Let's Fix Your Supply Chain And Save You A Ton Of Money (With Lara Guevara)

If you are operating an E commerce business, you are going to love this episode of the Andrew Farris podcast. That is because we are talking about a topic that is often referenced but rarely referenced with real detail, real insight and that is optimizing the efficiency of your supply chain. I don't talk about it that much because I'm not an expert on this subject, but I do know how much it matters. And so on this episode of the show I've got Lara Guevara on the show to talk about things like how there are savings in your manufacturing relationships by understanding how shipping works. For example, from shipping your from your manufacturer to your 3 PL forward freight, how there's savings related to blanket POS, other savings related to understanding not just your manufacturer but your manufacturer's vendors, your manufacturer's manufacturers. Right. All of those kinds of things. There is a lot here that you are going to love. We get into inventory, forecasting, all of that. And so you are going to love this episode. Lara Guevara is the CEO of More Staffing. You have heard me talk about More Staffing on this show and perhaps their sister company, daughter company, More Fractional supply Chain where they are specifically bringing incredible experienced Filipino talent to E commerce businesses. And so yes, this episode, technically speaking is sponsored but I want you to know this episode is not a plug format more fractional supply chain in terms of like, you know, we're not going to spend the whole time talking about how great their service is. What we talk about on this show is basically what it is that more fractional supply chain looks for to help save and create efficiencies in the supply chain. If you don't know this stuff well, you are going to learn a lot on this episode. Lara really does know this stuff well. She's got deep expertise. She's run supply chains for E commerce brands. She's seen it from every side and she's worked with a lot of brands. Like I said. Stay tuned. Learn a lot from Lara Guevara, CEO of More Staffing and More Fractional Supply Chain. Lara, how's it going? Great to see you as always.

Hey, good morning from the Philippines, Andrew and or good evening to our listeners.

Right? Yeah, it's, it's like 2:30 for me in the afternoon in LA, about 6:30 in the morning for you in the Philippines and who knows what time it is for people listening to this in their cars or on a walk or whatever it is, you know. So yeah, how's things in the Philippines right now? How you doing?

Of course, Filipinos started celebrating Christmas last September 1st. So we are nearing the actual celebration and everyone is very excited. A lot of Christmas parties on the side and schools are starting to have vacations, so everything is family time at this point.

Okay, awesome. Yeah, we're recording here in the middle of December, and so. Yeah, that's. Yeah, that's. It's a long Christmas celebration in the Philippines.

Yes. Yes.

Okay. I didn't know that.

It's the most, it's the longest and the, like, the most important, like analyzing it in the, in the US the biggest is Thanksgiving, followed by probably Christmas and New Year, but in here, since September, it's all about Christmas until the three kings on January. So it's a very, very long Christmas season.

Okay, got it. Yeah. All right. Yeah, we, I mean, it probably depends for us, like, certainly in E commerce land, the biggest time is like right after Thanksgiving, of course, into Christmas, but then. Yeah. Okay, so listen, you and I, part of this conversation came up from. You tweeted, you tweeted this great thread about. And everybody should go follow you on Twitter, by the way. And I'll, I'll put the link in the show notes to go follow Lara on Twitter. You know, you, you tweeted like all of these different ways that people can think about getting more efficiency in their supply chain for E Commerce. Like, you know this world like the back of your hand. And I was like, my gosh, why have we done an episode about this? I don't, I don't know. I've actually wanted to do an episode about this for a while, but just haven't, I don't know, just haven't had the right person to talk to or haven't thought about it. And so when you tweeted that like, let's do this, and you immediately respond, yes, let's definitely do that. So I don't know where the best place to start is. I mean, I think maybe the simple thing to do is to talk about sort of like all the elements of the supply chain that you see as like the top places where the lowest hanging fruit is. Maybe that's the place to start. So when you guys have people come to you who want E commerce supply chain help, you have a, you have part of your service at more staffing called more fractional supply chain. And so you have people come to you specifically looking for supply chain help. When they come to you, what are the most common, like lowest hanging fruit things that like, immediately you're looking for going, I'm pretty sure you probably have some Efficiencies to be gained to gain here, like what's top of mind for you?

All right, so first and foremost I would like to start this conversation by saying supply chain is an investment and there is a return if the team is managed well or if supply chain is managed well. So commonly we actually as for your question, we make sure that we first ask their pain points and what are their priorities, their projects that they wanted to move forward first in supply chain because different E commerce businesses have different priorities. But I would say 75% of our clients would say it is the inventory planning at the same time followed by new product development or launching of new products for their campaigns. So when we have these discussions with them during the discovery call, we would see what are the top three things that we can improve on immediately because we want to provide to them an actual return in the first three months of working together. And those are savings, sales opportunities and supply chain risk management. For the savings, we can directly communicate with a vendor for price negotiation and that's applicable for the cost of the product. And at the same time, this is the most commonly neglected negotiation is the freight forwarder, which is sometimes higher cost than the product itself. So we would start identifying who are your vendors, Are you connecting to the actual manufacturer or a middleman? Because it is very important that we find that direct manufacturer so that we can negotiate with them directly with cost. And from there we either we can help them with the actual cost of the product and followed by the cost of freight forwarding. And that is usually like straightforwarding cost is trickier than cost of the product because we have a lot of straight forwarding services in, in China or in Asia and other parts of the world wherein you can actually save more than 30% if handled properly. So I would start in those.

