Transforming Supply Chain Setbacks into Success with Alex Burdge

Transcript:

Alex Burdge00:00

I think people lose too much money and time and focus because the one thing that you can do, that nobody else can do, is create your company. I love it, and so it's like again. There will be a time when you get to scale that you need to do that equation every year and say is it time to do 3p? Oh, this way or this way or this way. But that's a long way down the road in my opinion, and even as a supply chain company.

Jared Ward 00:19

We haven't telling your product, do not at fulfilling your product.

Alex Burdge00:21

And again, don't worry, like if you on a piece of paper, you think you can save 50 cents per item, to fulfill it yourself, like don't, because you're not gonna save 50 cents and you're gonna have a ton of headache and, as the founder, you're gonna be running a 3pL, you're not gonna be running your brand.

Jared Ward 00:42

Welcome to the ops on filter podcast. Today I have a special , alex from shift global. Alex, why are you here today? I think it's through our yeah.

Alex Burdge00:54

So yeah. So so close friend and Cmo Levi Lindsay, he's always out wheeling and dealing and get getting me in front of people. So yeah, grateful for that.

Jared Ward 01:06

Yeah, he's. He's Alex's agent.

Alex Burdge01:08

Yeah, that's right.

Jared Ward 01:10

He's hilarious. Yeah, I'm super excited to have you on the podcast today. Obviously, we talked to founders and operators in e-commerce companies. Alex, before I dive into your background, can you just introduce yourself and yeah you've been up to for the past, like 10 years.

Alex Burdge01:27

Yep, so Well, I'm trying to decide where to start here. So studied supply chain management at Burgum Young University. Prior to that, I had several years working in supply chain management. That was really my introduction, just kind of landed there through an internship and Really loved it and felt like I was something I could do well, and so I continued to do that. And then I studied supply chain management, graduated in supply chain management, and while I was finishing up at BYU is when we Launch shift global.

Jared Ward 02:03

Why? Why did you launch shift like where did that even come from?

Alex Burdge02:08

Well, a Couple of reasons. One I've always you know, I've always been kind of entrepreneurial, drip, entrepreneurially driven, and and knew that I wanted to start another company, and supply chain is just what I knew, and I feel like I'd observed opportunities and supply chain to Be disruptive and to provide something valuable, and so that was an ambition that I have had at the time working at another supply chain company. Obviously I was, I was not in a position to do that, but that company ended up going out of business while I was still with them, and so I had this decision to make and at that point, it was hey, go start a, a company in this same category or go get a job in this category. And what year was this? 2017?

02:52

okay so, yeah, really grateful for that company. I mean, I learned a lot it was. It was a good refiner's fire for me to kind of be prepared to have the knowledge that I needed to go do a lot of these things in addition to, you know, schooling. But anyway, that's. That's where it all started. It was both passion and and what I thought I could do well and and what made sense for my life at the time, and it just all kind of came together.

Jared Ward 03:14

Awesome. Well, I'm excited to dive into some of the details of sourcing, manufacturing, getting advice from you for e-commerce operators and founders, because you have deep experience in that realm and you're somebody that I really respect and I appreciate that. So my first question is so at shift, who do you guys, who do you guys work with and what do you? What problems do you solve for them?

Alex Burdge03:41

Yeah, so shift has gone through a bit of you know, just like any Young company kind of an evolution of what we are and who we service, and it's changing. You know, just having a conversation before I came here about pivoting again and refining and refining and you know, and so it started out won't mean too long of a story, but it started out really as more of a traditional sourcing agency. A lot of that was out of the necessity that we didn't have. We didn't go raise money, we were bootstrapped, and so we had to say, well, what can we do with only a couple people? And that was what. We can help people source their stuff out of China, we can help manage that experience.

04:19

But we didn't do design, we didn't do you know a lot of these other things, at least at a deep level. And then it, and then it evolved into more services. We have Data and insights, meaning we both have supply chain data now for our customers so that they can monitor and understand how their supply chain is doing through dashboards. And then we also and that's more, that's more on the enterprise level. You know, high, high complexity.

Jared Ward 04:47

What does the customer hope to see through those dashboards?

Alex Burdge04:49

Well, it's mostly things like what are the K that, what are the KPIs that are really important to them. So what? What's the on-time and in full percentages, what's you know, if they have special data points along the supply chain that they need collected, like we can install cameras and and collect quality data, or we can, you know, install special equipment to be able to gather data. So it's still in its, it's young form. I mean, it's something that we've we've done manually for a long time, where we've presented reports to customers, but we're trying to get it to a point where they have something visually in front of them and that will all kind of roll out here soon. But so the data. But the other part of the data that I'm talking about is what product, product category should you be in and why? So actually, on the front end, we've we've bolted on a design team, development team and a market insights team, and that's so you help brands expand or you help them optimize, rather, their supply chain.

Jared Ward 05:43

So it's like delivery times, quality.

Alex Burdge05:45

That's exactly.

Jared Ward 05:46

That's exactly what you're not really pivoting to, but like what you're doing better and better is Really helping. Category expansion for brands like hey, you should be playing in this category. Let's go deeper here, let's do this product.

