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Brands & 3PLs: Avoid These Partnership Mistakes - Recording

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Brands and 3PLs, it’s time to come together for optimal growth and profitability!

Skubana co-founder Chad Rubin is teaming up with his 3PL partner in ecommerce, President of Swan Packaging, Tim Werkley. Together the two of them will share the mistakes Chad made as an early brand and the obstacles Tim faced as a 3PL. We hope brands and 3PLs alike can learn how to navigate one of the most important relationships for their business.

Chad will share his mistakes and advice for brands on the following topics:

🚚 How to begin the 3PL Process
💰 Budgeting and Cost Analysis
🌐 Flexible 3PL Network Systems

Tim on the other hand, will advise 3PLs on:

🎯 How to Entice Brands
🧑‍💻 Examining Your Network
⚙️ Integrating with a Superior Softwar

Avoid common  partnership mistakes_play

Transcript

Ashley Brown: 

Hello, everyone, and welcome to our webinar today. This is for brands and 3PLs on how to avoid partnership mistakes. With me, I have Chad from Skubana and Tim from Swan Packaging, but we'll get into those introductions later. First, we're gonna go through some housekeeping rules. So the first feature we have button. So feel free to share any thoughts, opinions, comments, concerns that you have throughout the webinar. We'll be checking that frequently. And then, also, if you wanna connect with anyone, feel free to drop your website or LinkedIn. And let's get it started today with go ahead and chat where you're joining us from. I'm in sunny San Diego. So let me know if you're on the West Coast or the East Coast. And then- 

Chad Rubin:  

I'm dialing in from Hallandale, which is right near Aventura and Hollywood in Florida. Excited to be here. 

Tim Werkley:  

And I'm calling in from Wyckoff, New Jersey, a little bit outside New York City. 

Ashley Brown:  

Nice, nice. And then also next to the chat, we have the questions. So make sure to use this throughout the presentation, any questions you might have. We'll have a live Q and A at the end, so feel free to use that throughout. And then the last feature is the poll tab. So I'll have a couple polls throughout the presentation today. Let's just get to know each other a little better. So feel free to utilize that as well. And then I'm gonna go ahead and kick it off to Tim. 

Tim Werkley:  

Good afternoon, good morning, everyone. My name is Tim Werkley, and my company is Swan Packaging Fulfillment. First, I wanna thank 3PL Central and Skubana for hosting today. It's a great event and I'm really looking forward to sharing our experiences together. I have a long experience with Skubana and 3PL Central, and both with Chad, as well, for quite some time. A little bit about us. We're a third-party fulfillment center. We're based in Wayne, New Jersey, which is a little bit outside of New York City. We were established in 1986, so we're in our 35th year. And we have about a 150,000-square-foot facility with about 75 employees. We started as a packaging company. So we were doing primarily things like kit assemblies and shrink wrapping and different kinds of packaging and assembly-line-basis projects. And then in the '90s and through the 2000s, we became a fulfillment center. Had customers asking us to store inventory for them, and pick and pack and ship orders. And fast-forward to today, we specialize in direct-to-consumer order fulfillment services. We also provide business-to-business fulfillment services. Still do a lot of kit assembly and packaging work. And we also provide what we call Amazon support services. So that's a mix of things like FBA prep, FBM fulfillment, as well, and sending product into the FBA facilities and all the associated services. A little bit of first-party Vendor Central work and seller-fulfilled Prime. We work primarily with direct-selling brands and all kinds of products, from consumer electronics and gadgets to apparel, a lot of dietary supplements, health and beauty aid type products. And we've been working with 3PL Central since 2012. I think Chad and his direct-selling business since 2013. And Skubana since its inception. So I'm happy to be here, and thanks for the opportunity. And I'll hand this off to Chad.  

Ashley Brown:  

Perfect, we're so glad to have ya. 

Chad Rubin: 

Thank you, Tim. That's amazing. And I'm really excited to be doing this webinar with you. As you know, we go back a long time, and I entrusted you with my business. And here today, wanted to share all the mistakes that I've made in the process, the good and the bad and the ugly, and just make it as interactive as possible. And I'll share some personal and professional announcements at the end that are super exciting, that I think people are gonna be excited to hear, and we'll get into that at the end. So from my background, like Tim said, I have an e-commerce business, D-to-C business, where we manufacture vacuum filters, coffee filters, air filters, all types of home appliance parts for the home, and sell 'em direct. And out of that business, we started Skubana, which is an operational platform for brands and merchants, really end to end, to run all their orders, inventory, purchase orders and analytics out of. We were recently acquired by 3PL Central. We'll get into that in a little bit. As you can see here, I have a cat, and her name is Callie. And also was on the founding board of Prosper Show, which is an Amazon seller event that was acquired pre-COVID. So yeah, I'm to dive in and get into the meat and potatoes of our relationship, Tim, and all the mistakes in the process and what others can glean from that. And so this is what my warehouse actually used to look like. And it was in Harlem, New York. Initially, I was actually operating out of my Upper West Side apartment, and then we went to Harlem, and then we went to an area in New Jersey. And so at the beginning, it was just an insane jungle, right? And there was high highs and there was really low lows. In fact, I think I've been working with Tim now for over 3,000 days. It think it's like 3,011. 

Ashley Brown:  

Wow. 

Chad Rubin:  

So it's super fascinating, but there's some costly that I've made in the process, and we all do, but some mistakes are costlier than others. And that's really what I wanna dive into today with Tim, to make sure those people don't make those same mistakes, right? Those same obstacles, those same struggles that I went through don't have to be emblematic for other people. 

