Episode 304: A Global Vision for 2024 with Jeremy Lott (SanMar) and Jonathan Isaacson (Gemline)

So I feel as if every time we get the two of you on the stage, there's always some new challenge with supply chain. So let's start off with some easy stuff. Right. So war in Taiwan, potential. What do you guys think about that? Is it going to impact the industry?

Do I think a war in Taiwan would impact the industry? Absolutely. I mean, I think it'll impact the world and it's a really scary thing. You know, there was an election in Taiwan this week. The more Democratic leaning anti China candidates won. You know, does that make it more likely there's war? I'm not sure, but, but you know, there's a lot of things that are caught in our control in the industry. You know, if you have a global conflict like that, it will have a significant impact on our industry for sure and on every industry globally.

So these kind of geopolitical supply chain issues always come up in these forums. And what I would tell most distributors is not to spend a lot of time thinking about it or worrying about it. That's what you have to rely on the supplier community for. If there is a war in China, which I think the chances are actually quite low because they know what the impact would be, the issues in this industry would be the least of our problems. 80% of the pharmaceutical precursors come out of China or some number like that. There'd be lots of industries that get impacted. But it's so out of our control that I wouldn't spend a lot of time as a distributor worrying about that. There are other issues that we can worry about.

So let's talk about some other ones. Ports in Mexico were recently shut down. Largest shipping firms are continuing to pause shipments through the Red Sea due to the Houthi attacks. Drought crippling the Panama Canal. We've seen massive impacts during COVID on freight costs. So do you think there's going to be significant impacts from that? How do we prepare for that? Terms of preparing our clients?

I mean, we're already seeing it to a degree. And, and so we ship most of what we ship on contracted rates through the year. So we haven't felt it yet. But if you, if you go into the spot market and you buy Trans Pacific containers today, the cost has doubled in the last three weeks, both because of, mostly because of, you know, disruption in the Suez. But the Panama Canal is not operating at, you know, 100% capacity because of drought issues in Panama. And so, you know, freight costs are. I don't expect the $30,000 container issues that we were seeing two years ago. But, but it is certainly affected by some of these kind of macro issues. And we've just, like I said, we've seen it recently with Trans Pacific rates. And so, yeah, I think there's, you know, those things all eventually go into, into cost. At this point, at least for Sanmar, we're not seeing any real disruptions. And like I said, we're shipping all uncontracted rates. So we haven't paid any of those higher freight costs yet. But it's certainly out there.

We have seen some higher freight costs in certain routes, but not in all routes. The reality is the freight companies can't survive at what the rates were recently. It went up to crazy numbers, 22,000, 30,000 for containers and then it dropped down to 3,000. That's not economic for the shipping companies. And so the rates are going to go up at some point in time and they're going to hopefully normalize. But the world we're in with lots of geopolitical disruption is the world we're probably going to be in for some amount of time. This is going to be standard fare and we're going to have to figure out how we're going to work around it because, you know, I just don't see a reason that it's going to change.

Let's talk about China. So, Jonathan, when you interviewed former U.S. secretary of Defense Leon Panetta, when asked about doing business with China, while cautious, he encouraged businesses to be in China but keep a low profile. What do you think of his response?

Yeah, so I definitely think being in China with a high profile, especially around issues that they get cranky about, it's not a good idea if you want to continue to do business in China. And I knew the China issue would get asked and I knew the China issue would get asked of me and we could spend an hour talking about what's going on in China right now. And the reality is that if you go way back, what's going on in China has happened before. There have been three times over history, I promise not to go into detail where they've turned inwards instead of turning outwards. And the reality is that no matter how many experts you get, nobody really knows what's going to happen there. And so like we talked about with chipping and pricing, this is the world we live in and we're going to have to deal with it. The way we're thinking about this is by having alternatives to China where there is potential to have an alternative. There is not a potential for every commodity to easily Move it to other places. We work in a lot of places with a lot of different risks and we manage those risks like we have over the last 30 years. Actually longer than that. But I can't tell you how many coups and other disruptions we've been through. It's part of the world we live in and part of our normal course of business is managing stuff like this.

So both of you have done significant diversification away from China over the years. Let's talk about with India being projected to be the world's third largest economy by 2030, the fastest growing major economy in three years, with a strong logistics framework. Are you seeing that as a big opportunity in terms of shifting?