Alex Burdge06:00

Yeah, yeah, exactly so, and it all can be summed up into exactly what you just said, which is we're not a design agency, we're not a sourcing agency, we're not a brokerage. Really, what we are is we're a strategic supply chain partner, and what that means is we'll come into your company, we'll analyze All of the different we know we call them levers along the supply chain. So everything from why are you wired? Why is this your product lineup and Do you have a long tail of products that you need to cut off? And what is your strategy for inventory? What is your strategy for sourcing? What is your strategy for logistics, quality, okay, etc.

06:35

Right, we, what is your 3 pl strategy? We don't own any 3 pls. We don't do fulfillment, but we have experts that can come in and say why are you doing this? Why are you building this in-house, or why is this outside when it should be in-house, you know? So we try to analyze the whole thing and then we'll we'll create this audit and we'll come back to a company. You say you know what. These are the things that we think you're doing exceptionally well and what you focused on, but there's a lot of money you're leaving on the table because you haven't optimized x, y and z and we can not only prescribe that, but then we can go and build the solution you know, get it humming for you and either hand it back off to you in the long term or we can continue to maintain it, you know for you.

Jared Ward 07:12

What are the biggest mistakes you see medium-sized brands make?

Alex Burdge07:18

I'd say it starts with, like most companies severely undervalue both product and supply chain, and you know, so it's. It's actually been really surprising to me how many even 10, 20, 50, 100, 200 million dollar companies or even bigger, are under the hood.

07:37

Pretty messy, right, and we all are that's not to say we're not but I just mean, in a sense of supply chain, sometimes has one or two people on their team and it's a hundred million dollar company with 400 skews or 500 skews and it's like you know. So that's where it starts, as in the. I think the owners of the company need to recognize that the supply chain is, a lot of the time, what will enable you to scale or what will, you know, burn up all your cash flow if you're not smart? And so that's one mistake. The other big mistake I think we see is but a lot of the time, companies build what they needed when they started and it's really hard to go back and rebuild it when they need to, because they're entrenched in well.

08:18

These are the factories that we found when we started. They were right then, they were in the right country, they were the right size, but a lot of the time what we see is usually every two to three years. If you're a fast-growing company, every two to three years you need a some kind of an overhaul of that supply chain. Now Sometimes you stick with the vendor for a lot longer, but you may have to overhaul how you work with them, your terms, you know. Maybe you need to move to another location that they own, and sometimes you need a new factory all together. But I would say, a lot of the time we go in and we say, yeah, this makes sense for a five million dollar version of you, but now that you're 40 or you're 30 and you're trying to trend to 100, you are leaving a lot of money on the table With this supply chain and if we could relocate you and really trim the fat, you could save a lot of money and be ready for scale even something that I saw the.

Jared Ward 09:03

So back in the day, back in the day, I also ran a sourcing division. In fact, before we dive into brands who have to change up factories, get out of China, optimize in China. Quick question you speak Chinese right?

Alex Burdge09:19

I don't know you don't okay.

Jared Ward 09:20

Yeah, I thought you did no.

09:24

So in Utah, sourcing people or like sourcing experts, like a dime a dozen, and there's there's tons of, there's tons of sourcing professionals who will help you, like, find a factory in China or do similar stuff Not to the level that you guys do. What do you think? Why was shift able to succeed and build a much more I Would say, much more professional set of services in Utah, where personally I feel it's super saturated, but you guys were able to rise to the top and work with the top brands in Utah? Why? Why is that?

Alex Burdge10:03

Well, I think part of its luck, part of its. You know, we've we've had loyal, good customers that have been patient, but I would say it all goes back to this strategy piece. So two things the first is the strategy, the second is the geography limitations of most companies, and so on. The strategy piece not to repeat too much of what I just said, but our ability to come in and we've put together a team of people who are, I think, can be respected around any table of any brand in the world. You know our chief supply chain officer, our COO, a lot of our key people. They can sit down eye level with a half billion dollar company and come up with solutions that are valuable, and so that's one thing is that we have really invested in the right type of people who have deep knowledge. And so when they approach a problem again there might be 24 different levers A lot of these sourcing companies pull one of them and that is what's your factory. But to be able to look at somebody's supply chain everything from cash flow to quality, to lead time to geopolitical risk, you know, and on and on and on that takes a lot of experience and it takes the ability to holistically, you know, prescribe something and to be able to really then execute and make it happen. And so that's the second piece, which is the execution.

11:29

And we do that, I think, very uniquely in that we have full time teams, not just like one person or two. You know, we have full teams in Vietnam, china and Mexico, and each of those then branches out to their respective geographies. And so all of us, Southeast Asia, we have a significant amount of factories available in India, bangladesh, you know, on and on Thailand, myanmar, but then we also can tap into North America, central America and South America through with our Mexico base. And that's really unique and that's what we found is that a lot of companies come to us because and they may be, like I said, they may be a half billion or even billion dollar, we have several billion dollar customers that come to us and they say not that, that's how much we make from them. But you know, their revenue is that big.

