Blog postsFebruary 07, 2019
Rethinking the supply chain: 3 startup CEOs talk data, dynamics, and the future
Alloy, Convoy, and FLEXE discuss supply chain innovations designed to help forward-looking businesses succeed.
In late January, FLEXE’s Co-Founder and CEO, Karl Siebrecht, participated in a panel at Slalom’s Supply Chain Innovation for Business Growth Summit in Seattle titled, “Rethinking the Supply Chain.” He was joined on stage with Alloy Co-Founder and CEO, Joel Beal, and Convoy’s Co-Founder and CEO, Dan Lewis. The two-day event was sponsored by Slalom and hosted by Harshad Kanvinde. Below is the video and transcript.
Neil Ackerman, Global Supply Chain Transformation Executive, Johnson & Johnson
- Dan Lewis, Co-Founder and CEO, Convoy
- Joel Beal, Co-Founder and CEO, Alloy
- Karl Siebrecht, Co-Founder and CEO, FLEXE
I'm Neil Ackerman, and we have what I think are some of the greatest startups in the country and, of course, in the Pacific-Northwest with us today.
Okay, so what we're going to do here is go around with the mic. They're going to tell you about the history of their companies so we can get acquainted with their pitches. And then we have some questions around agility, how they think about the supply chain, and even startups.
I'll just pass it, starting with my friend Dan, and then we'll go from there. But in between, there will be some swag back there if you want a cool coaster that looks like a pallet, or a stress kinda house. And then there's a book, because you always have to have a book, and the book is on the back table, "The Future of Supply Chain." Thank you, Karl, and your organization for providing the book, and it's back there. And there are many articles from supply chain leaders and executives. It's great for really casual reading and a lot of smart stuff.
Thank you, Neil. Hi everybody, Dan Lewis. I'm the CEO and founder of Convoy. I'll give a story that kind of was one of the insights that led to building Convoy, which gives some of my background and some context, and then quickly describe what we do. So prior to starting Convoy in 2015, I was at Amazon, and one of the big observations that I had was around the power of delivery and the power of supply chain. Amazon has always said there are three major themes that their development is against: selection, prices, and fast and more convenient delivery.
That third one is extremely powerful and extremely difficult to match. And so what was really interesting is for years they were working on how to get faster and faster delivery times. And humans, the people that shop, like me, had to decide, "I'm going to go to the store and I can procrastinate to the last minute, but I have to go to the store. Or I can have the convenience of sitting on my couch and being lazy, and ordering online, but I have to order 5 to 10 days in advance.” And that was sort of the world when online shopping started.
Then they started to converge, and all of a sudden you could order online and get it guaranteed in 2 days with, like, 99.9% reliability. So you could procrastinate and be lazy, and those are two really powerful human conditions. That just caused growth to spike. And what was really fascinating when I looked into this, was people will always wait as long as they possibly can, it's just human nature.
Once you become the company that can deliver really quickly, the decision set of your customer actually shrinks to one. So there's almost a monopoly within the short-notice delivery purchase when Amazon did Prime.
So I was there, and realized [the supply chain] is what's driving customer behavior, it's not the location of the store, it's not how nice the sales staff was. It was the ability to effectively deliver and allow someone to wait longer and longer to order and be the only one that could serve their needs.
And so I left and spent about eight weeks doing research figuring out, let's just dive into this question. I had some background, I did some work in warehousing transportation and a lot of work in ocean and canals, but not a lot in other parts. I did a lot of interviews with the truck stops, and warehouses, and talked to everybody I could find that would talk to me, and realized that there was a huge hole in the truck-loading space, and that that was a really good entry point into becoming a digital supply chain solution.
There was some really real material problems we could solve because trucking is so fragmented. There were so many small trucking companies, thousands of brokers connecting small companies with their customers. Even the large asset-based carriers brokered about 50% of their work to the small guys.
So nobody actually had visibility into what was going on. There was very poor data across the network when it came to truck load. Pricing was a black box. The prices shifted and it's kind of negotiated and variable. There were all these things that we felt like data, and technology, and connecting all of these trucking companies to a platform would let us solve.