Yeah, yeah, well, and so I mean that alone is a really fascinating observation because I've actually seen people point this out that like essentially you're referring to like freight from the manufacturer to the 3 PL, right? Like Ocean freight.

Right, that's right.

Okay, so. Or to your warehouse or whatever. Right. So it's funny because I've seen people talk about the possible savings here very vaguely. I actually have. Only I've seen like I've. Yeah, but rarely when I hear people talk about negotiating with their manufacturer do I hear anybody call out this line item basically and say like there are savings like here. And you're saying a lot of times it is actually like ocean freight. Is it as expensive as the product itself?

That's right. Sometimes more, more expensive.

So there can actually be bigger, faster savings there. And that's just, by that I mean are you, are you able to go and ask like have your manufacturer set up with a different, with a different sea freight company or something like that? Like is that, like is that, is that the way you're doing this? Basically getting them to ship it with somebody else? Or like how, how do you even control that?

Yes, most of our, when we ask them who are your vendors, who are your freight forwarders? Is the next question. They would say we just rely from the freight forwarders of our vendors and then boom. That's the, that's the lowest hanging fruit there. Because not only your vendors can get profits from the product, but they're also getting profit from the freight forwarders. So they are the middleman of that. If you don't know how to do your own shipment, it's a huge additional cost. And sometimes like most of the time when we ask them who are your freight forwarders? Now we are in the mercy of our, of our vendors. Freight forwarder or no, I use freightos Flexport and those are programs or apps that you can book your, your own freight freight shipment. But that's very expensive because it has a platform. So it's like if Those are the two answers that we get and 100% those two will be, then we already have the advantage of saying we can give you savings within three months. We haven't heard someone yet that has their own connection of freight forwarder and that can actually give you more savings than negotiating the actual product.

And that's just by you knowing your way around, around what freight forwarding is available in China and some of that. So if somebody's manufacturing in China, just by doing that alone, you're going to, you're going to potentially have significant savings right there.

Yes, yes.

My gosh, that is, that is connection and network. Yeah, go ahead, keep going. Sorry, keep going.

Connection, network, connection and network of freight forwarders. That's why if I, if I am like dedicating 10 hours a week for supply chain research and updating myself with latest trends, 50% of that is in freight in shipment. And others are like combination of negotiation for the vendors what's in for the next year. But 50% of my time is dedicated understanding the shipment status right now because that is where we can get quick and biggest savings based on my experience.

That is awesome. Is that mostly for people shipping from China or is that elsewhere in the world too?

It can be applied to any, anywhere from Asia, there's not much issues with or much savings with other parts of the world, but anything coming from Asia there can be a huge potential savings.

Yeah, makes sense. Okay, so that's really fascinating to me. The. Do you find any pullback in quality when you do that? Like, do you end up, you know, is there a sort of a you get what you pay for thing here? Do you end up having any issues on that side of things?

Actually, not for freight forwarding, unlike negotiating an actual product, they might lower the quality of the raw materials of the product that you're using for freight forwarding. The only thing that you have to check when you're negotiating cost is where is this landing or where is this docking in the US and at the same time, what is the route? And there are so many programs where you can check the route of the vessel. That's another part and a whole story on, on being able to track shipments. So if they say that normally it will take 30 days to ship this product from Ningbo to LA, for example, and they would say, we are going to use a different port cheaper, but it will take 35 days, it will have additional five days. And so that clarity and communication and transparency that you don't, if you don't mind the additional five days before it arrives. And at the same time you will get a savings of 10%. So you will then decide, yes, let's go for it. So it's just, what is your cost? What is our lead time? And then where is this docking? Because it's very important to know if they are docking in the busiest part of the ports there in the, in the US it will take longer time and sometimes more expensive as well.

Yeah, okay, man. Yeah, it's. This is just, that's, that's one of those details where I think about this all the time, where I'm always talking to people about just like hammering away at all these parts of their business. And this is like exactly the kind of thing I have in mind. The idea that you would go and negotiate, it's like, sounds great to say, okay, you know, negotiate down your cost with your suppliers. But like, what does that mean? Like, you gotta be more specific than that because that your cost with your suppliers actually refers to a whole bunch of different stuff. There's a whole bunch of, you know, there's all kinds of different things in there. And so that's so interesting. Okay, you, you said something else really fascinating in your Twitter thread originally, which was. And I'll link the Twitter thread as well. In the, in the show notes. But you said something about one of the best places to negotiate for supply chains is actually just by being more aware of, of local currencies and of, of the exchange rates basically. Can you talk about that a little bit?