Tim Werkley:  

And I can attest to Chad's warehouse. I visited several times. And this is really only the location in New Jersey, but it was a mess. Chad had a small, growing business. He owned and operated everything. Kind of took it upon himself to need to run and manage all aspects of the business. And he had some shortcomings with his ability to run the warehouse, primarily because of really the growth of the business, I think, and the expansion of the SKU count. And I remember walking through, and the method of determining when you needed to reorder inventory was sort of looking up in the air and counting the boxes 15 feet over your head and saying, "How many units do I have? "How much do I need to order?" And we kinda came in. And Chad was a very tough nut to crack. It took a couple of years to get him to see the light of outsourcing fulfillment, but it really did allow him to expand the business, shed a lot of fixed costs, get back into, as he says, working on his business instead of in his business. And allowed him to have that beautiful asset of time to grow the business, and then go out and writes Skubana and sell it and live the American dream. 

Chad Rubin:  

Nice. So if we go to the next slide, that was like the initial team that we worked with. And the beautiful thing about working, and this is not a pitch on Tim's business specifically, I just know that I had a life-changing experience, right, that has had an outsized impact on my future by working together. So this team, for example, was adopted pretty much by Tim initially into his warehouse, right? He consumed our warehouse employment team, and that was really an amazing thing to witness and bear witness to because, essentially, I didn't really have to let people go. He brought them into the fold of his business. And only like an agile company can really do that, a 3PL. 

Tim Werkley:  

Yeah, we've done that a few times with other customers, where, usually when they have an in-house operation, they're outsourcing for the first time, a lot of the comfort level is kind of gained by not changing everything all at the same time. And we took on a bunch of staff, some of which lasted a considerable amount of time, and others didn't last very long 'cause of the differential in commute, but they were instrumental in onboarding the account and getting things sort of running in a smoother way, but that's not always an easy thing to do or not always possible, depending upon the proximity, but it certainly helped. 

Chad Rubin:  

Yeah, all right, so if we go to the next slide, Ashley. And just so everyone understands, this presentation really is like a framework of the mistakes that I've made so that other people don't do this. And so there's a deep amount of dwelling and reflection that's had to happen up to the point of maximum utilization of that dwell time, where it was positive to reflect and share, firstly, share this experience with other people. And like Tim shared earlier, Skubana would have never been able to be accomplished. Like, my life was freed up so much more by adopting a 3PL. And we'll find out who on this call is in a 3PL versus their own warehouse. Essentially, I would've never been able to run two businesses simultaneously and in parallel without this idea of giving up operations, right, giving up operations of running a warehouse from a day-to-day perspective to focus on other things in my life.   

Tim Werkley:  

Yeah. The management of people's time is an intangible asset that's extremely hard to quantify and calculate, but it really can change the way you operate. Most direct-to-consumer marketers are good at product procurements, they know their inventory items, they know the products they're selling, they're really good digital marketers. Those skillsets tend to not also contain things like running a warehouse, right? That's fundamentally a different type of operation, and one that really makes a lot of sense to outsource. But when you run your own business and you kind of bring it up from infancy to maturity, I think you have a sense of ownership and control of that whole process. And letting go of that takes some convincing and takes some faith in the provider that you're gonna work with. 

Chad Rubin:  

Totally. And so for those that don't know, right, and I see a lot of familiar faces on this webinar, Skubana's just an operational platform doing orders, inventory, purchase orders, analytics. Really one ecosystem to plug in, whether you have a 3PL or you have your own warehouse, or we can do hybrid simultaneously to run and automate your entire business. And again, if people wanna chat in the chat box, if they have questions, things that come up, like Tim and I are gonna be freestyling here on the call. This is gonna be unscripted, and so if things come up, please put 'em in the question box or put them in the chat box. We'd love to make sure we're tackling and maximizing the value of everybody who's joining today.  

Tim Werkley:  

And just a little thing you may not know, Chad is also a part-time DJ, so he may be freestyling in different ways today than we expect. 

Chad Rubin:  

Totally. Thank you for sharing that, Tim. All right, Ashley, we're moving on here. Oh, yeah, so we're gonna do a poll.  

Ashley Brown:  

All right, so go ahead, guys. Use that right side. I'm going to make this poll live. Let's see. 

Chad Rubin:  

Yeah, since you've had a chance to get to know us, we wanna get to know who's on the call today. 

Ashley Brown:  

And then we're gonna look at some real time results, see if we have more brands, more 3PLs. Oh, okay, votes are coming in. It looks like we might be split 50/50. Oh, nope, 3PLs are taking over, but there we go. So now that we have all met, we've got a good foundation, let's go ahead and get into- 

Chad Rubin:  

Well, what are the results? I don't even know. What is the breakdown? 

Ashley Brown:  

Oh, okay, sorry. They're live on the side. So it looks like right now, there's 53% of us are 3PLs. Oh, 50% of us are 3PLs. We have 16% brands with their own fulfillment. Same percentage brands that use multiple 3PLs. We have a few that use just one 3PL. 

Chad Rubin:  

You guys, it was split 50/50, roughly, 3PLs and brands. 

Ashley Brown:  

Mm-hm. 

Chad Rubin:  

Awesome.  

Ashley Brown:  

Good mix. 

Tim Werkley:  

It makes sense, with the confluence of Skubana and 3PL Central, that you have both represented well. And really, as we'll probably talk more about soon, it just provides a very good combination of technologies to support both services and those services combined.   

Chad Rubin:  

Cool. Let's hit the next slide. So today, we're gonna talk about how would you begin the 3PL process? What are we looking out for when I'm looking to contractually put my inventory into a 3PL? And the difference between like an open and a closed ecosystem in a 3PL network. So those are the things that we're gonna be focusing on, on the brand side. And if we go to the next slide.   