And it also turned out that right then in 2015, truck drivers were getting smartphones for the first time. That was a free phone they could get with their AT&T two-year upgrade. So there was the window of opportunity to build a platform. Once you connect everyone, you have visibility, you have a bunch of data, you can make real-time price decisions, real-time capacity decisions. You can provide insights to your customers, and all of a sudden you create a better kind of trucking company that's never existed before. So we don't think of ourselves as a broker or as an asset-based carrier. We actually think of ourselves as being as flexible and, sort of, adjustable as a broker, but as reliable and with the same level of visibility as an asset-based carrier.
And it allows us to operate across a bunch of barriers where people haven't been able to deliver really high quality, real data-driven solutions in trucking. And so we are currently a full truck load provider that does business across the United States. And a lot of the innovation we do is both with the trucking companies for our customers, who are our major shippers. And then we're also thinking about a lot of ways to take that data and improve the number one friction point in trucking, which is the trucking interacting with the warehouse, or the manufacturing side of the facility. And so that's the problem we're solving and we're based here in Seattle, about 500 employees and we've existed for about 4 years now.
Making trucking sexy again.
That should be a shirt. We'll get a shirt made.
I think you have a future in marketing.
So my name's Joel Beal. I'm one of the co-founders and CEO of Alloy. I came up here from the Bay Area, so I had a little bit of a longer commute than my colleagues up here, but I am a native to the Northwest. So it's fun to come back and see the weather again and all the excitement about the Bay Area.
To give a little background on Alloy, my career has really been spent building big data platforms in lots of different spaces, starting in retail, moving over into financial technology. But it's all about this challenge of, how do you connect, what we talked about a lot today, disparate data systems that sit across a lot of different companies. And at its core what we try to do at Alloy is to help really connect the demand, the sales side of businesses, with their supply chain. A pain point that many of you experience, I'm sure.
How do we go about doing that? Well, we've built an integration platform that connects and plugs into hundreds of different retailers, distributors, third-party logistics providers, contract manufacturers, to give you that kind of turn-key visibility by location, by truck, you name it. Where's my inventory? What does my demand look like? How is that shifting over time? And we're going to talk a bit about agility and doing continuous forecasting so that you can understand, hey, as those consumers tastes are changing so rapidly, what does that mean with where my inventory is across my supply chain and how it connects to getting you closer to your customer. Thank you.
Thank you. Keeping demand sexy. I like it. You know where I'm going with this, right? Yeah. All right, Karl.
My name's Karl Siebrecht. I'm the CEO and one of the co-founders of FLEXE, located next door, literally. Thanks again for this choice of location. What FLEXE does is we are a software platform that connects our retailer and brand companies to a very large network of warehouses so that they can plug into distribution, warehousing, and fulfillment solutions once, and have, sort of, near infinite scale on a very flexible basis.
So lots of metaphors abound, but the one that I think works really well, and is actually thematically consistent with this summit and what people are talking about tomorrow, is cloud services.
You think about when AWS invented cloud, how that compared to data centers. Data centers were these necessary investments in infrastructure but came in fairly fixed large functions. So I could build a data center, I could outsource a data center. I would get a forecast of the capacity I would need, and then I would roll with that data center until I outgrew it. Then I would add another and another. Amazon came along and they're like, "Hey, plug in once, pay for the drink." And they turned that infrastructure into a service, and then over time that service started to layer on more and more sophistication for information storage, now to things like AI-as-a-service.
That's what we have done with warehousing.
We serve two types of customers. We serve very, very large enterprises from Walmart and Ace Hardware. We are a flexible complement to their existing warehousing infrastructure, which is mostly built on long-term leases and/or long-term 3PL contracts. So for things like seasonal peaks, new product launches, and shifts in consumer demand that were outside of what your forecast may have been, we're a great solution to complement that fixed infrastructure.
Our other segment is the high-growth VC-backed startups. Again, similar to how a startup like us would use cloud and never have to build a data center, they plug in their shopping cart to our API, and orders flow through. They can have warehouse fulfillment centers anywhere and never have to spend a dime in infrastructure. So that's a way to describe our business model. We like to call it “structural flexibility.”