12:15

But the point is is that you would think well, they're highly sophisticated, they've been around. Why do they need shift? Well, in a lot of the time, it's because China has been the no brainer answer for so long that they built their entire sourcing infrastructure and internal team around China capabilities and when, all of a sudden, they've had these disruptions that have caused them to feel uncertainty. Even a billion dollar company sees a tremendous amount of value in someone who has a network and an ability to operate successfully in these other geographies that aren't as robust and automatic as China. So, anyway, I'm talking too much, but that's really. It's our ability to diagnose and prescribe and then our ability to execute with boots on the ground that we haven't seen. We haven't seen in a lot of, if any, competition in the same way we're doing it?

Jared Ward 12:59

Yeah, absolutely. So what I've seen is, early on in brands they'll go to Alibaba or they'll know their sourcing person in China and they never really graduate from it. So they could start out as a really small brand. They start sourcing from Alibaba, they grow to $20 million and it's really time to start optimizing. Maybe they don't even know they're going through a trading company or somebody who's adding a five, 10, 15% markup, or maybe it's just not the best country or the best factory to do business with. But they don't even really look elsewhere and if they do, it's just the main thing that they're looking for is to cut cost and that's it. Even in my limited experience, I've seen brands who only focus on the cost of their product. It becomes a massive detriment to their supply chain and to their vendor relations Excuse me, their supplier relations. What have you seen with that? Brands that are almost only focused on price. What typically happens when they're just trying to get the lowest price?

Alex Burdge14:12

Well. So there's a lot of things that can go wrong. So our internal kind of North Star as a company is everything that we do needs to either make or save our customer's money. So there's a reason that there's make or save, and sometimes the answer is cost cutting, sometimes it's finding a cheaper factory, sometimes that's the way they need to go. But the other side of the coin is making more money, which usually is at a much higher multiple than the saving of the money, because you're selling whatever the cogs are at a five or seven multiple, and so every dollar you can anyway.

14:45

You see how the economics kind of work where we say, okay, adding a robust quality team and process isn't going to make the product cheaper, but it's hopefully going to make a material impact on the amount of returns you have, which again is a higher multiple when you have the reverse logistics and the sales price and all that.

15:06

And so same thing with okay, coming in here and helping you be thoughtful about what products you need to design and when to launch them isn't going to get you the cheapest product. Sometimes you have to pay for good design work, but again does it speak to the customer and get your sales up, and so you can't really neglect either. If you go all into cost and you forget the side, yeah, you may get the cheapest product, but you may have quality issues, you may have a terrible relationship with your supply chain, there's a lot of things that can go wrong, and so you have to find that kind of the intersection where you're optimizing both, and I think that's what we're really trying to do for brands. We're not the cheapest option, but we can save you money no matter what. If you consider making and saving money in the same equation.

Jared Ward 15:49

Yeah, I think it happens so many times with brands that we work with, because I mean, we don't get the peak under the hood that you get with supply chain, but we still get a little peak under the hood. What I find super common is people don't really have relationships with their suppliers. It's like they'll go to a different factory if they'll save them 10 cents and it could be an inferior product with more defects. People are very short term in their thinking and it hurts the business in the long run when you just think about cost. That's why I really like the holistic approach that you guys take. So when should a brand think about moving to Latin America or at least have a part of their manufacturing in Latin America or North America, I guess? When does that actually make sense? Because this was all the buzz when tariffs were going up and shipping containers were at a 6x what they normally are.

16:55

A lot of brands are trying to get to Vietnam. A lot of them are trying to get to Latin America. I think a lot of people ran into like, oh yeah, maybe this doesn't actually make sense. What are some issues you run into as a brand if I'm trying to switch to Vietnam or if I'm trying to go to Latin America?

Alex Burdge17:12

Yeah, it's a big question. Every situation is different. I would say most, I'd say nine out of 10 startups should start in China. Still why? Well, they're still the best at a lot of things. The biggest thing is that they're more flexible on MOQ, and they're more flexible mostly because the material availability is extremely high. The sub-suppliers are available in a network that is unparalleled in any other country.

Jared Ward 17:45

Basically, china still has the best infrastructure for.

Alex Burdge17:48

By far. The other part of it is that and the expertise in a lot of areas. The other part of it is that it usually takes longer to make products in other countries. Like Vietnam is Because 70% of their raw materials are still sourced from China. You may get certain benefits from being in Vietnam, but the one you're usually not gonna get is speed. As a small company, you can sometimes overcome that by being a big company and having stocking plans and doing things to eliminate that extra time. But all of this kind of ladders up to vendors being less willing to make small, agile orders because of all of these other complexities. And so the other thing is is like Vietnam is pretty tremendous in a lot of categories and I would say second to China, that's our, that that seems to be one of the more robust networks and is continuing to accelerate, as is India.

18:47

But Mexico is also interesting and they have been through times when they were, you know, at their height, extremely Popular to manufacture Mexico and then it kind of went away and now it's coming back. It's just category specific. You have to look do they have the expertise and they have the infrastructure for raw materials and we more than half of our. The majority of our work now goes to Mexico. So I'm not suggesting that it's not, but those are bigger companies, right, and there is an ability to make smaller Run batch product down there, but there's always trade-offs and so you really have to get an expert to come in, to go in and say let's look at all of the vendors and everyone involved and is this is? Is this something that makes sense to be here?