Yeah. So if you go back in time a little bit, when before China joined the wto there was a quota system in place and so you would start the year and you would produce in China and then you would hit the quota and, and you would have to go to a different country. So you would go to Cambodia or you would go to Myanmar or you would go to Sri Lanka and you would start to produce. And everyone thought when China, China joined the WTO it was just going to kill those other countries. What happened at least in apparel production is that you built really significant apparel producing bases in these countries. And China, as they kind of moved up the value chain, frankly was less interested in producing apparel than kind of in other products. Then you had the 301 tariffs that came in during the Trump administration and that was a further push out of China. And so the industry has, has moved in significant ways. I think the more recent piece that is positive for India to your question is more around. Most people probably know this. The US has a ban on using Chinese cotton. And so that took a very significant piece of the world's cotton supply and took it off the market. For the United States and Europe, it's equivalent to if you took, I think it's Iraq, Saudi Arabia and Kuwait and like that amount of oil and you took it off the world's market kind of overnight. That's how much the world's cotton kind of came off the market. So it's a really significant kind of impact. India is a significant cotton growing kind of region. And so we are doing more production there because of that and because of the traceability that you need in importing cotton products. But we see a lot of growth in the entire subcontinent. So we've opened a second sourcing office or it's a third in Dubai today that's managing production in Pakistan. India Sri Lanka and Bangladesh, we're seeing a lot of growth there, and that's coming maybe the expense of East Asia, at least for us. You know, China, Vietnam, kind of, etc. And we're seeing more growth in that region

in hard goods. It really depends on the commodity. We've been doing business in Pakistan since the 80s. Pakistan is a failed state by almost every measure. It's a very difficult place, but we've been doing business there for a long time. And when these issues with the China cotton came up, we also had to move everything out quite quickly. Luckily, we had this base that was sitting there in China and that we built up in India. And just so you know, if the US Government catches you buying Chinese cotton from Xinjiang, it's really not a good thing. They. There's significant penalties for doing this. And so without absolute guarantees of traceability, there's no safe way to buy cotton from China. And that's why everybody is moving out. But India, Pakistan, Bangladesh, Sri Lanka all have their own set of political issues that probably nobody here is interested in, but that we have to deal with also. And India also has pretty creaky infrastructure that makes it a little bit more complicated to do business there. But there's a lot of stuff moving into a lot of different places. India is just one of them.

Let's talk about the economy and jobs. Jeremy, can you talk about the current state of economic uncertainty and how you view it from your perspective? You have theory. You have a theory that a mild growth rate is on the horizon. Can you unpack that?

Yeah.

I mean, I always have to preface this, that I've been wrong about just about everything for the last three years. So, you know, like, it's probably for senior year from now, you're gonna be like, you're wrong again. A year ago, I was pretty convinced that there would be a recession in 2023. I was convinced that because I thought as the Fed tried to bring down inflation, the idea of a soft landing just was unrealistic, that they were gonna kind of overshoot that. You would just see they, you know, high interest rates put the economy into recession. You saw a pretty resilient consumer in 23, more resilient than I thought. You've seen employment stay, you know, unemployment still at, like, historically low levels, although not maybe where it was 12 months ago. And so those things really led to, you know, a growth year in 2023. From an economic perspective, I'm expecting a relatively anemic growth year in 24, both for Sanmar, our industry and kind of for the US economy. But I have a theory, I guess that I've been working at at least Sanmar and if you were to look at kind of historical growth rate for Sanmar and the industry and you were to draw a line, let's say from 2018 to 2025 and you looked at that historical, I actually think we're going to kind of hit that number. We're just going to get there in a really weird way. You know, we had this huge dump in 2020, all of this growth pulled forward in 21 and 22 and then relatively flat growth in kind of 23 and 24. And so I think some of the just extreme growth the industry had, certainly Sanmar had those years was just pulling forward growth that we would have had in those next couple of years. And so the curve looks weird, but I think we're going to actually end up in that place. I think the mistake we had internally and some of the reasons we overbuilt inventory this year so much is we looked at like you had this extreme growth and then we said, oh, and we're just going to go back to our historical growth rate and grow from those numbers. And I just don't think that's real. There's nothing that tells me the world changed so significantly that that many more T shirts are being sold. I think it was just pulled forward. So that's the way I'm looking at this year, the way we're planning for 24.