The name FLEXE was not an accident. You can plug in once and then, part of the dynamic here, is you don't really know how your business is going to change. This is a way to get scale in a flexible infrastructure to account for that uncertainty.
Great, thank you. So before we had this, I reached out to some of you, and with the help of Harshad we got some questions from our friends here. The first one is for Convoy and then we'll probably just move that way right down the line as there's more to say. If not, we'll just go to the next question in the line.
You saw a theme this morning about business-to-business, business-to-consumer, and even person-to-person, or peer-to-peer. We were wondering how you folks see these differences, how you sell to these differences, what that looks like in your company, and maybe some lessons learned over time about these three entities. Especially supply chain professionals, we have the same challenge managing these three different groups. Thank you.
Our business is primarily focused on companies that ship freight as our customers, and then small companies that move freight, the small trucking companies, are the providers in our network. And what we've done, is we've aggregated tens of thousands of small trucking companies. We're not a manufacturer, but we are a creating infrastructure of assets and transportation providers that have a single platform and have technology embedded in their truck via their smartphone.
That is very consumer. Like, going to thousands of small trucking companies and getting them to do something is really hard, and we focused a lot on all of the channels that we used to reach them, the training mechanisms that we use to get them set up, and deployed, and operating. But a huge part of it, and this probably applies in every business, is the relationship they have with the brand and how they feel about working with you, and what is their motivation to do this? You could explain things very logically and we find that helps. We could say, "This is the benefit. You should use it for this reason," etc., etc.
But in order to connect with truck drivers and get them to change the way they've been doing business for the last 20, 30, 40 years, we have to empathize with their situation, also understand what they need, and then paint a picture that creates an opportunity for them to make more money and be successful and live the life they want to live. Have the freedom and the flexibility, kind of identify with what does it mean to be that person? So I think in terms of how we focus on working with them, with that audience, it's really about how we can help them in their future vision.
On the side that we work with our customers, and we think about B2B, we spend a lot of time listening. I think that what we found was most of the companies that we work with, we want to help them understand what's happening at their facility, and it turns out the transportation layer has a lot of opinions and insights into what's happening in their facility. We want to help them figure out how to manage their routing guides so they don't run out of capacity and have to shut down a warehouse. Or they're not at their numbers because they can't get things shipped and they have this really complex routing guide to do that. What do they want to do differently?
What we've actually found is that most of the companies we work with, and this is really important in B2B, have all of the ideas, great ideas, brilliant ideas. They just rarely have a partner that is interested in hearing them, and sitting down, and trying to solve it. And then has the flexibility, and the data, and a technology team and platform to actually go implement some of those ideas.
That was a really big focus for Convoy early on. There were so many brilliant ideas amongst the supply chain teams of our shippers that had never happened in the last 10 or 20 years because none of the large, asset-based carriers or brokers had the capabilities or the desire to partner on a technology level and really innovate and do crazy, creative things. So that's the number one thing we've learned from that, is just sit back and listen and then enable those ideas to come to fruition.
There's a theme, if you remember our speaker this morning, about being in a jar, right? And I think you're going to hear when we get to our other speakers on this question that each of them are able to find a way to get you out of the jar and resolve something exciting. Joel?
Sure. So it's interesting as you look at our client base, it's pretty similar to FLEXE. We work with certainly plenty of Fortune 500s and a lot of younger brands. It's very interesting to see the difference in how they operate and how they think about supply chain, and they're all paranoid of each other. The small brands are very jealous of the fact that P&G has 250 employees in Bentonville and are working with Walmart. They don't have that kind of, ability or knowledge, and certainly not those number of resources.
Simultaneously, I'm sure for many of the people in this room, you look at these young companies, they're so nimble, they're so data-driven at their core. I think as you look at B2B versus B2C, that line is getting more and more blurred.
One of the things that I do see, that is somewhat troubling, is that they tend to be pretty siloed within organizations. As many of you, especially on the consumer goods side, as you go more into a B2C business that tends to be a new business unit, right? It's like, okay, they're going to do e-commerce, and we've got our traditional sales and retail working over here. And there are certainly reasons that that's done, but I do think it creates challenges certainly further up the supply chain. You're like, "Okay, I'm kind of serving multiple masters here." There's different levels of understanding about our customer."
