How do I Build a Supply Chain?

Hello, my name is Ian Peterman. I am CEO and founder of the Peterman Design Firm, and today we're going to talk about setting up supply chain for your product. And, you know, I get asked, you know, how do I build a supply chain? Do I really need to do all that right now? Do I have to set up a supply chain before before I launch? Questions like that. And so I just want to start off by talking about basically the importance of the supply chain and why you need it and the fact that you have one, whether you think about it or not. And so, you know, everybody has a supply chain. That is a reality of your life. You are part of a supply chain, whether you're receiving a product or not, when you receive a product from Amazon, you are part of a supply chain. Basically, that supply chain just goes over— it's really how do you take— so your whole supply chain is how do you take raw material, turn it into a product, and then get it to an end customer. And so you may work for a company that is a part of a supply chain. You are sometimes the customer. That is the end of the supply chain, and you may even be the person that is actually pulling raw material out of there. You've worked in timber, you chop down a tree that gets processed, you're at the very beginning. If you are the person who grows a plant that then gets eaten by somebody, you're at the beginning. You are growing, you are creating the raw material that, that's the beginning of a supply chain. all the way end. And we can get into, you know, circular supply chains, circular economy, um, well, more conscious. And it's something that we work with. We follow more what we call a conscious design process where there is a raw material. Sometimes that raw material is some end product from something else. And so that's where recycling comes into play, where your raw material may be some product. You know, you drink a soda can, it gets recycled, that aluminum gets melted back down, cleaned, all that stuff, and then it cycles back. And here we go back to a point, maybe a little raw material is entered and your old aluminum can gets formed back into another aluminum can and back into the supply chain. So that supply chain, whether you're— whether we're circular ideal, or cradle to grave, which is, you know, you have these products and it goes to the grave, whether it's being composted at the end of the— or going to the landfill. So, you know, it could be good or bad. That is determined on— that is the supply chain. And when you are producing a product, even if you are making it all yourself, you're making it at home, you have a supply chain. You know, if you have a little Etsy store, And you're making, for example, little plants. Well, you probably don't grow all your own cactus. You probably don't have a quarry in your yard making all the gravel. The dirt also comes from somewhere. So unless you're digging up your entire yard to put dirt in here, and of course, you know, whatever your, your little planter. Is unless you are pulling clay out of the earth in your own property and baking it into a clay pot, you have a supply chain. And you, you have a supply as a, you know, pre-production supply chain. You absolutely have a post-production supply chain, whether you use, you know, UPS, FedEx, DHL, whoever you use, post office, to get your product somewhere, that's part of the supply chain. You are using the services provided by somebody else in order to get your product from you to your customer. And so it's a big— it can be a big area. It can be very complicated. All of the people, machines, locations required to get you a product from Amazon 24 to 48 hours, there's a lot of moving parts. A lot of people are involved in touching, managing, and getting the product to you. And that's, that's just the 2-day part. That doesn't include actually manufacturing it, getting it shipped to an Amazon fulfillment center where it's processed, all that stuff. There's a huge amount that goes into it. And so you need to be aware of a few things when you're building a supply chain, and that is Everything that you use should be considered part of your supply chain, even if it's an office supply. If I use a pen to write down— write a little handwritten note to put into my product and send it, my supply chain counts— should be counting this. This is a device that is required for production. And it's going to run out. I'm gonna have to buy another thing of ink for it or a whole nother pen. You know, you use single-use BIC pens, well, you got to buy another one, can't refill it. So being aware of everything that goes into a supply chain is your kind of your first, first step is observe it, be aware of it, think about all the things that are involved. Then when you're building supply chain, and supply chain and costing are just intertwined because good costing looks at your supply chain and says, how can I cost optimize what I'm doing in my entire supply chain? If you aren't aware of your whole supply chain, you won't even know the cost of your product. So I've worked with all kinds of different clients, especially startups and even established companies who don't consider the pen They ignore some things. They don't think about everything. It's put in there and they bring to me a cost of goods. They say, oh, this is the cost of goods. And I look through their line items and they're missing things. And so when you have an incorrect cost of goods, it means you have a poorly managed supply chain, which means you may not be as profitable as you are. And so this whole supply chain conversation really is part of costing. How do I Make sure that I have a good cost, make sure that I can actually sell the product for a profit to my customers. On the supply chain side, if you're sourcing, always— something else that you always need to do is have multiple sources. So this is especially important when you're doing something, you know, like pre-selling, and crowdfunding is pre-selling. So making sure that you have manufacturer And if you have the possibility, you know, if they can't— if there's a small possibility that you may end up requiring more of a certain thing than somebody can produce, and that could be, you know, your local store may run out of Bic pens, or Amazon is known— you know, they aren't, but if they were known for running out of Bic pens, then you would want to know. Where else can you get a pen? Because that pen is part of your process. Maybe you ship a pen with your product. Well, if you run out of pens and you ship that product without a pen, but everybody else got pens, people who didn't will know. And thanks to social media, the world will know that you didn't deliver pens in your products to some people. Then you'll end up with unhappy customers. So one of the keys to having happy customers is having a happy supply chain, because that means that you can deliver your product on time to the customer in the way that you promised you would. And so when setting up, make sure you have backups. Even just one backup manufacturer can save you. It's rare, but I've even had clients that have had suppliers simply go out of business. And when that happens, if you don't have a backup, you can be put in a really tight situation, especially if you don't control your drawings or things like that, which I've had to rescue clients out of. They've come to me because Company— their company that was making their product went out of business, had all their drawings, nobody can get a hold of them, you know, sometimes as quickly. Also, you know, natural disasters, you can have a factory burn down, you know, and these aren't super commonplace, but they're all things that without a backup, if any of the— if anything happens, you know, even if the company is just unable to produce anything for a few weeks, If you don't have a backup, if you get a flood of orders during that time and you need to purchase, you could end up having unhappy customers. And so making sure that you have backups is key to having a healthy and successful supply chain. And big corporations, their secret to success is their sourcing and supply chain management department is constantly looking for new suppliers. They're constantly— it doesn't matter if they have a great price or if they have assurances or if it's even in-house. They will go and they will look for new suppliers. They'll talk to new suppliers. They'll talk to old suppliers. They'll talk to people they talked to before. And there's this whole cycle and growth and optimization that continuously happens. And that's how big companies are able to save money on products. They're able to Reduce costs on the product because they're constantly saying, looking and saying, hey, where can we reduce costs? Where can we find a better supplier for this part? Oh, we're having— Yeah. And this comes to even if you're not a big supplier, if your quality starts decreasing and say you start getting more part failures than before, well, obviously first try to work with your supplier and fix it. But second, if you have a backup, maybe it's time to pull them up and say, okay, well, let's see what, what happened. And sometimes, you know, it's a whole team goes away, people get replaced, people leave a company, things get lost, things get messed up in a shuffle and can't get back. And so having a backup Will allow you to have somebody start producing while you figure out what's wrong with supply chain supplier number 1. You have a number 2 that can just turn on. And so that will also save you. So those 2 key points: have a supply chain that— be aware of everything that's in your supply chain. Know what goes into everything. Have a backup. And if you do those things, you'll have a healthy supply chain, you'll have something— you'll be able to build a supply chain pretty well and you'll be able to manage it. So I hope this answers your question.