Jonathan the speed of inflation is cooling down. The S and P had one of its longest winning streaks since 2004. Jobless claims are surprisingly low considering expectations. What are you most enthusiastic about given the state of our economy and what concerns you the most?

So I'll start with what concerns me the most. Are concern is not if we have an issue, it won't be an economic issue, it'll be a geopolitical issue. You can look around the world, you can look at elections, you can look at whatever. And if the economy really goes off the rails, it'll be because of politics, not because of economics, I think. But in terms of optimism, Jeremy went through it. I think one thing that we saw is that in certain end user verticals, people stop buying for different reasons. And when we talk to distributors, depending on who you sell and where you're located in the country, you had a very different experience. So if you were in the Northwest and you were anywhere in the Northwest selling tech, you had a tougher time than if you were selling energy in the south or if you were selling education, higher prices did worse than lower prices in a lot of places because financial services, consulting, a whole bunch of verticals pulled back those industries. A number of those industries are going to come back and start buying again. And we saw an enormous amount of. We saw a lot of companies jumping back into the market in the fourth quarter. We had a really strong fourth quarter with the people who weren't buying coming back in to do end of the year gifting. And so, by and large, we're more positive than negative going into 2024. We recognize the risks. We do think there's a lot of opportunity for growth, and we think that there's a bunch of industries that are going to come back into the market and stay in the market in a different way than they did last year.

How do you think the uncertainty of this year's election season is going to affect the economy?

Geez, Jeremy, what do you think?

You know, I don't like uncertainty, so I think that's the piece kind of to the business that just makes you nervous. I mean, you don't know what it's going to look like. I think everyone knows, you know, likely who our two candidates are. I think everyone knows that it's going to be an election with probably a lot of, you know, heated rhetoric. I mean, it's not going to be, at least from my perspective as like a business owner, I don't look forward to kind of that level of uncertainty. I think it's a negative. I think as companies, they're going to, you know, as they see that, that, that, you know, makes them tighten their purse strings a little bit. At the same time, there's going to be opportunities. I mean, certainly I have a friend who's a commercial printer and, and election years are his best years because he's printing, you know, pamphlets for, you know, that everyone's mails out. So there's going to be opportunities with, with election years too. So we'll see how it plays out.

I think Jeremy did a great job with that.

You can't punt that. Jonathan, come on.

What I said before is true, that our risk is political globally including in the US this year. And I'm hoping. I don't trust the polls because who here has a landline and who's answering it? Nobody's answering their phones. I'm hoping that they're all wrong, that they, they haven't proven to us that they can actually poll. You know, people are still cranky and I think I don't understand at some Level I do, but I mostly don't understand the crankiness given the country we live in. I mean, this is a great place with a lot of opportunity and, you know, we, I, it's. People are crankier than I think they should be given how good things are and, and all the advancements we see in so many different areas. So I'm hoping cooler heads prevail. But I don't know, everybody seems to see the same politicians I see and you just sigh and hope for the best.

Labor has been a huge challenge over the past few years, to say the least. New York Times reported the US labor market ended 2023 strong with an with unemployment steady at 3.7%. What are you guys seeing within your businesses in terms of challenges around hiring?

You know, we've seen it largely normalized. I mean, you know, this was two years ago. It was a huge issue, especially in our distribution centers. But, you know, even for like pretty significant corporate jobs, we would get, you know, two candidates for really, you know, great jobs.

Today.

We've, we are able to hire people really across the board, you know, entry level in our distribution centers or, you know, senior leaders in our team. Wages certainly haven't come back down. They went, they rose pretty significantly and those wages are, you know, higher. Wages are here to stay there, there. But, but, but the availability of labor today is, you know, I think pretty normal. And we're in, you know, a dozen states today operating and, you know, there's some pockets, but for the most part we're able to hire in pretty normal ways.

Sanmar is dealing with a lot more variability because of their footprint across so many states. We're in a gateway community where there's a fair amount of available labor and we're seen as an employer of choice for a whole bunch of reasons. So we're able to hire. During the pandemic, we started running 24 hours a day. We're still running 24 hours a day. We don't really see that we're going to be limited by the availability of labor. Certainly costs have gone up, but they had to because of inflation. People just would not be able to survive if labor costs did not go up. They are not going back down. I think the rate of inflation will stay moderated, but I do think that for most businesses, there will be more labor available, more easily available.