In that sense, we're focused on understanding that demand. But in B2B and B2C, you need to understand the customer better, whatever they may be doing. If it's B2B, then they're selling to an end customer that we've been talking to. If it's B2C, you're going direct. But the goal in all of that is to really unify that better and give as much information, whether you're able to acquire it yourself, or are working with those partners so that you can understand what that end consumer is doing. Because that's what's driving so much of the chaos upstream and the challenges and really improving the customer experience that we've been talking about. And I think it's so much of a shift in supply chains.
A lot of us this morning were talking about some challenges of getting our data unified, organized. How has Alloy helped some of those bigger companies to do that?
For us, one thing I've really committed to when I started Alloy was, I've worked at a lot of enterprise software companies. Many have long deployment processes, and for me, I was like, "I don't want to do that again. I'm not going to start that kind of company."
That's hard when you're dealing with lots of disparate data. So I kind of have this contradiction; I’ve always worked in this space where that’s the challenge, but I don’t want to do that anymore. For us, it was all about throwing out perfection. Let’s throw out the ideal that we’re going to get all together and create this great partnership because that stuff rarely gets off the ground. Instead, let’s go get what’s already out there today, what’s available, and let’s make that as turn-key as it can be.
I mean, you're talking about FLEXE and the scaling of capacity. How can I make it so I can say, "Great, I'm going to work with this new partner? There's already an integration there that I can use. I'm going to get all the data that's available."
I want more, I always want more, right? But I'm going to take what I can get. And so that's the approach that we've taken. There's a lot of data that's being shared. There should be a whole lot more, but to convince people to share more data and better data, and to invest in it, you have to drive value from what's already out there. And I think that's where there's also a bit of a gap sometimes. How do we go show our partners that it's like, “Yes, you're already sharing this with me. Look at all the stuff that we're learning together, and if you just shared this much more, that'll become possible.”
For FLEXE, we don't do anything peer-to-peer. That's not built into our model. But our customers have use cases and needs that are both B2C, so direct e-commerce fulfillment, and B2B. I am a CPG product shipping to a retailer, or I may be a manufacturer shipping to a distributor, or what have you. But one of the observations that I think is pretty interesting is I think most of the disruption, or the primary driver of change in creating some new pain in the supply chain in both those scenarios, comes from changing consumer demands and attitudes. And I would give most of the credit there to Amazon, who's just made things possible for us and reset our expectations about how things should be.
I'll give maybe two examples. On the B2C side it's probably pretty obvious. What our customers fundamentally care about is, "I want it there at a certain time," and that could be one-day, same-day, two-day, or maybe they don't care. "But I want a certain time of delivery and I want a cost per unit. And as long as my quality exceeds my threshold that's what I care about is those two quantitative metrics."
And from a warehousing standpoint, what they don't actually care about, really, is what warehouse that's routing through. Sort of like, if you can abstract that for me and hit my output objectives, then they can be warehoused anywhere. There's also a qualitative objective, which is increasingly important, and that is when a consumer gets that box, what's the experience going to be? That’s true for a lot of these startups and increasingly more of the larger companies. The supply chain and the actual experience the consumer has when they receive the box is part of the brand experience. And so it's time, it's cost, and then it's customer service, that make the customer experience and, ideally, delights customers.
On the B2B side, I'll use another example. Ace Hardware is a customer of ours. Their supply chain is a B2B operation. They deliver products to their co-op owned stores, which are these neighborhood stores. Everyone's been to an Ace. But a lot of the competition is online.
If a consumer goes into an Ace because it's right in town and they can't find a product they need right on the store shelf, there's an easy alternative place to go. One of the things that's important in Ace's supply chain is, “Can I reload my store shelves at the highest velocity SKUs so that I have fewer and fewer stock-outs?” Well, it turns out, the high-velocity SKUs are different in the southeast than the northeast, and they're different in March than they are in July. And it's constantly changing, and there's some work being done to try and forecast demand, but it's hard. Even when AI is great and forecasting tools are excellent, there will still be error. And so the question is, how do you account for that error?
