying.” But splitting up your orders appropriately, right? Collaborating with them of, okay, give me what you can today and give me the rest next quarter, next month, next year, again, whatever your buying patterns are.

So, it’s less of just ‘Hey, you know, did you get my PO and are we good on date,’ but it’s ‘Did you get my PO?’ and let’s talk specifically about the content, because maybe there’s some concessions we can give. Maybe I can be a good partner to you as a vendor by saying, ‘You know what, give me just the 500, and you can fulfill another customer’s 500.’ You know, we can wait and be a good partner, and you know it’s almost, you know, I think back to the empathy. Right now, everyone is dealing with difficult supply chains, so your suppliers are as well. You know your suppliers have vendors that most likely are providing them goods to be able to provide you a finished product or whatever widgets you’re buying from them. So you’ve got to think like all the way down the supply chain, beyond just your supplier network, and make sure that we’re collaborating as best we can, beyond just ‘Did you get my purchase orders and are we on track?’ But let’s be smart about the quantities and dates that we’re providing, and can we split up orders? So the concept of splitting a purchase order, it sounds kind of again okay, yeah, that makes sense. We’re gonna split them into two, but it’s not so just tactical, it is strategic. How many are we going to be able to deliver on this date, and do we need to split it a few times, and then getting all that data into the ERP appropriately, so your ERP knows the different quantities that are going to arrive on those different dates. So there’s a lot of steps that go into collaborating with your vendors in a strategic way, and trying to do that with emails, spreadsheets, and phone calls is a losing strategy. It will become a bottleneck if it isn’t already, right? So when you have a bottleneck at procurement and supplier communication, your options are either, ‘Let’s continue to throw heads at a bottleneck,’ which is right now very difficult to find these procurement folks. They are very expensive, and they’re getting burnt out. You see articles all the time as we’re seeing heads of supply chains quit at a very high rate because of burnout. So instead of that, embrace technology, embrace the digital world we live in right now, embrace technology.

So, you and your vendors can communicate and collaborate strategically better without the email, spreadsheet, phone calls back and forth kind of hero, right? People in supply chain are heroes, you know. We don’t need as much hero effort. Utilize technology to what we call “manage by exception.” Let your specialized staff focus on the risk and the exception, and let automation take care of the rest. And that’s what SourceDay can do in the first mile.

If people want to check you out, where do you want to send them? I’m very active on LinkedIn, so Colby Young on LinkedIn. I’m happy to respond immediately, connect with me. I am on my email constantly, [email protected]. I’d love to chat with you more about any supply chain issues you have, your outlook on your supplier network, your direct spin, first mile, how you’re accomplishing some of these difficult things today, and see if SourceDay’s a right solution for you to continue to scale your business without procurement and the first mile being a bottleneck. Would love to chat, talk about my experience, success stories we’ve seen, and learn more about your business.

Thanks for sharing your prepping for supply chain, your supply chain for the holiday season wisdom with us today, Colby. If you missed anything, you can check out the show notes. If you are new to the show, make sure to follow the podcast so you don’t miss any of our direct spend supply chain content. I’m @SarahScudder on LinkedIn and at @SScudder on Twitter.

This brings us to the end of yet another episode of What the Duck?! Another Supply Chain Podcast. I’m your host, Sarah Scudder, and we’ll be back next week.