Let's talk about technology. So both Sanmar and Gemline are connected suppliers on common sku. On the skewcast recently, Bobby interviewed Gemline's president, Frank Carpento, and Sanmar CRO, Steve Cuthbert and both emphasize that ultimately this is less about technology and more about customer experience. It feels like we're in the 24 hour rush race again where suppliers are now allocating more and more technology infrastructure changes directly as it relates to customer experience. To take this big topic down to this year only, what importance does technology investments that are customer driven have for you in 2024 and how much emphasis are you putting on customer experience and tech and why now?

I think it's. We look at it as a huge area of investment for us and I think there's two things we're focused on. One is, is more customer facing than the other. But the first is automation within our distribution centers. It's what we talked about with labor costs today. When we look out in the future, we have to be able to really efficiently pull and ship orders. And so that for us is, is probably the biggest single dollar area of investment over the next several years is, is automating our distribution centers. We have a new distribution center in Ashland, Virginia and it will be kind of our first kind of fully automated dc. I think the second piece is we recognize just the friction in terms of how hard it is to find a product, buy a product, decorate a product, ship a product, all those things. And so just organizationally we're really focused on how we make that easier for people. I have a son who is a freshman in high school. He plays basketball. And the coach called me and said, would you do T shirts for the basketball team? And I was like, sure, no problem. It's like pretend kids. And I went on sanmar.com and I know we wanted maroon shirts and we wanted them to be short sleeve. And we. I had like a budget and there's like 20 shirts came up and I had a really hard time choosing what shirts. And I know this product like really well. And I called her like head of merchandising and she told me what shirt to buy. And then I was like, you know, we have a challenge as an industry and it used to be, you know, we had this big catalog at the end. It was a thousand pages long and it was easier to pick because the shirts that were our best selling shirts we gave like three pages and pretty stacks. And the shirts we didn't like so much, you know, they were like small in the corner. And like, it's very difficult now to know how to find and search product and to do it in a really meaningful way. And so that's something that organizationally we're

really focused on for us, we look at this business and one of our big goals is digitization, but that means we're going to digitize everything. So I think that we're at an inflection point in the industry where the old processes that were analog are going to go away. And you can't just say, I'm going to do a digital process on the floor from the front end all the way through. Everything has to be digitized. And part of the problem is technology. Part of the problem is change management. These are enormous, enormous jobs. Hugely complicated. Part of it is how you help people through the curation process. Part of it is how you make it mistake proof on the floor so that things flow through with. In our world where we're doing a lot of embellishment on stuff of various kinds to allow the customer to be able to have what they want, but remove the complexity from the people who actually have to deliver it for you. And that is a much harder thing to do than it might seem on the surface. But changes in technology are going to allow us to do things that we couldn't do before. And we are shoveling money into the furnace of it like we never have before because this is a do or die from the way that we see it. And, and I think you'll see a very different supplier community over time because if you can't invest in it or you don't get to a certain point, it's a survival thing. You just, you won't be able to survive as everything starts to digitize and it's again a topic that would probably take an hour and a half, but it's going to be a huge change for everybody.

Let's talk about sustainability and product. So Jonathan, you've detailed, you have a detailed talk about the impact of PVC on our industry, but with it requiring us to have a chemical engineering degree to understand it, can you unpack the threat to our industry on this topic?

So PVC is very inexpensive. It's used in a fair amount of stuff. After we're done, go onto your favorite search engine and look up vinyl chloride, which is the precursor chemical to PVC polyvinyl chloride, and look up pvc. So vinyl chloride and PVC polyvinyl chloride and just put, is it safe? Ask Google, ask Bard, ask Bing, and look at what comes up. Vinyl chloride, which is the tanker car in East Palestine, Ohio that went over was carrying vinyl chloride and the fish died, the animals all got sick. They had people in these suits who are running around trying to detox the place. It's because it's a terrible chemical that's a carcinogen. It's a terrible chemical. The chlorine that's used to make vinyl chloride has an enormous carbon footprint. It uses a huge amount of energy. We were talking at our table, one of these table talks, and I said, the question is really, what would you do for money? So would you give your friend a known carcinogen? Would you give their kid a known carcinogen? And if you wouldn't, then why are you giving them a PPC stress ball? I sit here and I listen to people talk about elevating brands and sustainability and baked in. All of the product in this industry is pvc. And they're talking even about PVC pipes and whether they're safe as we replace the pipes. And I don't know where this is going to come out or when. I think I do know where it's going to come out because we've eliminated PVC from about 95% of our products now. The goal is to take it out of everything because it is a terrible chemical. And you don't have to believe me. You can look it up and you can know that Nike, Adidas, Converse, pick a brand, none of them used PVC and Nike got rid of it back in 98. And so the question is, why are we the only industry that thinks this is okay? I don't understand it. And it's going to be up to you. You're going to decide what suppliers will do and if you think this is okay. And so it's one thing to say, hey, we all believe in sustainability, we believe in community. It's another thing to help your customers understand the choices that they're making as they choose products.