If you can pump in flexibility at scale, and through FLEXE, light up a bunch of complementary nodes that are like the satellite nodes to your existing core DCs, and you pump your high-movers through there, you can ensure a better B2B experience for your co-op partner. The bar is now higher because their consumers are expecting the product to be there when they need it, and if it's not, they'll just go on Amazon.
A question specifically for you that came out was, how does FLEXE know when they're standing up these partners, what their warehouse capabilities are? How can you guarantee from supply chain leaders here that you will find a partner that can do fast fashion, that can handle a one-day delivery?
Yeah, so we are very, very transparent when we go through the matching process for any of our given customers and their specific scope of work or scope of need, and the different providers that are candidates to being their solution providers to that. We've got more than 1,100 warehouses in the marketplace. That's a lot of warehouses. About 500 to 600 companies, some are food grade, some are not. Some are pharma grade, some are cold chain, some are bulk store, some are set up for fulfillment. So there are all different shapes and sizes that have their capabilities.
We go through a process of filtering those and qualifying them to allow them to be part of the network. That's the first step. The second step is once we understand the customer's scope of work—the work we do for Walmart is very, very different than the work we do for our start-up companies—we go through what we call a curated matching process. Because none of our customers want to go to a website, and search, and click, and hit “Buy.” That's not the way they buy. It doesn't map to the sophistication of their operation. But to be able to curate a set of potential solutions to them is super valuable.
Then once they pick the one or several of those providers that are the right match, we select our partners, and then the one connection for the big guys is mostly EDI. The one connection with FLEXE allows me to turn on any of these facilities when and where I need them without having to go through another big startup process each time.
Great, thank you. You know, Joel, we had some—two, three—groups today that really talked a lot about culture and the difficulties of change management within an organization. Tell us about the culture of your startup, how that culture works with some of the larger corporations. And really, what are you the most proud of about your culture? It'll be the same kind of thing for our friend at Convoy.
Okay. So we might be a little unconventional probably in a lot of ways, but I'm a pretty big believer that when I tackle problems, we don't necessarily go get a bunch of experts in that area. And maybe I shouldn't admit this, but we don't have a ton of supply chain experts at Alloy. We certainly have people that have worked in supply chain, but the primary thing we're looking for is generally people that are amazing technologists, know how to build really scalable architecture, and are intensely curious and want to learn.
We certainly get lots of resources outside, and we've been hiring more and more people, but we have tried to create a culture that's just kind of intensely curious and questioning. And I mentioned, I think, a little bit of my background. I used to work in fin-tech and I had been in a company that did the same thing. And I remember showing up at these big banks and they were just kind of shocked that none of us really knew much about finance. But just found that it was a way of, ensuring you have no preconceived notions about how things should be. Actually you do, you come in as a technologist and you're like, "This is really messed up. Like, how do supply chains operate in this way?" And we were talking about EDI, and I don't think we're going to get rid of EDI any time soon.
But it's kind of like, how did we get here, and why is it so hard to do these things and so much easier in other spaces? Can we start to rethink this? Now you have to start somewhere. You can't just rethink the whole thing at once, but I think, a culture starts with that kind of curiosity, that desire to make something better, a feeling that it can have a real impact on businesses, which I think is something that really gets people excited that are in the trenches building the tech.
It's interesting, as I look at our customers. We were talking to a company that we just recently started working with, so I'm thinking on the other side of the coin, and the culture they have. And it's interesting because it was the chief supply chain officer. This is an up-and-coming CPG, probably many of you have purchased their products, they're doing very well. And I remember he was saying, "Our team really loves your team but I'm a little concerned. I think they almost like it too much." We hadn't started working together at this point. Because I have a bunch of former bankers, they know nothing about CPG. They really know nothing about supply chain but they're very analytical. They're really excited about new tools, and that's great but I want to make sure you guys really know what you're doing. It's not just people that are excited about working with other curious, smart people.
I do think it's interesting comparing that to some of the other customers we work with. Everybody has their own type that they bring in, but for us, curiosity. We're an extremely open company as well. I think that kind of goes to our broader mission of sharing more information across the supply chain, we do that internally. So I think if you talked to most of our employees they'd say, "Okay, we had a board meeting last week." It's like that stuff gets posted.