Jared Ward 19:27

So really this because you talked about before in the podcast on there's specific milestones of when you should think about retooling your supply chain. Yeah so it's still its best. China is the best general manufacturing place because of their network of like suppliers, sub suppliers, expertise over decades yeah, small mo cues, that makes sense. So talk about this milestone a little bit like when is it, when is it good to actually look into? Hmm, should we, should we go to Mexico or should we do some of our Manufacturing in North America?

Alex Burdge20:00

Well, so it's good number one if you have extremely high tariffs, even if you're small, it's worth doing the exercise. Okay, so there are certain product categories that are nearing 50% tariff like.

Jared Ward 20:11

Backpacks, oh, oh yeah they're at like 43 or 44 hammer, no medic. Yeah, he's awesome, yeah, he talks about it, anyways yeah, yeah.

Alex Burdge20:22

So backpacks, bags, there are certain, there's certain other textiles, certain plastics. So if you're just getting hammered on Tariffs, even if you're a sub one million dollar top-line company, it's still worth doing the exercise in my opinion, because you can find certain vendors who will do the MLQs again. It's a very nuanced question, but the other trigger I would say is is you know, when you've gotten into that kind of like maybe four or five, six million dollars and you have enough buying power to be interesting at a vendor, I think it's worth the exercise. If you're, if you're a sub one million dollar and you're not getting hammered on tariffs, or you're sub two million dollars and your vendors are doing a good job, there's just so many benefits I wouldn't even think about it.

Jared Ward 21:08

It's not worth it. Tariffs is one reason to go to Mexico. What are what are some other reasons?

Alex Burdge21:13

Cash flow. I mean once it's up and roll.

Jared Ward 21:15

Getting it up and started is a lot harder, but once it's up and humming, if you have people managing it, your turn time on logistics is five days how in that's it sounds like I'm starting to understand why a brand would go to shift specifically for, like you guys are setting up the Mexico Manufacturing or but you know potentially other countries, but you'll go set up the Mexico manufacturing, which is the most challenging part and you can deliver on like really quickly, time save the Monteros.

Alex Burdge21:44

Yeah, exactly, yeah, free trade massive value. Yeah, I mean, I think it's been really good for us and our customers and I think, if, if we can get their product to work down there, it's pretty awesome. I mean, how a lot of customers we have a truck leaving, you know, this day of the week every week gets up here in five days. The other thing is, as we can usually leverage better payment terms out of Mexico than we can out of China, really yeah.

22:07

I think there's just, I think there's a long history of there's such a world between us and China and I think there's been a lot of Factories that have been burned or customers that have been burned, you know, over 40, 50 years, where there's just an apprehension to Give terms of someone that far away, with that little trust and and and you can build that over time. But in Mexico a lot of the time we can start out at like a net 15, net 30, wow term, yeah, that's amazing.

22:36

And so if you add that with the five-day lead time a lot of time you have your product before you pay for it Okay, which changes the game, and a lot of brands will say, hey, I'll pay, fit, 10, 15, 20% more, if that's the case, for my product category to have the cash flow.

Jared Ward 22:48

Yeah, you know. So, oh, that's really cool.

Alex Burdge22:51

Yeah.

Jared Ward 22:52

I Want to move on to horror stories for a little bit. Great anybody who's touched manufacturing. They've got scars and horror stories. Give me a, give me, give me one of your best horror stories. Manufacturing in China. It could be QC, it could just be travel. It could be getting lost in Mexico. Hmm, give me one of those.

Alex Burdge23:16

Well, I have a few. We had a lot of them in our first 18 months. That should have killed us, but one it was we were three months old and we got a quarter million dollar PO from a customer, which was obviously you guys are pumped. Oh yeah, I mean the boys celebrating. Yeah, it was. It was a magnitude above anything we'd seen. We got it, we produced it in China, and it wasn't just for a customer, it was for Sam's Club For that customer so and you know, you start dealing with those types of retailers and they don't mess around with their timelines and their quality.

23:55

Well, we make this thing and it's a soft good and it delivers. And just then, mind you, at the time we had 20 to 30 thousand dollars max as a company, like those were. We were feeling amazing on the days that we had 30, we thought it was like done deal because our overhead was a few thousand bucks, yeah, yeah so I get a text from our customer and he says, hey, these don't fit Like.

24:22

What's going on? Meaning the textile went over another product and it was supposed to be a cover and he said these, these don't fit like. And we were already six weeks late to Sam's Club, which wasn't wholly our fault. A lot of it was when the customer ordered too late and it was. It was just a challenge. But they were getting flak from or from Sam's Club for the last six weeks, getting just blown up, and they finally got the product. It finally got here and I I say, okay, I'll be right there, I go up there, you know, just pit my stomach, go up there. We both just look at it on the ground and we're like, yeah, that's, that's a problem, right. So then it turns into a big issue where, long story short, you know, we're, I flew over to China and and it was a it was a lonely, difficult trip because I was by myself, I had this pending like as our company gonna survive, you know, and I was over there to try to negotiate with the factory who made them too small, and I just remember like fetal position, you know, in the hotel bed, like I Don't know what to do here.