Speaking of products, Jeremy Gilden's going through a little bit of problems right now. A bit of a revolt with shareholders and a big shakeup in leadership. Haynes has gone through significant challenges, which sounds like a far off problem to all of us sitting here right now. But what are you seeing as the impact of those kinds of issues?

Can I add one thing to what Jonathan said? And I'll do it.

Only good things.

Oh, good. No, no, it's good. I think what's really one of the things that's important about what he said and is that when you think about sustainability holistically, it's really tough because it's not just about like picking a shirt that is made or a jacket or bag that is, you know, with recycled this or organic kind of that. You know, how is that product made, what are the chemicals, where was it produced, what was the power source that was used to produce that? You know, all of those things are really, really deep into a supply chain and are really hard things to know. And so I think it's, it's, you know, incumbent on, on distributors, one, to like, try to be educated on it. It's hard. Two, to ask questions of their suppliers and to really try and understand who are the suppliers that are doing that hard work of going into the supply chain. Because it is difficult. It's easy to say here's a green product or here's a sustainable product. It's really hard to actually make that and understand it. And so I just, I think it's a, it's an important lesson.

And I'm going to add even one thing to that, which is that there is no perfection. We're going to keep discovering things. We decided to get rid of PVC originally because we found that anytime there was a problem with the product, it always emanated, or not always, but almost always emanated out of the pvc. We're like, let's just get rid of this. And then we started doing more work and we found all this other stuff. But the reality is, I was talking to somebody earlier, polyester and nylon. The way that we get polyester and nylon is we stick a tube in the ground, we pull out a hydrocarbon, or we dig a hole in the ground, we pull out coal, we send it to these giant chemical plants, they do a bunch of stuff and then out comes nylon or polyester. They're hydrocarbon based. And, you know, there is an impact on the environment from pulling it out, from putting it through. And it doesn't mean that you're not going to use hydrocarbons. There's going to be a transition and there is no perfection. But it means that we're working on minimizing the impact over time. And there's a lot of stuff, I know there's a lot of stuff that Sanmar is doing. There's a lot of stuff that Gemline is doing. There's a lot of stuff that other people are doing. But this whole part, this, this is hard. It's going to take some time and it's going to be helped along by the consumers that are making the choices every day. Yeah.

So, you know, it's. We make product ourselves, we own manufacturing, we source from factories around the world, and then we buy from other companies, companies like Nike in the North Face and Carhartt, but also companies that are in the industry like Hanes and Gildan and you know, Bella Canvas, next level companies. I'm sure you buy from all of them. And so it's interesting sometimes because those are really important suppliers to the industry. Even though, you know, they don't always show up on the, you know, the rankings. But they're, but they're important in terms of, you know, what they sell and the products that they sell into the industry. And so it's just, it's been an interesting time. Hanes brands, really large company, significantly over leveraged. There are activists, investors who are forcing them to sell the Champion brand most likely which is maybe one of their most valuable assets. And so at Gildan, another one of our really important partners, the board recently fired the CEO who was really the founder of the organization. And there's turmoil there with investors who aren't happy about it, who don't like the new CEO and want the old CEO kind of back.

Yeah.

So the current, the recently appointed CEO was at Fruit of the Loom 20 years ago and then actually ran Broder Brothers before it was Alpha Broder. So was a vendor and a competitor of ours, somebody I've known for a long time. But look, I, I don't think similar to what Jonathan said about, you know, war in Asia, it's like I wouldn't worry about these things. These are things that a supplier community that like we're managing there will be but I think it's just important to be aware of, you know, what's going on kind of in, within your suppliers and within the kind of the factories or the companies that are supplying us to.