Tim Werkley:  

So we're gonna talk about how to entice brands. And so this really revolves around how to build a case for people to outsource if they're not currently outsourcing. We're gonna talk about why brands outsource or change 3PLs, if they're already outsourcing. And the thing that I like to drive home is why there needs to be a fit between the 3PL and the brand. On many levels, both technology and many other things, that needs to be there for it to work long term. We're gonna talk a little bit about the warehouse network options and what's best suited for different kinds of brands. And then talk about how all those things sort of tie into technology and how you can use the technology to manage the relationship differently than you may be now. 

Chad Rubin:  

And if that doesn't help people, I really want people to choose their own adventure here. So if we start getting in a thread and you're like, hey, I have this question, this comes up for us, please put it in the chat. It'll likely help a lot of other people. So I'm gonna speak from a brand perspective. Tim's gonna speak from a 3PL perspective. Clearly, synergistically, like we've been working together for a long time. And so just again, the whole idea is to really create a ton of value for those that are listening on the call. So just to share, Tim courted me for, I wanna say, like two years. 

Tim Werkley:  

Oh, yeah.  

Chad Rubin:  

And I had no control on the inventory side, which is why we had started Skubana. Shipping times were off. Inventory was getting lost. Intangible amount of my soft hours were going into the business. And instead of trying to fix this weakness, I really wanted to amplify a strength. And so finally, and I wish it was my courage, but it was my wife who was like, "Hey, Chad, "this has got to stop. "You have to make a change here," right? And there was an ultimatum, let's just say, personally in the mix that helped me get that to the finish line with Tim. But I didn't realize the opportunity costs of the switch and I didn't realize all the things I was suffering from a tangible perspective, but all the intangibles and all the returns and all the other loss of hair that is just invaluable, that wasn't on the P and L. 

Tim Werkley:  

Yeah, the hair has a very small appearance on the P and L, but I'm well on my way with Chad, so I feel your pain there, but, no, I echo everything you say. Outsourcing is one of these... If you run everything yourself and it's your baby and you feel this necessity to control all aspects of the business and maintain the margin, and letting go of that is a very tricky thing. And it requires a lot of faith in who you're looking at and belief in the fit of the alignment of the services with what you need. And I think Chad and I had that from the inception. The location certainly helped, and given that we're very close in proximity, but we hit it off. As I said, it took a very long time. He probably was my longest courtship in history, but in the end, it worked out well. 

Chad Rubin:  

And I just wanna also put an exclamation mark on this margin concept. I think that was probably the biggest challenge for me, was back in 20, say it was 2013 when I made the move and the switch, I was very concerned about margin degradation and the erosion of my margin profile. And little did I know that giving up something, giving up some margin, created a whole new opportunity for me to explore. Even though I did take a hit on margin, that's real, it opened up many other possibilities. And even those intangibles about the returns or even live chats coming in or people being like where's my stuff, et cetera, all of that went away. So there was margin, I was able to make up some margin on those line items, but the biggest item, which is invaluable, is the time and the opportunity of time to take back time and deploy that in whatever way I see fit. 

Tim Werkley:  

Yeah, agreed. The margin thing is a tricky one. I mean, 3PLs can drive margin back into the business through things like saving on shipping expenses and reclaiming inventory that you may have lost through improper operations, right? Returns are big one. I know Chad had a lot of problems with returns and with managing the ability to both capture them quickly and deal with the customer, and that has a downstream intangible effect of the bad publicity and the negative social media feedback you get. So all of these things, some of which are tangible and others are intangible, but you don't necessarily know what you're gaining until you're no longer losing those things. 

Chad Rubin:  

Totally. All right, let's move to the next slide here. So in my opinion, it has been life-changing. And so in my experience, making the move to moving to a professional company that manages my business is one that I'll cherish forever. And so there's a few things that I look out for, that I wanted to share with those that are joining today on the call. One is, I mean, I would say probably a big one that I'm starting to realize is this closed versus open model, right? And so Skubana was acquired by 3PL Central, and I think the commonality between those two systems is this idea of ecosystem. So ecosystem, from a biology perspective, is essentially mutual dependencies of organisms, that they can enable each other to function. And I do view both of these companies as complementary, whereas they're both very open in the process. And so I believe that your software becomes your ceiling of growth, really, not your floor. And so making sure to pick the right company, that's leveraging the right software, but also has an agile, nimble approach, similar to Tim. Like Tim, I don't believe that shopping for a 3PL is a one-size-fits-all type of mentality, right? It's not transactional. This is not just booking an Uber ride and giving somebody five stars and being on your way. A 3PL is your most mission critical function, probably your largest line item in your P and L- 

Tim Werkley:  

Certainly. 

Chad Rubin:  

Is gonna be your 3PL. And the largest line item on your balance sheet sits in that 3PL. 

Tim Werkley:  

Yeah, I mean, aside from the cost of your product and your marketing and advertising expenses, we're effectively displacing the retail store and the person driving back and forth to the retail store. So the logistics of getting the product into the people's hands is of paramount importance in modern e-commerce. And as it evolves, it's moving more into time to home and transit time. And those are less tangible, less quantifiable values, but nonetheless important, right? But that closed network versus open network is an important topic in the sense that in a closed network, it's very difficult to adapt, right? If your business evolves into going into business-to-business fulfillment in conjunction with your direct-to-consumer sales, or you start selling more heavily through Amazon and you need FBA prep and replenishment services, and the 3PL system or mix of services don't support those directions, then you're in a position where they're not necessarily a good fit anymore. And your business becomes very constrained and can potentially create a lot of downstream problems. So the direction that 3PL Central and Skubana are going to allow for that to be more open for use of different warehouses around the country is a very positive direction, I think, for the industry. 