25:33

This is a bigger amount of money than I know how to solve and and Luckily, the customer was good. It was challenging, they were ups and downs and ultimately what we landed on was that it was. It really was a shared Responsibility between all three parties. The customer didn't define spec, they didn't have any technical documents. We should have, you know, monitored that and and made them aware of the risks, and we didn't. The factory should have made them because they still had a golden sample and they made them too tight. It was, I would say it was 70% factory and the other 30 was split between us and the customer.

26:07

I Talked to the factory. I was holding up a big payment and saying you got to fix this, we have to replace these and we have to air freight them or else were toast, and they said, okay, we'll help replace them at a huge discount and, but we need our last payment to be able to proceed. So I sent it Immediately. They got it and they said we're not going to replace them at a discount, like, if you want them, you got to buy them, and so it was bad.

26:37

It was bad and I found out later from the employee who I had worked with. She said the owners never intended to pay you, they just wanted their money. So they were willing to tell you whatever you needed to hear. So we had to buy them all again at full price and the customer and we figured it out and got it done and we lived to die another day. But that was a bad. That was a bad. I have a lot of photos on my phone of those products. It's been long enough now that it's okay, but it was hard for a long time.

Jared Ward 27:07

What did you learn from that, personally and just as a businessman? How did you guys? What changed in your negotiations with clients after that experience?

Alex Burdge27:20

Yeah, I think the biggest thing is like technical development and design. At the time we didn't have a team, but we later added a design and development team. That would enable us to. Even if our customers didn't have robust documents, we could build those out for them. And if we could graph out the quality issues in correlation to that design development team, it would have fallen off a cliff right, because we were able to avoid it. But we also installed a quality team on the ground that helped avoid those things and there were a lot of learnings.

Jared Ward 27:48

But yeah, so I'm dying to ask you about this. This is something that you and I have talked about before. As somebody who's been in supply chain, I do understand that, like that pit of anxiety in your stomach and it comes from. I'm sure purchasers at e-commerce brands can feel this Like you feel an enormous amount of responsibility. Basically, the backbone of the business depends on you. For somebody that runs shift global, though, especially in the early days, you're not only taking on that pressure for one client, but two or three or four or five or 10. It took me a long time to learn how to cope with the anxiety that comes with that. How do you cope with?

28:35

the anxiety of feeling the responsibility for brand supply chains. It's really stressful.

Alex Burdge28:43

It is yeah. First thing is having an incredible team Cliche thing for a CEO to say, but it's true. It's been the single most impactful decision in terms of anxiety relief. Having six executives that are all, I think, some of the best talent in this ecosystem or this industry, and having amazing individual contributors and managers. There's not a single person on our team that isn't made of the right stuff. I think that that makes all the difference. You have people that you know will go the distance and they're not going to drop the ball.

29:29

Having a great partner my dad is my business partner. We started this together. He and I actively are on this journey together. He doesn't have an organizational role in terms of the org chart or reporting, but he has an extremely critical role in helping with the negotiations and strategy, specifically with vendors, but also just company-wide. Having a partner that you trust and that's complementary to you is huge. It'd be really lonely without that. Those are things you know an amazing spouse, an amazing family.

30:09

I think there's a lot of little things, but I still have a lot of days where I just feel anxiety and you just have to move forward. There was a I'm sure this before. There's a Kobe Bryant quote that stuck with me in relation to this mental toughness and being able to just be calm. He says something to the effect of mental toughness is the ability to be in the middle of an extremely strenuous environment and situation but to take your mind somewhere else. It's not to flee from that, it's not to pretend it doesn't exist, but it's this ability that if you can find peace and like removing your mind from that present thing and just being calm and just letting it ride, usually the solution will come, usually things are better and always things work out. And that helps me to just be calm. Easy for me to say.

Jared Ward 31:07

Sitting here and there's a fire, I'll feel differently. Yeah, no, that's great. Now, moving on to winds. What have been the biggest winds for you at shift? What's some work that you're very proud of.

Alex Burdge31:25

So there's one customer that we work with right now there are a few, but one in particular that we've put a lot of time and effort and thought into and we've built what we think is a really good supply chain with them.

31:42

The savings next year, for example, on an annual basis will be many millions of dollars for them. That's really what the pride comes from is being able to look at something and say this company and us together created value for our employees and their employees and the supply chain. So we measure a lot of our success by what kind of an impact have we made on our customer's bottom line. Those are really the moments for me. There's another one where we've re-engineered their packaging and re-engineered their supply chain and driven their costs down by 20%, saved them probably seven figures in shipping, and so again, those are the things where it's like okay, cool, we charge this much, we can show this much value To us, we're providing value to this community and we're not perfect, but we do pride ourselves and we can do that and we try hard to do that with every customer in some way.