Oh, my iPad went to sleep. I want to talk about leadership for a minute. So Jonathan, you've recently transitioned roles and passed the CEO reigns to Frank. How's that going for you? Not for Frank. I know he's doing an amazing job. But for you in terms of letting go and stepping back and taking on a different perspective.

Yeah. So there's been lots of books written by lots of different experts that say that this doesn't work, that generally transitioning, especially in businesses like a Gemline or like a Sanmar that have these, we have, we both have a certain way of approaching the business, a long term way of approaching the business and that it, it doesn't work in our case. It, it has worked. The way that job splits is that I'm much more looking forward around strategy and trying to see around corners and also the keeper of the corporate culture and Frank is running the day to day thing. The Day to day business. And part of the reason that we did that is one, it's a lot of work for one person to do it. It's much easier as a split because it gives you time to actually think. And two, I had been doing this for so long that it's. If you think about Gildan or Hanes, how do you get a fresh look at the business? Somebody to come in and say, does this really make sense? Now I will say doing these things is not without pain. It's a little bit like the trust fall. And there have been days where I've gone home and had a drink and watched the Waltons or something to try to detox from what I saw going on and be like, oh, this will be fine, everything will be fine. And so far everything has been fine. No, everything has been good. So this is. And by the way, I didn't know this question was coming, so surprise. The. So it's actually been good. I think it's been good for Gemline and I think it's been good for the both of us. It's a very difficult thing to do, especially when you've been around for a very long time. A lot of areas there.

Jeremy, it's been a pretty wild past few years. Navigating through Covid supply chain issues, opening new warehouses, a greater move to remote work. What have you found the key to keeping your team aligned, connected and motivated in navigating big change like that?

Well, you know, when, when Covid first hit our team, you know, we all went home, we were doing these kind of daily zoom calls and then personally it was like awful time, but, but professionally it was actually kind of this amazing thing because we were all in this bunker together, like, like fighting this existential fight for like how you save this business, you know, Sanmar was about to celebrate its 50th year. It was like year 49. And I was like, we may not make it and it's on my watch that we don't do it. I mean, that was kind of how we felt. So it was this kind of amazing time as a, as a leadership team. You know, then we, you know, we survived. The world didn't end. We went back and we started to fall back into like some of those kind of older habits that we had had around, like, you know, territorial things or bureaucracy or people are on different pages from the other. And, and we've actually tried to go back to like, what was it? Not the sense of urgency, like, because I don't think that's sustainable, but what was it that in that time like brought us together? And it was really like a shared sense of like, purpose and mission and everyone understood exactly what it was that like we had to do. I think we'd gone away from how we communicated that. So going back to starting with like broad level, like what is our longer term vision? And then from a strategic planning standpoint, making sure that everybody was like reading from the same sheet of music and really understood what it was that we were trying to do. And whether you didn't agree with that or not, you understood that this was the mission and we were kind of together as an organization. We'll never go back to that, how it felt those first know a few months of COVID but that's really helped us as a team kind of manage through some really, really challenging times.

What are some of the things that each of the two of you do to continue to grow yourself as leaders?

Oh yeah, punt that one, huh? So one we have a board of. It's a board of advisors, but it's the same thing as a board of directors. And they are very challenging. There are some very smart people on that board that have expectations and they're all not only smart, but a couple of them are really fast processors and they throw stuff at you and you need to be ready for it. And so. And I also do a lot of learning outside of the industry in school next week for a week. There's a lot of stuff that, that I do externally and when we run these webinars, when Gemline ran these webinars, they're great opportunities for me to be able to engage with other people and have these conversations and to learn. So I'm out a lot. I sit on a fair amount of boards and do a lot of stuff outside the industry. And there's ample opportunities to learn what other businesses are doing or how people are approaching problems. In fact, the getting Frank in there allowed me to do a little bit more exploration and to dive into some things that I might not have had time to dive into before.

You know, every year I'm kind of like leading the largest company that I've ever led. And I learned how to lead a business watching my dad. I mean, I grew up in a family business and this was kind of how my dad did things. And it's been challenging on, if I'm being totally honest, because we've had to as the company has gotten to a scale, it doesn't work to do some of the things the way my dad did them. And so I'VE had to go back and really change the way I do things and lead and put some of the processes that we've had in place. And they're things that are hard for me because it's just, I don't like doing them. But I've had to adjust some of those things. I'm a hands on leader because that's the way, that's the only way I know how to do it. I visit our distribution centers, I see customers, I talk to our people, I meet with my team. I meet like skip levels down. I mean I'm, I'm very hands on because it's the only way that I can get enough information to make good decisions. I, I wish I had kind of this secret sauce of how I continue better. It's just for me it's, it's continuing to learn. And then I enjoy being. Whenever I can be around smart people who I can learn from, I always try to take advantage of that.