Yes. The fun thing about this is when I started working with E commerce businesses like more than five years ago, the first client that I have negotiating and using RMB and not US dollars. So actually that's where I'm coming from. Like the new or the, I'm not saying old timers, but probably the more the business owners that have been doing this long term has know this technique already. And then we noticed that the new ones dealing with the vendors, they would start with negotiating via US Dollars. So I actually learned negotiating in the beginning using rmb. And so somehow I realized or I noticed when I have new clients, they would ask me to do USD because that's how they probably they just don't want to convert and they think it's the same and they just wanted to see everything in US dollars as compared to seeing R and B and computing the conversion themselves. So there's a huge probability of savings here because when we negotiate with their local currency, we can encourage them an open costing relationship. They can provide to you their raw materials cost using RMB as well and then just a margin which is usually what will be their profit. So they can also make sure that if they are of course they have their manufacturers as well and suppliers as well. So this is one step back is actually understanding three tiers of your suppliers. So your tier one is your vendor, your manufacturer, tier two is the vendor of your vendor and tier three is a vendor of your vendor of your vendor. So having that R and D discussion with them is helping your tier one vendors to negotiate better with their tier two and with their tier three tier things. So they have, they don't have to monitor exchange rate of USD and rmb. It's faster for them, it's more fair for them and actually for you. And then it will help them give you the true cost of their product. So a lot of advantage there. And the downside, the only downside for you is if you will launch this technique but you don't have time to monitor this. And so that's why I keep saying this, that if you will do this way of negotiating prices with your vendor, make sure you track, you track US Dollars conversion to Chinese Yuan, because if not, and if we can't see that the dollar will be weaker in the next few days, then you have to let your vendor know that they need to secure their orders to their suppliers before the. We have a higher conversion rate. So it's just making sure that first you know, when you need to let your vendor know, lock in your price. Lock in your price. Your vendors as well, because we will lock in with you. It's like a blanket PO wherein instead of ordering just for the first quarter of the year, I wanted to order for the second quarter of the year until. Or the third quarter of the year. So your vendor there, your manufacturer will also order their raw materials for the rest of the year. And it's like helping your vendor as well to plan their orders ahead so the savings can be observed not only by you or experienced by you, but also by your vendor. So technically you're helping them as well.

Yeah. That way it's not just you winning at their expense or whatever it is. Right. Yeah, that makes sense.

Yes.

So helpful. Again, it's the same thing I was saying with that last one. It's like when you talk about starting to do some of these things, it makes. It's really about understanding every single layer and every single detail of the process. And that's the way you actually end up creating efficiency for yourself. Man, it's so good. What else should I know or what else should people know about negotiating with vendors on the cost of the goods themselves? Like on the cost of the actual product itself? Like, what are the other, are there other efficiencies there for savings? You know, is there, is there anything I'm not thinking of here besides, you know, forward shipping and, or Ford freight and, and obviously what you just mentioned in terms of exchange rate and all that kind of stuff. Are there any other key sort of leverage points in those conversations?

So one I previously mentioned about blanket po. It's like if you know that the product right now or the raw materials right now is cheaper, we want to secure that and we want to order ahead. But that means you have to also, you have a bit. You, you need to have a cash, good cash flow here because you are advanced ordering to get the lower, the cheaper price.

People through, talk people through what a blanket PO is because I just want to make sure people understand what you're talking about.

All right, so blanket pos, usually when we forecast demand planning and inventory forecasting, we order usually in the cycle of 45 days or 60 days. So you are going to be, you are planning your products ahead for 45 days or 60 days bracket POS. We wanted to extend that forecasting into A longer term. And we want to see if there's an opportunity of savings in ordering six months worth of product instead of two months. And then if we see that there's a opportunity there to save, we're going to create an order, purchase order that has the whole quantity for the next six months, for example, but there's no delivery date. It's just for your vendor to secure their raw materials as well. Not only raw materials is to secure their labors as well, their production capacity as well. Because the, when you help your vendor plan their productions ahead, you're. You're up for great savings there. And then not only, not only they can secure your, their raw materials at a lower cost, you're also insured that you will not run out of this product because they have secured their product as well. So blanket PO is ordering for a long, much longer time, sometimes for a year, but there's no date on the delivery. And it has an arrangement that you will be sending the dates on the delivery once you have like the usual forecasting timeline that you have. So if you run your forecasting or inventory planning every months, for example, then monthly you will update the vendor on the delivery dates.

Yeah, that makes sense. That. So when I've seen blink of POS done, typically what I see is people, they secure, they like commit to the order, but they don't pay for the whole thing until later. Right. Like, I mean, that's like you're actually going to pay for it, depending on your terms later. You're just, you're just committing to the inventory up front and committing to some kind of payment. Isn't that right?

That's right.

Yeah. Okay, so. So you don't have to have the cash on hand to order a year's worth of stuff or whatever. That's not the idea. The idea is that, yes, you, you just know that you're going to need that much stuff. So like, if I was on the inventory, if I was on the demand plan side of this, what I would do is look at especially for like core products that I know for a fact I'm going to sell. Right. I'm not gonna, I'm not gonna go place a blanket P.O. for like a new product I'm launching that I'm not sure I was gonna do. I'm gonna go place it for, you know, my hero product that's going to go take up a huge portion of my inventory.

That's right. And with regards to payment, usually the arrangement with the vendor is having like, if you are in the 30, 70 like 30% deposit. If you do a blanket PO, you will only do a deposit on the quantity that you want to delivered at a certain period of time. Your vendor should be securing their raw materials as well without paying it with the vendors at that time. So yes, you, you don't have to have the cash flow to pay like the whole 30% for that blanket po.

That makes sense is maybe oh, so actually I cut you off. So blanket PO was one of the places where you thought there was a potential savings for, for brands like if you can commit to the inventory in advance, you can get savings on it, you can lock in the price, all those things. Maybe you even do that relative to the strength of the dollar. If the in, in, in that particular moment, it might be a good reason to do it. But what else you said you were going to go to some other ones that you thought were some other places for savings in that side of things.