Jared Ward 32:41

Moving on to Luminous's neck of the woods. So we do a lot of demand planning, forecasting, visibility, just overall visibility with clients. I find a lot of e-commerce purchasers, so the person who has the purchasing or planning role they find it very challenging to make sure that they get on time deliveries and they stay in stock. Any advice from your perspective when dealing with a factory, I'd say specifically with long lead times, a purchaser who needs to stay in stock, and they're working with a factory who has very long lead times, they're probably not prioritizing them fully and that purchaser probably doesn't have a lot of experience like you do in working with a factory.

Alex Burdge33:30

Yeah, I mean. The things that come to mind are one are they the right factory? Are you just putting up with exceptionally long lead times because you feel stuck, or is that what the industry demands? If that's just what the industry standard is, then move down in the decision tree. But if it isn't, I would say stop there and try to really get to the root of that and have them fix that part of the supply chain. You can do that not just by moving factories but, like I said, if you need to stock long lead time raw materials, if you need to do certain things, put down blanket purchase orders so the factory can feel comfortable being more agile. There's all kinds of things in that realm.

Jared Ward 34:13

What is a blanket purchase order?

Alex Burdge34:15

It's like K over the next six months, we're committing to 100,000 of these, but we need you to be able to ship them in a cadence that is less than that. We can optimize our cash flow and you can optimize our lead time. Basically, you can stock the long lead time things and keep a consistent flow. It's good for factories too, because what any factory wants is consistency. Factories lose all their money when they have high times and then low times. They're trying to keep everybody working. That's really good advice. So that's that.

34:46

If the decision is, hey, no, this is just what it is, I would say and you've tried all of those things, I guess I would just say being able to, yeah, I don't know that there is anything else. If you've pulled all the levers and this is the right factory, I would say one thing I do see a lot is that companies treat their factories like they're just their taskmasters. You just have to get it done and if you miss the stay, you know and what I have seen is that 10 times out of 10, if you're overly aggressive with your vendors and you don't treat them like partners, there's going to come a time when that's gonna burn you, because these are just people on the other side that are working really hard to do you know they're part of this equation. If you don't treat them that way and you don't respect that sometimes, you just need to understand that's what it is and you need to figure it out at your company. You need to figure out how to have better cash flow or better ordering.

Jared Ward 35:42

What are some examples that you've seen of somebody being aggressive with a vendor? Because I think a lot of people who might watch that or hear that advice might be like. I'm not like that. Yeah you are.

Alex Burdge35:53

Well, I've seen some people who like, hey, this is the price that we have to have and this is the lead time that we have to have, and if you can't do it, then we're out. And then the vendor goes and moves mountains and does it, and then three months later they're like okay, here's your new target.

Jared Ward 36:06

Like you got to do this and now you got to do this and now you got to do this, or they cut corners in QC to actually give them that cost Totally.

Alex Burdge36:14

Or just the way they talk to them. I think a lot of people I've seen of two very stark types of communication Ones like I value you and I see your value and you can do something that I can't do and I'm going to respect that. And I've seen people and a good example of this is like Threadwall it's Colby Bauer I was always impressed the way he treated his factories early on when we started working with them and he had already found some factories and been working with them. He treated them like they were on his team and you.

Jared Ward 36:40

I think Thread that's been something in the culture of Thread. I had Mitch on and he talked about that. We have a clip about it where he talks about viewing his 3PL you guys, the supplier, all his partners, and we're in this for the long haul Until it doesn't make sense. I think that's a really valuable message.

Alex Burdge37:00

Yeah, it just sends a ripple effect. And then when you need somebody to go the extra mile for you, they're not just willing, they want to do it Because you've treated them well. It's just like that you want to be treated. So that's just one thing to keep in mind. But, yeah, I would say try to optimize it, try to make sure you're at the right vendor, try to do anything you can to shorten the lead time, shorten your cash flow position. If you can't, again, that's why companies like Shift exist. Sometimes we can be that bridge. We can come in and give you a JIT feeling and be a bridge for your cash flow and your supply chain. If that's the solution for you, then those things are available too.

Jared Ward 37:33

Awesome. I think that's a super good advice. Now for, let's say, a purchaser is doing all that. They're doing all the right things. They're treating their vendors correctly. What are signs that it's time to move on or it might be time to look elsewhere? What are some metrics that you guys look at? I guess red flags.

Alex Burdge37:54

Well, I mean the biggest things, what we all track quality obviously is the biggest one. Lead time dependability, I think, is far more of a red flag than lead time length. Sometimes it's like the hardest thing about a vendor is if you can't pin down what they're going to do. If they say we're 12 weeks or we're 16 weeks and that's actually what they are, and they hit it or exceed it every time and you've decided that's where you want to be, you can live with that. I mean, if you can right, because you know what to depend on and you can plan your cash and you're purchasing and all of it.

38:25

If they say, hey, we're 12 weeks, and sometimes they're 16, and sometimes they're eight, it's almost impossible to get on top of that situation because you've got another five or 10 or 20 vendors that all have a ripple effect based upon if that vendor did what they said they'd do and then, and so I would say that's the biggest. You know that's how you poison the well, pretty quick is that? And I would say that's a red flag. If you can't get them to where they're dependable at some point, you need to probably move on because it's going to hurt you more than it's worth.