In our last interview, you both asked each other a question. I'm going to let you do that now because it's always fun to hear.

I will do that. One thing I just want to point out before we move on to that is for all of you who are running your own companies, you hear Jeremy talk about what he was thinking at the beginning of the pandemic. And I will tell you, I was talking to a lawyer friend of mine who, he's a pretty big shot lawyer and I was saying, geez, March of 2020, I was thinking, boy, that's been a good run. You can stick a fork in it. You know, I wonder what I'll do next, you know, teach people bird watching or dog walking or wonder what my next career is going to be. And somehow we managed our way. We didn't manage, we thrived our way through it, as did Sanmar. And some of you. You know, people had different experiences here, but nobody. There is no company that doesn't go through those tough times and there's no leader that doesn't have those periods where you're asking yourself if you can make it through whatever challenges in front of you. And the ability to persevere through those pieces and knowing that other people are dealing with the same thing, whether the company is very big or very small. Some of these challenges are the same. And one of the things I was able to do was to rely on a community of people, our board, other people, to be able to get the energy to get through everything that was going on around us because it was certainly a difficult Time. So with that, I'll go with the. I guess you want me to go first.

Absolutely, go for it.

So there has to be some really big. And if you look at the growth of Sanmar, it's clearly grown a lot. And there has to be some inflection points where you saw some sort of big uptick. Can you tell us about one of those inflection points? And to further what I was just saying, what's the lesson that the people sitting in this room might learn from your inflection point?

I think there's been a few big ones over time, but probably none bigger than in 1994. And we started Port Authority, which was our first private label brand. And. And if you can put yourself back in that time, we were one of, you know, probably 50 or 60 good size T shirt wholesalers around the country. The largest polo shirt brand probably in the world was a company called Outer Banks. You can't buy them anymore, but some of you might remember them. We were on allocation from them. Everything you get you could sell. And my dad went to Hong Kong with a couple of Polos and a jacket and he said, can you make this and can you do it in more colors and more sizes than, you know, what existed? The power dynamic in the industry between what we called the mills, people like Haynes and Fruit of the Loom and the San Mars of the world again, there were dozens of us, lots. You know, obviously the industries consolidated was really dramatic and I think we were kind of like hiding out in this, you know, northwest corner of the country up in Seattle. And they didn't really know what was going on. And we did these three Polos and who cared? And then the next year it was six and then it was 12. And then it grew.

But.

But being able to make our own product allowed us to change the margin structure of the business. It allowed us to invest in inventory and technology and other things that really did everything that propelled the business forward. And most of the people who didn't do that don't. Are companies that don't exist today. I mean that 50, 60 companies at the time is really three today. And Sanmar is the only one of the three that's still owned by the family or the people who did it then. The lesson I think is, you know, we have been a disruptor multiple times throughout our 50 year history. And I can kind of, you know, without taking too much time, the other three or four, but we have a history of doing that and each time comes with risk because they could have shut us down and we would have been out of business.

We.

But if you're not willing to take some of those risks and to just try to disrupt the industry, you know, you can't get to the scale that we have and thrive the way we have for 50 years.

Everybody got John, my turn.

Yeah. So if I can snap my fingers, you get to go back in time and change one decision. One thing you would have done differently, what would that be? Business wise?

I should have been a dentist. Besides that.

Besides that.

Okay. A bunch of business decisions. I would have changed, I think. Wow. What I think I would have done is done things faster. So let me step back and say the hardest thing about running a business is managing people. Everybody comes with their own set of expectations, their own history, all the stuff of who they are, what they want, what they need. And I think that. And this is sort of a soft thing, but it's really critically important. When the business didn't do well, that was. As the leader, I always felt like that was my fault and that there was stuff that I should have pushed down to the team more. And it's actually one of the things that Frank has been good at is developing people, pushing stuff deeper down into the team and letting them be more responsible as a team for decisions. And I really. It's a subtle change, but I wish I had changed that management system earlier to diffuse more stuff deeper into the organization. We always had autonomy, we always had a certain culture, but it's a shared sense of responsibility that goes. That is different. And it's, I think, part of leadership and certainly part of leadership of a privately held company. You look at things quite differently. And so I wish I had made that change earlier. If I could go back.