Chad Rubin:  

Totally. Another thing I wanted to add, another intangible that I think most brands don't think about when they're making the switch is the collective shipping rates that you'll get as a 3PL versus getting my own rates on my own. I think that's a really important selling point that doesn't get enough credence in the sales process. 

Tim Werkley:  

Agreed. Look, we aggregate the volume across all of our customers and purchase shipping from the carriers and negotiate with the carriers on that basis. And that affords us better discounts on the carrier rates than usually the brands can negotiate on their own. And when that is optimized or leveraged by the brand, they're able to save significantly, sometimes, beyond what they would otherwise do. So when we talk about the budget, that can fill the margin loss from having a margin with a 3PL. So particularly as you get into multiple locations, those shipping rates become more and more important. The direction of the carrier pricing structures are very punitive, and particularly in a blended postal model, are really evolving very quickly. And the optimization of shipping is a very critical piece for any brand at this point. 

Chad Rubin:  

And just to also add to that, one of the ways that we were able to transition from our own fulfillment to a 3PL model was the fact that Skubana supports both methodologies. So we're sorta like a shipping software plus integrations with 3PL Central, as an example. And so we were able to dip our toe in the water. Like, I was able to create a warehouse, connect to Swan via, initially it was through FTP and now it's through API, but we were able to dip our toe in the water without being thrown in the deep end without floaties, to make a nice transition. So as you received inventory, we were able to start letting go of that fulfillment process on our own warehouse. And I think that could have only have been done with the right software. If you don't have the right software, it is just aspirational at that point.  

Tim Werkley:  

Yeah, I mean, it no doubt makes it easier to onboard customers with Skubana. And particularly if the customer's selling on a lot of different sales channels and needs to aggregate all of the inventory together and unify the experience across channels, it's by far better than anything we, as a 3PL, can bring to the table. And so now that we can effectively offer that in conjunction with 3PL Central as our WMS, it's a very powerful tool to make it work well for brands and for 3PLs.   

Chad Rubin:  

Right. And then I think the other piece is like when you're looking at 3PLs, that I just wanted to touch on, when I was in the search, which is a huge time sink of talking to 3PLs, getting their rates, getting an understanding, all that's like very transactional, but a lot of 3PLs aren't apples-to-apple comparison. So a lot of it has to be normalized, right? Tim, if you wanna just share how you went about that. 'Cause that was a big part of our negotiation of our term, of our agreement. 

Tim Werkley:  

For sure, yeah. You would think that rates and the billing model across 3PLs would be fairly consistent, right? It's really anything but that. It's apples and oranges and all kinds of other fruits combined together in one big bowl. And I'm not quite sure why that is. I mean, ultimately, what we're providing is a reselling space and labor and shipping and packaging materials. The fee structure that 3PLs apply is usually transaction-based, sort of cost per order, cost per unit, things of that nature, and then storage and all of the costs that drive our costs, essentially. But the inability for there to be some sort of unification of rates, at least in the structure, is very challenging. So from a brand perspective, when you're going out to bid, it's unlikely that you're gonna get more than one 3PL with the same structure. So what I always recommend is to just do a pro forma invoice. Take all of the characteristics of the business. Apply it into a spreadsheet with the rates and how they would apply from each of the 3PLs. And then take a few sample months, perhaps at different times of the year, if you have seasonality. Blend it in with the shipping rates, and understand what your all-in costs for a given month or a period of time should be. I always offer to do that for customers on the basis of our rates and represent to them what this will look like when you apply all of the characteristics. And you need to make sure there's no hidden charges. And when you put that pro forma in place, it sort of roots those types of things out as well. 

Chad Rubin:  

Tim, I love that you're sharing how the sausage is made. Thank you for being so open. 

Tim Werkley:  

You got it. You helped me get there by forcing me to do it.  

Chad Rubin:  

Thanks. 

Chad Rubin:  

So yeah, this is your slide. Anything else you wanna jam on here? 

Tim Werkley:  

Yeah, so in general, with enticing brands or how to get customers as a 3PL, my experience is that there tends to be two types of customers that wanna outsource. One is, as I said, brands like Chad, where they had their own warehouse. They need to be sort of convinced or sold on the concept of outsourcing. And that is a hurdle that's a different hurdle than trying to explain why you're better at 3PL than somebody else. And then the other is a company who's moving from one 3PL to another, right? And usually, they're trying to solve some sort of problem or there's some deficiency that is getting created. And ultimately, it comes down to fit. And I brought this up before, but the alignment of the services that the 3PL provides and the services you need as a brand now, and then the services you'll need as a brand in the future, are extremely important. So making sure that those things are addressed. So things like can they do B2B? Can they do FBA prep? Is there EDI connectivity, right? You want to try and explain to the brand why you're right-sized for them. There's a lot of modern, newer 3PLs that are growing for the sake of growth and taking out thousands of customers, and you become a number in a machine. And the customer service is this sort of revolving door of people that last for three months. So that is something to certainly be aware of. But other than that, making sure that the products that they fulfill are similar enough to yours, or similar customers at least. And I always say to people, you need to visit the fulfillment center, right? You're outsourcing your operations. You're taking the core of your operational part of your business and putting it and trusting it to another company. And anybody can put up a sexy website with sort of stock images and make themselves look like they've been around a while and know what they're doing. But to vet that out, you really should visit. And Chad and I had many visits on both sides, and got him comfortable that we were a fit for him. 

Chad Rubin:  

And I wanna also add that right now, if you are open to having visitors at the warehouse, I think it becomes an unfair competitive advantage because of people, maybe other competitors, they're not letting their employees or people travel internally at the organization. So onsite visits and real, live communication in the physical world will just outbeat Zoom, which is very numbing all day long. 