Yes, I also mentioned earlier the knowing your tier one to three vendors because mostly I can say 99% of e commerce businesses know their tier one only tier one and not tier two and tier three. When you know your tier two and tier three vendors, you'll have the advantage of letting your vendor know that you know what you're doing as well. In terms of net cost negotiations, the confidence that you, you provide and at the same time being able to understand the whole supply chain of your vendor can help you with negotiating price as well. So how would you check and confirm if the price you're getting is valid and it's, it's fair. So it's only because you know the raw materials and the prices of the raw materials as well and then making sure that you understand how, how they produce it. So many of vendors in China are using third party factories. So make sure that when you're dealing with a new product or actually an order, you are dealing with direct manufacturer. And it's hard to know because you are not in China. But there are so many solutions to this. So one is making sure you have a third party quality check team and that's we have. I can, I can actually share with you the link of my favorite third party third party checker in the, in China, for example China, Vietnam, India. But they will be doing the auditing for you just to make sure that first they can, they can check if the manufacturing companies are compliant. Many of Chinese as you know these issues, some are not following not compliant. So they have to make sure that they are compliant with the salary, working hours, age of the laborers that you're using at the same time, the real capacity of the plan, do they have the real capacity if there's a surge in po? If not, what will be their risk management plan? Do they have partners so that someone can fulfill the orders on their behalf? Third is if it's their real manufacturing plan. So it's, for example, for a price of $300 for doing that whole day audit, you know that your, your vendor can be trusted and that is really actually doing the actual products that you're ordering.

Yeah. And that, that when you say be trusted that you, what it sounds like what you're saying is both to accomplish the work that you've asked them to do and to do it at the quality that you're asking them to do it at, but also to do that without exploiting people. Right. Like in terms of labor. Labor laws and some of that. Right?

Yes.

Yeah. Which I know is always like, I've got a concern I've had about working with some manufacturers across the world or some vendors across the world where it's not like I necessarily think they're definitely doing that. It's just that I know I'm far from it and so it's hard for me to be aware and I don't, I don't want to touch that if I'm a company, you know, it's not what I'm interested in doing. So, so yeah, that's really cool. So, yeah, we will. You can go ahead and give me that when this, when this conversation's over, you can give me that and I'll put the link in the show notes to a third party auditor. It's 300 bucks to go get that done.

Yes.

I mean that's, that's nothing. That's like, absolutely. Go do that. So that's a no brainer. Yeah. Okay, so the link for that will be in the show notes as well. And so go check that out as well. Okay. So we've covered those two blanket po. A third party auditor. What's the, what's. Did you have another one. Did you have another one place to negotiate with for your manufacturers? I have another question.

Understanding your, Understanding your tier one to tier three.

Oh, yes. Yeah, that's right. Sorry. Yeah, that's, yeah, that's another thing that I, it makes so much sense when you say that. When you, when you were talking about that, do you think like, should I just go ask my number, my first tier manufacturer, my tier one manufacturer, like just go ask them who they're working with?

Yes, that's right. So for example, I'm ordering an apparel, I'm ordering polos for my company. I would ask where are the fabrics coming from? So they should be able to provide the name of their vendors as well. And at the same time we can do our own audit to their vendors. And that is this practice is done. If you're doing corporate supply chain, you actually go to your vendor's vendor. But in the remote setup, people are forgetting about this very good practice because it's more complicated. It's in China. So the least you can do is to know the name, do your own research and provide like ask the third party to do the audit for you. Before, when I was working for KFC here in Philippines, we go to different parts of different countries to check or the manufacturer, our warehouse, our vendor for different raw materials that we have. But right now it's becoming less and less of that practice because of the limitations of remote. But there's a solution to that and we should not be doing a shortcut for that practice as well.

Yeah, that makes sense. Okay. What do you think about negotiating payment terms? And this is something that gets talked about a lot. And it's something in some ways that I think a lot of people really fetishize the idea that you would like. Everybody loves the idea of, of having negative cash conversion cycles or of. Or of being able to, you know, just for cash management, being able to essentially use your manufacturer as, as a lender, essentially. Do you have any thoughts about how E Commerce brands should be thinking about negotiating terms relative to negotiating prices? Because those two tend to be at odds with each other, in my experience, where you can get better terms, but essentially you're asking the. But you end up paying more per unit. And so like, you know, there's like a back and forth like do I want better terms or do I want cheaper costs? You know, and, and so I don't know how you think about negotiating payment terms with, with your suppliers.

So first step for this, if I am working with a client, I would ask their priority if it's their term or better price. Because you're right, there should be. It can be one way or the other, but there's a balance as well. So if your priority as a company right now is to save on cost, I will do the best negotiation for the payment terms based on the cost that we have. So an example of the best terms that probably I've gotten previously is 30 days net. So it arrives already in our warehouse and we're not yet paying the 50% and that is our hero product, being able to negotiate that to our hero product, best selling board shorts and then at the same time having the best payment terms for us. So what we do is 50, 50. It's 50%, sorry, 10% deposit and then 40% will be paid before the product leaves China and then 50% will be paid 30 days after it arrives in a warehouse. So that's the best payment terms that we, that we had, that I have negotiated with a vendor. But I had that because I believe that we already have a long term relationship with a vendor. So we have to consider that if it's a new vendor, it's probably not going to work.

Essentially you've built up credit, they know you're going to pay them. They don't have to worry about that. They can, they can do all that. You know, if they need to finance it, they can and they can, they can be okay. Did you, did you say you, you negotiated those terms specifically on one product?