Jared Ward 38:53

Okay, all right, I hope you're up for this challenge. So for the last five minutes, I'm going to do a quick challenge with you. Let's do it. Put you on the spot a little bit. So I want you to imagine that you are starting a brand from scratch. I know you've actually done this before, so I think this will be incredibly valuable to entrepreneurs who are listening to this. I want you to go through how you're going to set up your supply chain for scale. So let's identify a product in a category that you're developing this product in. So I mean, we could say let's say, alex is starting a backpack company today. I'll say like a backpack and bag accessories company. I want you to set up your supply chain at scale right now. How would you do that? To grow from zero to three million and then from three to a hundred million? What does the supply chain look like and what decisions are you making and why?

Alex Burdge39:44

Okay, you have like three to five minutes, so this is like blitzing.

Jared Ward 39:50

You said backpacks, backpacks, bag accessories, I think like thread, wallets and nomadic.

Alex Burdge39:57

Yeah, so what I would say is first things first. Those are and this isn't the point of it your exercise, but I think it's important you look at how saturated that opportunity is and how unique the value that you're offering is versus if you're just going to try to be a strong brand. You know innovation versus brand, and the reason that I say that is because, in supply chain, you want to get as far as you can without, with as little money as possible. Right, that's kind of we all know that. So what that means, though, is that if you can get by making 10 of these or 20 of these, or 50 of these in Utah or in LA or somewhere that can make them, I would do that and I wouldn't worry about your profits. So that's the first supply chain is really like. Until you can prove that people, you have something unique that people want in mass.

40:47

Proof of concept Proof of concept is huge for the supply chain because a lot of people go overseas and they order 500 backpacks and we've done this for people. They order 500 backpacks and they're stuck with them for 30 years and like that's in their garage forever. I mean, I've done it before, right On my first company, and so I'd say that that's your first. Supply chain is either you're making it, you're rapid prototyping it, or you're finding a small workshop and that's stage one. Once you have proven that you can, you have consistent repeat sales. That would justify you know an ROI within three to six months on an order.

Jared Ward 41:20

And what are you selling those at? Basically break even, to prove the concept, if you have to.

Alex Burdge41:24

I mean you sell them for the best you can, but I would not worry, so many entrepreneurs get. They get stuck up on how much money am I making? Nobody cares how much money you're making until you have something people want. You can figure the economics out later. So I would say that's step one supply chain. As soon as you feel confident, okay, we've have consistent sales, we have something meaningful here that then you go immediately to your supplier. And the two places I'd look for bags it's Southeast Asia and China. I wouldn't mess around with anything else. Vietnam is amazing and they do have vendors that will go down to lower MLQs. But, like I said, yeah, so I'd look in those two places, I'd bid it out, I would. I would either use an Alibaba or I'd use a company like shift or other sourcing agencies. I would find the right vendor. I mean, how much detail do you want me to go in here in terms of how to find the right vendor?

Jared Ward 42:12

I want you to find the vendor. Also a question too is would you outsource fulfillment to a 3PL? Would you do that in-house?

Alex Burdge42:19

Yeah, well, again in the first step. No, first stage. No, no way. Yeah, you do that out of your garage, you get it done, but as soon as you want to move this into a more efficient you know when you're at that place you have confidence 100%, 3pl, don't mess with that.

Jared Ward 42:34

How do you find a 3PL? Like which one are you going to use?

Alex Burdge42:38

I mean there's, there's. You'd be surprised how many there are around every corner. You know there's a lot, yeah, especially in Utah. I mean there's a lot of good ones, but I would just search for ones that have good reviews and but the psyche behind this.

Jared Ward 42:53

you, as soon as this is happening at even a small scale, like outsource it. I don't want to deal with it 100%. Yeah, that's interesting.

Alex Burdge43:01

I think people lose too much money in time and focus because the one thing that you can do that nobody else can do is create your company. I love it, and so it's like again. There will be a time when you get to scale that you need to do that equation every year and say is it time to do 3PL this way or this way or this way? But that's a long way down the road, in my opinion, Right, and even as a supply chain company we have a touch to.

Jared Ward 43:20

You need to get better at selling your product, not at fulfilling your product.

Alex Burdge43:23

And again, don't worry, like if you, on a piece of paper, you think you can save 50 cents per item, to fulfill it yourself, like don't, because you're not going to save 50 cents and you're going to have a ton of headache and, as the founder, you're going to be running a 3PL, you're not going to be running your brand.

Jared Ward 43:37

That's a hot take. I'm going to clip this. I'm going to put it on.

Alex Burdge43:40

LinkedIn Do you?

Jared Ward 43:40

guys think you should do it.

Alex Burdge43:42

People either rip me apart or they'll agree, but I'm good for you there, Anyway.

43:46

So that's what I think. And then I think you go to Southeast Asia. Specifically I would try Vietnam or China or Cambodia. But I would pick Vietnam or China and the way that I would do that, I mean I would. I would say it's highly contingent upon how much experience you have. If you really don't know supply chain and how to vet factories and how to manage them, I wouldn't go to Alibaba. I mean, it's a place you can start, but I would go to somebody that can help you, either a sole proprietor or a company that can help you find the right vendor.