Tim Werkley:  

Oh, for sure. I mean, like I said, what we do is operations, right? And if you want to entrust that amount of value and that amount of expense every month to a company, you need to make sure that they do what they say they do and that they have the infrastructure to support you as you grow. And that's very hard to ascertain from a phone call or a video call and assets represented on a website or some sort of marketing material. 

Chad Rubin:  

Yeah, yeah, I think that's what you're seeing with a lot of the, I've even called them like new 3PLs that are popping up, where they're sort of masquerading as they do everything. They do inventory, they do orders, they do your 3PL work. They maybe even have an e-commerce storefront. And it's like, to me, it's selling the dream. And I think that there's a way to be genuine and to be authentic. Like, if you're talking to just a salesperson that just wants to sell you services, their job is to sell you. Their job isn't to make sure that you're happy once you sign up for the deal. I think you need to really focus on referrals, the kind of a time and attention. I think that was really meaningful, Tim, when we were working together. Because like this choice is the difference between success and failure in our company. And so you have these 3PLs that are masquerading as if they do everything, when really, it's all just a facade that's just meant to sell you. 

Tim Werkley:  

Yeah, I mean, look, the word fulfillment means a lot of different things. It can be sending direct mail to people's homes for flats and white mail, up to container in, container out public warehousing. So when you find the term on a Google search, that doesn't mean that the company does exactly what you need, and that needs to be confirmed at multiple levels. And in terms of the kinds of 3PLs that will purport to do everything, right? I kind of, I use the analogy of a diner, right? If you go to a diner and there's 10,000 things on the menu, right, and you can order anything at any time of the day, but nothing is really that great, right? It's all kind of like mediocre. So the point being that you can't be all things to all people. And if the 3PL focuses on their core competencies, and those core competencies are aligned with your business outsourcing needs, that's a great fit. And a lot of it also tends to have to do with where the 3PL came from, right? So 3PLs that were technology companies, and then decided to get into the warehousing business because it was a adjunct type of services and they could grow that way, they tend to be very strong in technology, but not strong in operations. And call centers have gotten into fulfillment. And I mean, back in the '90s, in '80s and '90s, and that was the same idea. 

Chad Rubin:  

It's like Taco Bell selling hamburgers.   

Tim Werkley:  

Right. 

Chad Rubin:  

I hear you. The last thing I just wanted to share on this slide was you also wanna look at not just where your business is today, but where your business is going. So like, I may have started off, perhaps, on Magento, and then I went to Shopify, or I started on Amazon or I needed FBA prep. Or then we started doing Vendor Central and Seller Central. Or kitting and bundling became more important to us. Or maybe we start doing B2B direct to Home Depot. These are all real case, real-life scenarios. But I think you have to think about what is the roadmap for your business and can this company that you're getting, is this Mr. Right or Mr. Right Now? So are you getting the services that you need today just to satisfy your needs today? Or is it for the future and are you gonna be able to grow together and be agile and nimble? 

Tim Werkley:  

Yeah, I mean, I agree. I think that you can garner a lot of that reality by visiting, for one, during the engagement process, right? So companies that send you 25 marketing emails a month to get you to move their business to them versus a company that you visit and you're meeting with the top management and they're speaking to your problems and listening to and providing solutions for your challenges, the experience you have in the engagement process will tell you a lot about the five and 10-year experience you'll have after you sign on, right? So the sales cycle can seem very attractive and software looks great and so on, but mature operational things have a tendency to change, but that gut feeling you get out of the initial meetings and conversations, I think can go a long way. 

Chad Rubin:  

Yeah, it's like the inventory management space, right? You go to everyone's website, it all looks the same. And then you sign up for something and you realize, like you get under the hood and you realize there's no engine. The car can't drive. So I think it's the same thing in the 3PL space as well. There was a question here, there's a couple. So Tasha, definitely wanna talk about a lot of that offline. These are very specific to your business, and certainly can open up a thread there together. Brittany had asked about example discounted rates that a 3PL would get. I don't know, Tim, that would be maybe more your domain.   

Tim Werkley:  

Yeah, so I'm not seeing this. What is the question? 

Chad Rubin:  

In the chat, it just says can you give an example of discounted rates? 

Tim Werkley:  

Oh, okay, all right, sure. Discounted rates for shipping, right? So the carriers, different carriers have different ways of providing rates. So companies like UPS and FedEx have a published rate, and then will offer a discount off of the published rate. Essentially, the more you spend and the more kinds of expensive services you use from the carrier, the better the discount they will give you. And to the extent that you, the dimensional side of it, it blends into that a bit, but I'm not gonna dig into that. It's a little bit too deep. But so essentially, the more you spend, the better discount you get. So 3PLs use that as a selling point and as a source of margin, and it's to be expected. It's something that isn't necessarily an unfair way of operating. But when you go into the engagement process, you should be aware that that's a reality and have that as an open conversation and use that to help grow your business by being able to save money on shipping, right? Other carriers do not discount their rates. They just provide net rates. And in that scenario, it's just about the same drivers of savings, or the drivers are the same in terms of the savings that the 3PL will get, but it's not being discounted from a published rate. 

Chad Rubin:  

Got it. So to answer Grant's question, I think this covers it. You leverage your size to get aggressive parcel pricing.  

Tim Werkley: 

Correct, yeah. It's the spend. It's the overall business size. When you get into multiple locations, then the zonal aspect of it becomes a little bit more relevant. Particularly with UPS and FedEx, there are many, many, many surcharges that they have out there now. And the blend of those surcharges, depending upon when they're applicable, can really significantly increase the cost to deliver a parcel. So to the extent those things can be negotiated and avoided through rate shoppings has a lot to do with what your bottom-line cost is to deliver. So if you can strategically, and usually using technology, avoid the presence and application of some of these surcharges by choosing a different carrier and service that's similar enough at that point, you can really optimize your shipping spend.   