Yes, the hero, the best selling product and actually not one spu. It's for example, we have a board source, but it is like 10 designs. So it is applicable to the 10 designs of our board.

Yeah, but negotiating terms for different products differently makes a lot of sense and I don't know, I've never thought about that. But, but it's the same thing with the blanket PO thing that we're talking about where it's like, yeah, if you are approaching different parts of your inventory and your relationship to manufacture differently across those things. Of course, I mean, of course things that you're producing at a higher volume that are more reliable, that you know you're going to sell through, that you could forecast more accurately. That's the kind of things where you would want to go and get, you know, longer payment terms, place a larger po, get cheaper costs, et cetera. Instead of feeling like you have to do that across the entirety of everything that you're ordering, which is, which is actually definitely how I've heard most people talk about this in the past is the idea that like you would sort of get all in rates but instead you're saying it sounds like, think about it in terms of different, different SKUs having different impacts.

I would say apply the Pareto principle. We know that focus on your biggest product first and then have different projects, savings project for that product and you will see because that will move the needle. Do not focus or use your energy with a hundred percent of your product and then ending up not being able to have successful Campaigns or supply chains savings for all of the products. So focus on your biggest product, your hero product, your best selling product and start doing projects for that. Start doing cost negotiation, payment terms, freight shipment and different ways on how to how to get a blanket deals for that hero.

Yeah, that's really smart. Okay, I want to talk a little bit about about inventory forecasting and demand planning because there's a whole other side of this besides on the supply chain side for E commerce businesses and this is something I see people really struggle with. Yeah. Advocate a lot that part of the thing you do here is start by just building a good forecast in a business in general. Right. So I talk a lot about cohort forecasting and using in forecasting your new customer revenue and returning customer revenue differently and put out a few different things about that. I'll link again in the show notes a guide to sort of phase one of a cohort forecast. That's, that's something I talk about a lot. And so but let's just assume that an E commerce business comes to you and has a cohort forecast in place and they're beginning to think about sort of, you know, they forecast their spend, they forecast a new customer revenue. The forecast are returning customer revenue. What should they be thinking about on inventory forecasting? Or maybe it's even before they get to that full business forecast to think better about inventory forecasting and demand planning.

Yeah. So before I answer that question, all the things that we've discussed earlier before, this is actually the problems that E commerce usually don't know and this time the inventory planning is the problem or the challenge that they know.

Yeah. Everybody knows this.

Yes. If we ask them what's your pain point number one is this. So I'm very happy actually discussing this or makes us excited to discuss this with our, with our clients because this will definitely support them with growth in terms of proper ordering forecasting. So I would start by answering we should have the past data. The most important two things is the past data and future campaigns. So let's discuss past data first. So past data, historical sales order histories, all of those should, you should have those data. And if you don't that would be completely, your forecasting is completely will be definitely off. Shopify for example is providing this information and all you have to do is download like a past data. But for po historical purchase order history you should have tracked it. Otherwise you don't have the date and the quantity that you've had and you can't use this data for your forecasting. So Everything should be captured when you are working with supply chain. So I would say my, I would tell my team members to always have a tracker for everything like PO tracker, arrival shipment tracker, because all of this data will be used in forecasting in the future. If we go in and work with a new client for fractional supply chain agent, they don't have data at all. We will start creating trackers for them and then we are going to start using them for so that in the future they can use it. But if they have that, it would be very helpful for us to create the template for forecasting and inventory, inventory planning. So that is the past data or the other thing that can contribute to a better forecasting and the next is future campaigns. Once you have the data of your previous sales is not enough if you don't add your campaign growth or marketing strategies or marketing campaigns aligned or plotted or planned for the next quarter, for example. So we're discussing how much should we what is our multiplier? If we are to discuss this with our marketing supply chain and marketing person. If we are going to have a huge marketing campaign for our Euro product this Thanksgiving, for example, what is our multiplier? How much percent is our buffer? So having that transparency and communication with your marketing is very important. So again, it's using past data for historical sales and then combining it with future forecast with your growth and marketing campaigns.