Jared Ward 44:23

So the goal there is somebody that you know will get you direct access to a factory and can like manage that experience.

Alex Burdge44:30

Yes, yeah and I would. Or, specifically, it's more about finding the right factory than it is about access.

44:38

I think you go in Alibaba and there's going to be maybe 50,000 options for bag manufacturers and to pretend, without experience, that you could somehow find the right one. Sometimes you can, but there's a lot of risk of finding the wrong one In terms of time. You could spend a year developing with that factory not knowing that you're at the wrong one, either because of price or size or or you at this, with this decision right here you're prioritizing boots on the ground like somebody who will actually go in.

Jared Ward 45:04

Absolutely Okay, absolutely.

Alex Burdge45:05

Yeah, and there's a lot of ways to do that, and I'm actually we can maybe talk about that on another episode but I'm watching a company right now to help small companies have boots on the ground of their own. Yeah, so, and that's really. This whole thing is like, this accumulation of this is what people need and they don't get it, and sometimes you're not big enough to go to a company like shift in terms of what it makes sense to pay for.

Jared Ward 45:25

What are you willing to pay At this point? Say, your brand's doing a million dollars. Your outsource to a 3PL. You've passed stage one. How much are you willing to pay a company to get the right factory and get that going?

Alex Burdge45:38

Oh, and you're talking as a percentage or as dollars or Any one of those Like what's the offer that you're like?

Jared Ward 45:47

yeah, I'm good with that, let's go.

Alex Burdge45:49

I would say and these are great questions Again I would worry less about how much it costs, I'd worry about getting the right factory as fast as you can and having it, that's having someone maintain it.

Jared Ward 46:03

You're really prioritizing, like I want this company to pick the right factory to be set it up.

Alex Burdge46:08

Yes, because you can, and you can, and I'm not going to pretend that you can't find good factories on your own in Alibaba. But you're up at night, you're speaking usually in broken English to each other, you don't have all the right documents, you don't have a way to manage the experience, and it takes you so long to get to where you have a ready for market product, and so that's why you can optimize all you want later, but right now, it's about finding someone that's trustworthy, that has high quality, and that speed is your number one priority as an entrepreneur, because you've got to figure out if you can. Is the bridge going to burn up before you can cross it or can you keep it? So it's like go with the experts that can find you the right person, the right price, the right quality, but again, I think price is the last one. Make sure you're not paying stupid money.

Jared Ward 46:53

You're probably going to be paying that through a percentage of manufactured costs. So I agree with you. I think that's worth it, because you cut down lead time and everything so much and you get it done the right way instead of like fumbling your way through Alibaba.

Alex Burdge 47:09

Yeah, and what we found is, if you find the right partner and you have boots on the ground, you're going to take what usually takes a year or two years and get it done in six months. So that's the question you have to ask is what is six to 12 or 18 months of my time as the founder of this company worth? Get it done, get the right factory, get through development. I would work with people who understand, again, boots on the ground to help you get through that process and then get it ready to manufacture. And then I think that stage lasts for a few years. I say that's a one to three year time and at that point you're either aren't growing and maybe need to rethink some things about how you're doing it, or you're growing every year and at that point you're usually ready to say, okay, I built this thing, focused on quality and speed, I can sell it. Yeah, and I have a customer base and I have a brand.

47:58

Now let's go back and see if there's any money we're leaving on the table. Can we trim things? Can we be more efficient? Can we get to a new factory? Is that that point? And then you have buying power, you have a customer. You know what you want, you know what your customer wants, you have a track record, you have cash flow, you know. And that makes this quest for the best price a lot easier than saying hey, I'm this guy, I just watched Shark Tank, I got this cool idea. Trust me, it's going to be big. Please give me good terms, give me the best price. Right, like, think about being the factory. Why would they want to do that? But if you can show them that, then you get somewhere real quick and then you have a real conversation to optimize it. Whether you want to take it in house or you already had it in house, you know. All those are the questions that you ask based on that situation. So I don't know that. That was a great, you know great answers, Dude.

Jared Ward 48:44

That was awesome. That's what I would do. I love how you divide those. I love how you divide that journey into three phases. Phase one is like this is the scrappy phase, getting proof of concept. Next is like okay, we're prepping for some sort of like medium level scale, Go into China. Then after that it's like okay, now it's time to optifies for for massive scale. I love that. That's, that was really good. Thanks, Okay, that was super valuable. Well, where can we find you, Alex?

Alex Burdge 49:12

Yeah, I mean my emails, Alex at Shift Global and anyone who, anyone who I can help, our team can help, whether you want to be a customer or not, we just love to be able to be a resource. Yeah, check it out, and hopefully you'll hear from me soon about this new. Hopefully Q1 will have some more announcements.

Jared Ward 49:32

We're going to get you doing content, man. You do some awesome YouTube videos from your experience.

Alex Burdge49:37

Thank you Anyways. Thanks for coming on, man.

Jared Ward 49:39

I appreciate it, see you guys.