Chad Rubin:  

Nice, and I think that's a good transition to the next slide here. When you mentioned zonal pricing on the parcel side. So we were traditionally in one warehouse, and now we're in two. And I do think the days of being in one warehouse are over, especially after that zonal piece. It really impacted my business. So the closer you can get to the customer, the better, in my perspective. Tim, go ahead. You sounded like you . 

Tim Werkley:  

Yeah, no, 100%. I mean, the easiest thing to quantify and budget around is the savings you get by the reduced cost of shipping when putting inventory in multiple locations. That's fairly easy to calculate. The time to home being quicker, one to two days versus four to five, or one to three, that's a little less tangible. But I use the analogy of my daughter. She's 12 years old, right? She goes on Amazon and picks something out that she wants. And we say, "Okay, just be aware, "this isn't gonna deliver for a week 1/2" because of whatever reason. And she immediately just, it's like impossible for her to accept that. She just moves on and picks something else, right, because they're just so conditioned to that now, that that's the expectation. So you know what? If your brand is not gonna deliver that expectation, your brand's not necessarily gonna last for very long, unless you have a really niche product that everybody likes and can't get somewhere else. Does that have a tangible amount around it? No, but it certainly is very valid and valuable. 

Chad Rubin:  

Mm-hm. And I would say just one last piece on the immediacy of getting a delivery fast to the consumer. Two is, obviously, you save on shipping costs. And then for me specifically, there was two other pieces as to why I needed two warehouses, one on the East Coast, one on the West Coast. The first was there was some tax implications that were created, where higher tariffs were created. And so this was another way around those higher tariffs. And then lastly, lead times. The lead times on my products to a West Coast facility saves my time by about 15 days. And that's also important and it's also cheaper. 

Tim Werkley:  

Yeah, situating your inventory relative to where the product is manufactured or coming into the country is important. So the ports of New Jersey and of LA are by far the biggest ports in the country and also where most of the people live in the country, right? So you look at a combination of the population density, distribution of where people live in the country, and that has a lot to do with the zonal and cost savings in shipping small packages. And then secondarily, the inbound inventory coming in from the ports or from your point of manufacture domestically. So it's kind of like blending those two things together to determine where's the optimal place to have warehouses in the country and determine how that's gonna impact your bottom line in a tangible way, and then the intangibles we talked about. 

Chad Rubin:  

And if we go to the next slide, one of the pieces of analysis that we did was we looked at our percentage of revenue and our percentage of units from each state. And that's really part of how we came up with where to plant our second warehouse. And then the other piece, of course, was the tariff piece, where our product line got hit with a 20, I think, roughly, a blended 23% tariff, which is pretty significant in a business, right? Imagine the margin erosion that happens when you are hit with such a tariff out of nowhere. 

Tim Werkley:  

Mm, yeah, and relative to warehouse locations and importing, I mean, the international logistics right now, at this point in time, is absolutely off the hook. I mean, the costs of bringing in containers from overseas and the delay in time, and then the trucking costs of moving inventory around the country are just, I mean, they're four to seven times what they were about a year 1/2 ago. Completely pandemic-driven and completely supply-and-demand oriented. And from what I'm reading, it's not being mitigated anytime soon. So that's here to stay for a period of time. And the takeaway there is order inventory earlier and expect delays.  

Chad Rubin:  

So let's just say pre-pandemic, 20-foot container costs $3,800, which would say, on average $4,000, and now it's 15,000. 

Tim Werkley:  

Right. 

Chad Rubin:  

Have you seen any brands being able to skirt that at all? Or is it just, you just have to embrace it?   

Tim Werkley:  

Skirting it is not necessarily possible. Unless you has some sort of preexisting contract with the shipping lines or brokers, it's unlikely that you're going to be able to do any better. I've heard rates of to $25,000 per container, as compared to $3,500 a few years ago. And I think the two main ports, New Jersey, New York, and California and LA, are extremely backed up. There's ships, you see all these pictures of ships sitting out in the ocean docked, 70 ships sitting, waiting to get into the port. And it's not going away anytime soon. The success our customers have had are in forecasting and buying earlier, right? And anticipating that and accepting it, and then taking on the risk and the inventory carrying costs of purchasing more earlier and betting on their brand, as opposed to trying to be hand to mouth with their inventory, based on their sales.   

Chad Rubin:  

Yeah. I went to dinner with a friend this past weekend who's also an e-commerce brand. And he was sharing with me that actually, the container costs and the air freight costs are at parity right now. And so he's just airing in everything. However, that loophole closed a bit with the release of the new iPhone. I think they air shipped in this iPhone. Apple got a lot of the capacity.   

Tim Werkley:  

Right, yeah, that's been happening. Yeah, I mean, I've seen air freight rates at $15 a kilogram. And that's probably five times what it was a year 1/2 ago, but some products don't lend themselves to air freight, right? If you have bulky product, I mean, it doesn't make any sense, right? It has to go on the sea. But there's all kinds of factors affecting the logistics industry now and the international shipping. And the government seemingly is trying to figure it out and help, but their subsidies to the economy also created part of the problem in the first place. 

Chad Rubin:  

Mm. Yeah, we're not gonna go down that rabbit hole. For another webinar. All right, so Ashley, we're gonna go to the next slide here. What do we got? Ah, have the right network.   