Bobby, do we have time to take some questions or do we need to wrap up questions from the audience.

Wow, we did a great job

in the middle.

You can shout and then we'll repeat it if you want. So I just.

Wow.

Sorry if I'm really loud. So I just wanted to ask, as shipping costs rise for larger companies like yourself, you guys look at more possibilities for North American suppliers and you know, do you think that will become a factor of essentially shipping and freight price, China out price Thailand out, Vietnam, things like that, do you think there's more of a possibility we start to have more like Main and North America, Maine, Canada, you know, products?

So I can put about 70,000 T shirts into, you know, a regular size shipping container.

The.

The cost difference of producing, at least domestically isn't going to be affected. Kind of by freight. We have a very small factory in Tennessee. We make in the USA product there that gets used for the military or for, you know, but, but we are doing a lot more production in this hemisphere now. Some of that is the cost of freight is less, but it's more around the time. So we are, you know, three days from Puerto Cortez to you know, our cross dock facility in Jacksonville too. That allows us to be better in stock versus some of the longer lead time kind of shipping. But I don't think, I don't think you'll see cost of shipping driving more production this hemisphere. It's just too small of a piece of the, of the total cost of a product.

The other thing is on the hard goods side, these are very long supply chains with huge capital expenditures up the supply chain. That's not going to move anytime soon and it's not moving back to the US until there are so bots. Because I just raise your hand if you have children and you want them to work in a sewing factory, please. You know, everybody says it's going to move back, but what happens in terms of the development of countries is you go farm, light manufacturing, heavy manufacturing, then the high value add stuff and sewing is done. And it, I mean the stuff people don't think about how much good has been done, how many people around the world have been pulled out of abject poverty by the jobs that you have provided. And you know, I'm a proud American citizen. But the people who are living in these countries also deserve hope and a future. And if you provide good jobs, you provide them hope and a future and health care, you can provide them education, you provide them a future. And the world is better off having a bunch of failed states where there aren't job potentials out there is good for nobody. And so this is actually a good thing that we can support some of these countries over time.

Time for one more. You talked about phasing out problematic materials. What do you think this will take to be for good?

I mean it's, I think one of the things China said was interesting. It's like, you know, there's a long way to go kind of on this. So you know, whether it's pvc, we've been focused on PFAS as a, as a chemical mostly because it's being regulated out in a few states, California and New York specifically. So as you have to reformulate, you know, the chemical companies take time people. PFAS goes into anything that's waterproof. So if you want your Jacket to keep, you know, you dry Today it's been one of the only chemicals that's existed. Now they're reformulating pfas, free waterproofing materials. But it didn't exist two years ago. You know, we've had alternatives to PVC for a while and so you know that takes time and money as an industry to do but the technology is there to kind of, kind of go past it. But you know, I'm sure three years from now we're going to timid's going to come out and tell us that here's a different chemical that's a carcinogen or that it's bad for you or that's you know, leaching plastics or whatever it is. And we're going to continue to kind of adjust. It's a, it's a, you know, it's a moving target for sure. I think we're on the right path, but we have a long way to go.

When my father in law would have a party in their backyard, what would he do before the party in the summer? We would throw off a DDT bomb and kill everything. Right. And a lot of people, that generation, you know, if you're in your 90s, you were dealing with lots of stuff. You know, I saw that they had the mosquito spraying people. I almost had a stroke when I saw them at the, on the Gemline property. That was a one and done. Because we like bees and we like flowers and we like to eat. We need bees if we want to eat. And but what happens is that we learn that things change over and we learn and this happens over time. And this is, there's a lot of things that are going to change. It's going to be, it's going to take some time. This will be driven. If it's not driven by you, it will be driven by your new customers who really care about this and who will change how these big end users buy. This whole sustainability thing. I can show you lots of charts, not today on what's going on globally with temperatures, with chemistry, with all stuff and they aren't pretty. There's going to be a demand for change. We're just going to have to formulate our way through it. It's going to happen. It's just going to take some time.

I don't know how much time. That's it.

Please join me in thinking. Excuse me.

We brought her to tears almost for this.

We made it all the way through without talking.

That.