There are, Let me say something about that really fast, Lara. No, I, this is so key. And like I, I've, I've just been with so many brands where, I mean, I've actually been on the marketing side of this with a supply chain person. Just so frustrated with me because suddenly I'll start selling a product for all of us who are running Facebook ads. You know, you, you, you've seen this happen. You run a new ad that hits on a product that you weren't expecting and that's great. But inventory doesn't come out of nowhere. So if suddenly, let's say you have three products in your business and product A is your hero product and product B does fine and product C doesn't do very much. Well, if you suddenly start running an app for product C and it crushes and suddenly product C starts selling a lot more than you expected, that's fantastic. But you are going to run out of inventory. It's going to happen. And so there's two approaches to this. One of them is that's okay, actually, you start doing that now, you know, you've got this banked and so you Slow down your sales on your, you know, if you're, you're, you know, listening to this podcast, maybe you're running bid caps now. You take a lower bid cap, you take a higher efficiency, you slow down the sales velocity in that product and you wait until you restock or whatever. Right. But there's another thing here which is, can actually go the other way which is if you know you have a lot of product A and you plan to keep selling it, you've placed that blanket P.O. for example, you're committed to the inventory like we just talked about. That means the marketer now has a challenge which is sell product A, build your ads, spin your creative wheels on product day. When you're seeding products to influencers, do it on product A. Like all of those things matter. And, and so however you approach products B and C are going to have to be necessarily down like different, different conversations. And so especially again once you've, once you've got like the blanket PO kind of thing or something like that, if you've made a commitment like that that we've talked about now it is part of the marketer's job to just sell a particular product. And you're right, the, the solution to this is actually very straightforward. It's get those people in the same room, so to speak. Could be on Slack or whatever, right. But get them in the same room, so to speak, talking about what are we doing inventory wise, what's our plan, what do we need to sell and do we need to actually speed anything up. And of course your marketing team may they want run a sale or do a gift with purchase or something like that, if they're, if their sales are too slow or let's say your sales are too fast on a product, it might mean getting rid of your sale on that product. I actually just did this with a client like that was, that was moving through some inventory too fast, it was working too well. And so they had a bogo on a bunch of, you know, a product going and they just took this product out of the bogo. They just made a thing and said like no, can't, can't do buy one, get one on this product anymore. Why? Because they're going to run out of it just, and they weren't going to be able to go fast enough. So yeah, I think that's so much of it. And that means, that also means that generally if you're building a like a year long forecast in advance, there has to be some assumption built into that forecast. Like, like you Said like looking at historic sales velocity across everything and go like, okay, this is what we expect to sell and if something's going to change, it's going to do that. For marketers, this can be really helpful because it can actually stop you from spinning your wheels against something you can't sell anyway. And people, people will, otherwise they'll start thinking like how do I sell a bunch of this product? Whatever. Well, if you go put a bunch of creative resources and go plan a photo shoot and all that kind of stuff around a product that you can't move because you don't have enough of it anyway, that was a waste of your money. Don't do it. Instead, it allows you to align your resources against your biggest opportunities.

Yes. One report that would help ask your inventory planners about this is, is your slow moving products. In your slow moving product report, you should see all the details that you need if you wanted to, if you wanted to do marketing campaigns so that you focus on those with a lot of inventory and slow moving. Because the thing here is I smiling earlier because this is the actual scenario that is happening with us. It's marketing. It's. It should not be marketing versus supply chain. But that's what happening because hey, hey, marketing. It's very easy to tell us that you're doing a marketing campaign for this. Of course we want us the company to sell but at least let us know so that we can give you an advice if this is the right product or we can already advise our vendor. I need this product Airship right now because there are products that are small that doesn't have to be C shipped. So at least do a courier shipment. It takes, it takes three to five days and then so that I can support you. It's always how supply chain is a support department. How can we support marketing campaigns? So having that transparency that even we, we cannot stop you from trying out ads and the likes we at least can share our thoughts and track. And actually most important for me is I will track that data. I will track the result of your marketing campaign because I can use it for, for future forecasting.

Yeah. And one of the things you said there that I've seen also done is like somebody actually gets on the phone with their manufacturer and says like hey, we actually think we're going to sell a lot more of product C than we expected. Can you switch around your, your manufacturing schedule? Is it possible for you to move things up? But sometimes they can, sometimes they can't. But if they can, sometimes it's also it doesn't matter to them. They don't. Then yeah, they, they might not care at all. They might be like, sure, we can switch, you know, whatever. It wasn't going to be a big deal for us. We're happy to do it. Sometimes it is a big deal depending on what the product is and the complexity of it. But like, yeah, I think, I think, I think that's, you're right. You just have to do that. I mean the way I've seen this actually play out again from the marketing side in part is to actually have whoever's running, especially against the running meta ads or something like that. If a new ad hits for a product that you were not previously selling, a lot of it's like, like send a message immediately and say, you know, hey, we're, we're spending, we were spending five grand a day on product A and no money on product C before. Well now look, we got a new ad and it's going to spend three grand a day on product C and we weren't planning on doing that. Okay, this is out of nowhere. Immediately alert somebody. This, this new product is taking off. We have an ad that took off. Go, go tell somebody today, right now. Here you go. And then you can decide, okay, we have very little of this. We need to get more right away. Or we have a lot of it, don't worry about it. Or we have a medium amount. Let's watch and see how it goes. See if this result holds and if we should react or if we should just kind of carry on, you know, whatever. So but you just gotta notify somebody immediately.

Yeah, yeah. The more we know, we are problem solvers. So the more we know, the more we can help solve the inventory issues. So that, that could help getting that.

The other thing I'll say here is that like the truth is inventory forecasting is impossible. I mean it's just like for a growing E commerce business, the error bars are going to be wide on your forecast. They just are like, it's just like. And so the notion of like, oh my gosh, how do we make it so we stop running out of inventory? The answer is like, ah, if you're growing fast, it's going to be pretty hard. Like do your best. And I bet you guys, Laura could, can help a lot with thinking about some of those things with just some good communication. But it's just going to be really, really hard improving it.

But there's no, like, yeah, there's no 100%. Like I had a mastermind last night with two inventory planners that we have. So we, I was, I asked them so if you. Last year you sold, you sold X number of your hero product and this year because you sold that last year, this year you doubled it because you know that it will, it will have more sales. But then again this year you sold everything by November. Doesn't, didn't even, you don't even have stocks for December. So like how are you going to measure the forecast that you've done the vendor planning that you've done for this year. And a lot of contributing factors has to be considered like again marketing campaigns. One of the answer that I get earlier that is I think going to be helpful that they use for their company is that they observe the number of new customers. So new customers and repeat customers and they sometimes. And they use it as a multiplier. So if they have like more from that. Yes.

Right.