Tim Werkley:  

Right, so we talked about a lot of this already. I mean, it comes down to multiple locations. Is that a fit for you, right? And determining if it's a fit, it comes down to a few things. It's not always viable for everybody, right? It isn't necessarily the solution. The SKU count is far and away the biggest topic, right? If you have thousands of SKUs, putting thousands of SKUs in more than one location is extremely challenging to do. It's expensive. You have to buy more inventory, and managing that inventory in multiple locations is very difficult to do. Putting product where people live is, we talked about what's important, but load balancing that inventory across locations can be challenging. But what you really wanna do is evaluate what is it gonna cost you to bring the inventory in and put it in two, three, four locations versus the shipping zone savings you're gonna have on the same amount of product you'll ship from two or three or four locations versus one? It's a little tricky to do that, but that's ultimately what you're trying to accomplish. But having multiple warehouses, and this kind of speaks to the network and technology side, for that to work correctly, the warehouses have to talk to each other correctly, right? And that transcends inventory management, order processing, the order routing by location, and that being subject to inventory availability. And then optimizing the location it ships from. Trying to get everything into one package, and then having visibility across the location. So having the technology stack to see what do I have in each location, getting some sort of trend reporting on each one. And if you don't have a lot of the technology side, you still can make it work with multiple 3PLs and manage the communications with them independently. It just becomes extremely challenging and it's not working in an optimal way. But this goes back to that closed versus open system. If you have a company that has a closed system and it has all this sort of solved for, while you may benefit from the interoperability working well, you're locked in to them, right? So that becomes a little bit dangerous. But the 3PL Central's warehouse management system, and then layered on with Skubana and the ability to control that inventory by location, run some reporting to see what should be where and when, and then routing orders in a sophisticated way, those are all things that are gonna be very valuable to any brand. 

Chad Rubin:  

So there was a question that came in from David. So if you're unable to physically visit a 3PL facility, what information should you require to really make a decision? 

Tim Werkley:  

You know, you can accomplish a lot of the same objectives through email and phone and video calls and so on. Ultimately, it's determining the fit. As I said, the fit is always the most important thing. Making sure that they're going to support where you wanna be in the future and negotiating rates, getting the rates aligned with where you need them to be. And that's a fairly straightforward spreadsheet type of thing. But again, if you can visit, do the visit, right? If you can't, try and spend enough time with them on the phone to get a sense of who they are and where they came from and what they're about and where they're going. Make sure that that's who you wanna be with long term. 

Chad Rubin:  

Mm. So the next two slides, I believe, are polls, and then we're gonna move into this whole new notion of 4PLs and network, and just learnings, what we're seeing on the ground. Before we do, let's take two polls here. So what do you wish your 3PL could provide? So this is for all the brands that are on the call right now, what do you wish your 3PL could provide? Share with us your deepest desires. 

Ashey Brown:  

It is anonymous, so don't be afraid. 

Chad Rubin:  

And Ashley, let me know when that's wrapped up.   

Ashey Brown:  

Looks like the number one wish right now is clear communication, better accuracy, and then also cheaper shipping rates, which wouldn't that be nice.   

Chad Rubin:  

And then for the 3PLs that are joining, what do you wish brands knew?   

Ashey Brown: 

Let's go, 3PLs. We need some votes in here. There we go. They'd like brands to know that they're flexible to their needs, trust their best practices and that they are true partners. All great things.   

Chad Rubin:  

Nice. All right, so this is like super important. So like back in the day, there was a company that was called Symphony, for example, and they had every aspect of your business covered, right? They had 3PLs, they had a shopping cart, they had an ERP system. And I think that's what I'm talking about when I talk about a restrictive or a closed system, is that like they are in complete control of your business at that point in time. So it's like a closed ecosystem is really how I would reference it. And the beautiful thing is that Skubana is agnostic to the 3PLs that we work with. You can work with any 3PL. In fact, we had our customer during the pandemic, nutrition supplement customer. They were able to, as there was COVID restrictions coming into different states, they would essentially reallocate their inventory to other 3PLs. And so they would miss that social distancing, which would obviously have massive implications for their customers. And they were able to do this with our nimble, agile software. We had another customer, Tushy, who's a case study on our website, they were able to go direct from Hong Kong, direct to China, or direct to the United States because their 3PL ran out of all their inventory and there was a rush on toilet paper, and they sell bidets. So those are really interesting things that I think are only accomplished, you can only accomplish those things if you have a nimble, agile system, but you're also working with like a best-in-class 3PL, but also best-in-class software stack.   

Tim Werkley:  

Mm. Yeah, I mean, I can only speak from the 3PL perspective that doesn't have that closed system, that I think I would have a very hard time convincing any brand at this point in time to relinquish control of their entire business to me, right? It's one thing for us to have a very important contribution to the success of the business and be one of the top two or three line items on their P and L, but to ask to control all elements of the entire shopping experience, all the way through delivery of the parcel, that's a tall order, and I wouldn't buy it if I was a brand.   

Chad Rubin:  

Yeah, and also, I shared early on, I don't have like warehouse operation, transportation chops. Like, that was never my strength, right? That was a weakness. And so you have this, and I'm relating to the 3PLs on the call and also the brands that have probably went through this process of shopping for a 3PL, where you see these fulfillment companies masquerading as software companies, or vice versa, right? And so we're stuck in this mentality of there's like one size fits all, and there's so much more that goes into the relationship of a brand and a 3PL than basic pick, pack and ship services. Like, the amount of handholding that Tim does for me. Like, I might ask him questions through the process. I would say I'm a fairly needy merchant or brand, but I think we're all needy, right? We have kitting assembly requirements. We have product inspection requirements. Maybe there's a defect on the floor. And the question is like can the 3PL that you're working with handle it, right? 