And so that could be, that could be. That's one. At the same time you have to add multiplier for your campaigns. If you're using, doing a lot of promos for, for Q4 and then so having that said, are we going to have a hundred percent of 100% forecast? Basically the answer is no. Because what we aim is to make sure that we also balance overstock and understock. If you are going to overstock and your product is what you call seasonal and you're left with a lot of products for January and it became, we all know that January onwards is the off peak season for selling and you're now left with a huge product inventory seeding cash flow in your warehouse. So it's making sure that you have enough but also having a little bit of a buffer but not too much that you're being, you're. You'll end up with a lot of products in your warehouse that you can't see sell anyway in the next coming months which is very, very tricky because from being the busy season of gifting season and then suddenly drop January to March. So that's, that's how it should be. I would say that managing overstocked and understocked should be always debt cost. If the product, I always say is the product small? Is the product cheap, Is the product seasonal? Is it. Can we use it all year round? If the answer is, if the answer is yes, then we can overstock. We for sure can handle and sell it next year. But if it's a jacket for Christmas that is very heavy, very hard to ship from China to us and then also the design is Christmasy and that's something that we really have to. It's better to get out of stock than overstock, then have a remaining furnace.

Yeah, I, it's, it's like, that's so insightful and so. Right. Like there's so much of the question. Sometimes there's generalized advice given about like, oh, you should make sure that again you like, really optimize for inventory turn and make sure that you have a fast cash conversion cycle. And that's great. Well look, if your product is really, really small and really, really cheap to make, actually that's not true. What you should optimize for is never running out, especially if you know you can sell it. Right. Because it's, because it's not. Because it actually doesn't tie up that much cash to keep it. And so, but like you said, like if your product is really seasonal or something like that, like you can end up sitting on it for a year. That's actually a big problem. You do tie up a lot of cash. Now you have to say we're willing to risk losing out on some growth potential. We'll. We'll take a higher profitability on our products. Now even if we have to raise the price or slow down our ads or something like that, we'll. We'll do that. We'll let that money trickle down to the bottom line of our business.

Yeah.

And yes, it's true. We won't grow as fast at the top line because of that. And that trade off I think is like is. Is really, really dependent on what the product is and on what your cash position is and some of those things.

Yeah. So being out of stock is not a sign of failed inventory planning. Being out of stock of a Christmas jacket by November or December is actually a success, which means you have sold all of your Christmas product and you're not left with anything for, for January to. To sell, which is probably you'll not be able to sell. But also for the small products that can be sold all year round, out of stock is a site of failure in forecasting because you shouldn't be running out of those small, cheap products that you have. So again, it's a matter of categorizing your products. We usually have category ABC for our products fast moving, slow products. We can discuss, you can discuss this with your supply chain manager and the owner, which is being able to categorize your products by its size, price, lead time and moq. We haven't discussed that yet, but minimum order quality, which can be a great consideration for reordering as well.

Yeah, it's so helpful to remember that so many of the generalized rules and things you see in general commentary around this stuff actually doesn't really work that way. Like things are actually more specific than than what the generalized rules would suggest sometimes, you know.

Yeah. Yeah.

Okay, so talk about more fractional supply chain or about more staffing. Really anything here. Lara. I think, I think for the person who's listened to this conversation and is like oh my gosh, there's so much stuff I don't know. Or maybe even they're thinking like I don't have time to go and do all this stuff. It sounds great, but I don't have time. Talk to people about how you're helping them solve that.

Okay, so I mentioned in the beginning of this call that supply chain is an investment if we can handle it correctly. What we're hoping to do and to support our clients with and by the way Andrew, this product was born because of our travel two months ago wherein we we went from North California to South and met with you. We went to our E commerce vendors, look at their warehouse, meet with them, ask their pain points and most of the common issues that they have is really having not enough people to work on their supply chain. So one of them has a supply chain manager. But supply chain manager can do end to end of course but you have a limitation on their expertise. So I would say for example my expertise is in new product development, project management, sourcing and negotiating. My least is inventory planning. So whenever I that's why I mentioned earlier I have a mastermind with inventory planners because I want to continue learning about inventory planning because that's my least expertise in the end to end supply chain. Ideally you have four members, demand and inventory planner which is good in Excel sheet data analysis which includes data gathering and data presentation. Next is you should have a sourcing person, your new product development lead which is the expert in negotiation, sourcing, vendor management. And then third is a support an admin coordinator which can track your POS order processing, send your orders, do all the nitty gritty stuff of supply chain and ideally you have a manager who will manage all of those members. But again earlier I've mentioned the limitation on budget. As an E commerce business that is just starting up, it's 100% possible to hire for full time at the same time or even hire for part time in one season. So what more supply chain is hoping to find Fractional supply chain that we're hoping to support is give you the expertise of all of those important categories in one service. So we will handle all of those and our team will be able to understand and provide you the actual expertise that you need. So for example, you're needing for this season focus on inventory planning only. So when you are, when we know that your focus is inventory planning, we will be able to support your members with an expert in venture planning. And if you have a shift in prioritization the next few months, then you can also get the expertise of a new product development and supply chain or sourcing expertise for that. So again we want to make sure that we can support the end to end supply chain by having different expertise provided to you instead of just one person who can do everything.