Tim Werkley:  

Yeah, I mean, it's going back to what we were talking about before, with the ability to adapt and flex and diversify the business to both where e-commerce is going in general, but also where it is now. Does a 3PL only focus on certain services within the industry? Or is it a little broader and it's diversified? So things like FBA prep and replenishment, kitting and assembly, right? Chad's business evolved quite a bit to involve a lot more of Amazon and sending product into FBA. And we adapted over time to facilitate that at a higher level for him and many other brands. And all things being equal, would I rather fulfill those packages from my own building instead of sending them to Amazon to be fulfilled? Of course, but that's not reality. And if the 3PL is unwilling to adopt that type of support for their customers, then they're gonna lose customers that need that kinda service. And Chad, you didn't need that much handholding. It wasn't so bad. 

Chad Rubin:  

Yeah. I appreciate that, Tim.

Tim Werkley:  

No problem. They're just a little hairy, too, so I kinda couldn't hold 'em for very long. 

Chad Rubin:  

Mm, totally. And so now we have two locations, we're able to hit the United States 95% of the time in two-day shipping without paying for two-day shipping. So I think that's an important point, especially for your child who wants her stuff delivered in two days. 

Tim Werkley:  

She's very impatient. So, yeah. 

Chad Rubin:  

So, yeah, we talked about this open system idea. And if we go to the next, where I'm just looking at time here. I think the next piece is really this 4PL idea. There's this new notion that you can take different warehouses, combine them together, and they might be on different stacks, and create a network of a 3PL. So like using your excess capacity to support another 3PL who's running out of capacity. And I think that is a big part of the reason why Skubana was acquired by 3PL Central, was that we have the orchestration and the routing and the inventory visibility, and they have their, the 3PL Central operating system built into these 3PLs. And I think that overcomes a very big hurdle, where the 3PLs that are on 3PL Central don't have to use disparate technologies, right? And I think that becomes a big hurdle, when the technology isn't harmonized together as one. And so, Tim, if you wanna share a little more about that, that'd be great. 

  

Tim Werkley:  

Yeah, I mean, we have a lot of customers on Skubana. Our first one was obviously Chad's business. That was the pilot customer for the software. But we found that those businesses tend to have started out using disparate technologies, unified their operational software together through Skubana. And then when we integrate to them, it's a very seamless experience, right? It's connecting the data through API. There's very little involvement at all day to day. It's really just focusing on marketing and selling and inventory procurement, keeping us stocked with product. And the move into a 4PL network, from our perspective, is fantastic. It does allow us to branch out our services to partner with 3PLs around the country. And I think it's a very positive direction that's going to, instead of trying to own all of the services and all the facilities, it allows 3PLs like us to leverage those partnerships through technology. So that's a great new addition.  

Chad Rubin: 

And so 3PL Central did launch their 4PL Network Manager. And so we're gonna blow up, if you're interested, right, as a brand or as a 3PL, you can hit up my dear friend, David Miller. You see his email address down below, dmiller@3plcentral.com. Put the subject line I'm in. And just simply with that, you can send him an email and explore this new 4PL community that's being built at 3PL Central. Yeah. Tim, anything else on that 4PL stuff? Anything else you wanted to share? 

Tim Werkley:  

Well, I know you have an announcement, and there are some things I'll share after you discuss that.   

Chad Rubin:  

Yeah, yeah, so my announcement is that today is my last day at Skubana and 3PL Central. And so this is a very special webinar for me. I've been doing webinars now for seven years. It's 22,113 days. And I believe that Skubana is in incredible hands with a great software company like 3PL Central. They just made another acquisition, of Scout. And so they're really going after these like best-in-class softwares and integrating them into their approach to build out a suite. So it's certainly my pleasure, firstly, to do this webinar with Tim, who, this is where it all started. And this is not necessarily where it's ending, but this is really an important milestone and a chapter that's closing in my life. 

Tim Werkley:  

Yeah. We were both considerably younger when we met. I think over the past 10 years, whatever it's been, we helped each other grow our businesses and evolve them with e-commerce. And we're a supplier to you, a customer of yours, kind of a business partner through Skubana, 3PL Central. And you've become a good friend of mine for a long time. We've been through Skubana and the Prosper Show for a long time as well. I feel like we enabled the business to grow and Skubana to be formed through that. And that partnership has worked out very well for all of us. And Chad is an e-commerce maverick and a forward-thinker in our industry. And he's always, as I said before, had this keen ability to know where the puck is going and get there, instead of being where it's been. And so I'm really looking forward to seeing where the puck's going next, Chad. So good luck to you. 

Chad Rubin:  

Thank you, Tim. That's so kind and wonderful. I'm getting teary. 

Ashley Brown:  

Yes, here at the Skubana team, we'll miss you as well. Now you just have to deal with customer service when Think Crucial needs us.   

Chad Rubin:  

Totally. And Tim, did you have anything else you wanted to share? Maybe we can just share your contact information. For those that wanna learn more, either wanna network with Tim on the 3PL side or a brand that's interested in working with Swan. Certainly, I can be used as a reference. I think this webinar is referenceable in itself. But Tim, what's the best way to reach you?   

Tim Werkley:  

Yeah, the email should be up there, tim@swanpackaging.com and our website is swanpackaging.com as well. And I always offer a free cup of coffee for the first 20 callers. But aside from that, happy to meet up and discuss how we can help you, learn about your business, give you some competitive pricing, give you a peace of mind and give you back that ultimate gift of time. So thank you very much, everybody. 

Chad Rubin:  

Thank you so much, everybody. And I'll say David had a question on invoicing. And so David, just email I'm in at dmiller@3plcentral.com and you'll get all the answers showered upon you.   

Ashley Brown:  

Perfect, thank you, everyone. Have a good- 

Chad Rubin:  

Yeah, thanks, everybody. Awesome.   

Tim Werkley:  

Thank you. 

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