Yeah, that makes so much sense. I, so I, I think that's great. The combination of being able to do some of these Things for a U.S. e Commerce business both already with the savings of, of doing this with a Filipino talent was already going to be cheaper than hiring that person in the US and as I always say, when I do our more staffing ad reads and those things, being able to do that while also paying a good wage in the Philippines means that first of all it's not exploitative, which is great, but secondly it's also going to attract really good, really good talent. Right? Like, I mean because the, because the value is competitive there, it's going to, it's going to, you're going to find really good people. So there's that. But then on top of that, to be able to do that at a fractional level, et cetera without having to like bring somebody on and commit to full time and somebody who's going to come in with that level of expertise across the business and even be able to bend the program to the need that you have at the time again to me is like a no brainer. I've already recommended more fractional supply chain to one person to you and I know you've had at least one meeting, you know, really specifically for, for a business that was manufacturing in China and where you know, we were able to look at it and say like you know, they wanted some supply chain help and just to go like go like you, you should absolutely go talk to them and immediately I think was very helpful. So yeah, I think, I think there's like this service. To me, when you, when you told me about this Laura, I was like this is a freaking no brainer for people like, like if for so many brands and I talk so often to founders who are especially on that sort of like moving from 1 million to 10 million in revenue where they're really starting to bring on more help. This is like one of the first things that I would personally be thinking about in my business is like as that as I'm starting to show real growth possibilities in it, I'm going to need help with these things. I'm going to need help with inventory planning. I'm going to need help with. And these are time consuming. I'm going to need help with planning a lot of stuff and I'm not going to know that. We're like, people don't get into E commerce because they deeply understand supply chain, but it's the same way. They don't do it because they understand accounting. They get into it because they love product, they love customer and they love marketing. That's why they. And so they really wanted to grow, you know, they want to grow their business with Facebook ads and that's what they do. But this actually really matters to. Running a great E commerce business is like having an efficient supply chain where everything works. It's, it's reliable, it's safe and, and you're not going to make all of your customers frustrated when you run out of your products all the time. At the same time, you're not going to miss out on the opportunities. Plus you get savings by negotiating rates intelligently and all those things. It, it's just, it's a very obvious service to me. So. Okay, you can go. What's the website for? More Fractional Supply chain.

So it's More Supply Chain Co.

Okay, More Supply Chain Co. I actually, it's funny, I partly wanted you to be able to say it, but also I was trying to remember what it was because I know it just changed. So More Supply Chain Co. You can go to there. And I think we still have a code, right? AJF20, is that right?

Yes, that's right. Okay, that's right.

So 20% off your first three months, which is awesome too. So there's even an offer for doing it. Anyway, I, I think like I said, there's a bunch of show notes here and stuff like that that you could follow up on for some of the things Lara talked about today. But I think this is probably a very, very helpful episode to people. Any last things, Laura, before we hang up? Anything else that people really need to hear?

Yeah, we wanted just to. The main support that we can do for fractional supply chain is being adaptable and flexible for, for what your company's needing right now. Again, our focus is to provide savings to you in the first three months and having a fractional supply chain can have a direct savings at the same time a longer effect of the support that we do. And so part of the document that we are going to provide to you is the playbook of supply chain from understanding your business into creating up new processes for a company. Even we're not in your company anymore, you have the playbook to use. So whoever is joining your team, they will be able to know the supply chain process because of that playbook. So hopefully we can help 1e commerce@ a time. Like right now we can only handle five clients but we are hoping to support more clients in the future next year. But again it is a good opportunity for us to help our E commerce business owners to continue with our supply chain.

Hope hopefully more get on that wait list if they, if they get filled up like I, I think that wait list will be bursting at the seams after this episode. Honestly it would be if I, if I was running an E commerce business, I would be on the phone with you immediately. So cool. Okay. Thank you Lara, so much. That is awesome.

Thank you. Thank you Andrew.

Always good to talk to you.

I know that in the future we will find a time to discuss like focus on supply chain because we've, we've discussed like the end to end of it and we wanted to focus sometimes on forecasting new product development, project management thing. So hopefully we have a chance so much get to.

Yeah, yeah, let's do another one for sure. I think people are going to love this episode and they're going to want me to bring you back on and do more. It's going to be the most popular sponsored episode in the history of sponsored episodes because it's going to be really. All right. Thank you so much, Lara. I told you, right? I told you this is going to be a good episode. I told you you would like this. And like I said to Laura at the end, I am fully expecting to bring her back and talk about all the things we did not get to. She told me after we hung up there was a bunch of stuff related to like inventory planning tools she's working on and so yeah, I love her distinction between problems that brands do know they have and problems they don't know they have. I think it's a really helpful way to break up what's going on with different brands and so. So I hope that was helpful to you. I would love to hear from you about this episode. Please email me podcastjfgrowth.com or reach out to me on Twitter jf andrewjferriss that's where I am. You can also go to ajfgrowth.com for anything that I am doing if you want to see what's going on there. I would love you to rate and review this show. Of course do follow up with Lara by the way she gave you all the links. All the links are in the show notes there as well and you can go reach out to get more fractional supply chain. As she said she does not have that many slots available so so if you're interested in working with her, you should make sure to go beat the doors down as fast as possible to get on to either start working with them now or get on their waitlist. I think it'll be a really big help to you. Like I said, yes, rate and review all the usual stuff. Share this with somebody I think that this will be a very helpful episode to a lot of people. So if there's somebody you know who's operating an e commerce business, make sure to share it with them as well. Thanks so much as always for listening. I'll see you next time.

All I know the script with my.

Eyes close and I say that song.