And I think that just creates a culture of people looking to change things, people questioning things. I get questioned all the time, and that's good. That certainly makes it a fun place to work.
Great, thank you very much. That's helpful.
Culture is a really interesting question. I was thinking about this while you were talking. I mean, we have a culture that we've developed and we put a lot of energy and time into it. I think the thing I'm most proud about is probably the area where we're not fully developed yet. This is a really hard part, it's making a culture where it's okay to fail and where people are okay being critical, and feeling like it's okay to make a mistake. To take a risk, and then to recover quickly from that, and that's its reward. And then failing, and understanding you failed, and moving on quickly is as rewarding as being successful.
I've seen people leave really successful technology companies that are my friends and go start startups and then completely fail, and they've never known failure before that. I actually worry if somebody's never been in a failed situation and they're going to go start a company. I'm like, "You need to go through some failure before you actually go start a company. You need to understand for what's it like not to work." So this is one that's really hard, because culturally humans don't like to fail and expose weakness and be vulnerable to each other.
We put a lot of energy into that because, frankly, innovator's dilemma, creativity, everything depends on a culture where it's okay to take risk. We don't actually work with very many early-stage companies. We actually work almost exclusively with established manufacturers, beverage companies, CPG companies, retailers, industrials, pharmaceuticals, all this stuff. And many of these are publicly traded companies, so they can't actually take as many risks in some cases. One of the reasons why you have innovator's dilemma is because it's so hard to throw out the existing solution you're using today or build something that cannibalizes it internally. That's really hard to do.
We know that because we aren't public right now, because we're an early-stage startup, because we're VC-backed, we have the obligation and the freedom to take more risks, and I want to fully take advantage of that. I want a culture that leans into that, and it's okay to fail. So the reason that's actually, I think, really important for when you think about startups you wanna work with, is there are just fundamental reasons why earlier stage companies, especially private, especially startup, is that change, the risk taking culture, to work closely with them.
Because not only is that a good culture to spend time with and to share ideas with, it's a comparative advantage. You can't do that in certain areas, but you can partner with companies that are willing to take those risks, and they can take that risk for you. So if you look at your portfolio of innovation, how do you innovate in the supply chain? Some of the parts of your supply chain, you're going to do it in-house, you're going to kill it because this is your bread and butter. It's the thing you're best at, or you have a lot of data, or experience. But there's certain areas you aren't, so we look at it and we think, "If there are companies that are focusing on a bunch of things with their customers in their supply chain, but maybe they're not going to focus on truckload, we're going to spend every single day building the best truck loading company in the world."
And so we could be the most advantageous partner to work with because I will take the risk, and I will do all these innovative things, and I will invest a ton of time and energy. And if you put two people against it you're going to get a huge return that you would never get in-house from doing it, and you wouldn't take the risk. There's just some systematic things around that. So that's something that I think is super important to our culture, because it's a differentiator and it actually allows us to be an extremely good partner to many companies that want to take on that risk but can't necessarily always do it in-house in the same way that we can.
Some of our deepest partnerships are where they've said, "I wanna put one person full-time working with you and we're going to do these seven innovative things in the next year. And we're going to come up with all of them, we're going to pay for them, because we want to train them." But it's sort of that partnership that's really symbiotic. That's one that I think I'm really passionate about. It's super hard to create that culture, and if we do it well, we're going to be not only a better company, but a better partner for all of our customers.
There's a theme, right, that we heard earlier that all the good ideas don't have to come from your own company. It doesn't have to be built here. It can be built over here, and we'll focus on our strengths and let them in on that one area, and you could have a really big win. There's another partner or startup that's not on the panel but they're here in the audience, they're called Aera. And again, an AI, data science machine that has such a unique way of doing things that we can't replicate it, it’s so much better.
And I think that we’ll find that in supply chains, as you continue to try to transform, we're all not going to be great at everything. And this is true in our lives, so it really makes a ton of sense. It's probably a good transition to talk about how Karl's company thinks about culture. I'm biased because I remember the first pitch Karl ever did in South Lake Union at a pizza place, that I don't even think is open anymore. It was years ago, but I'll let him speak about some of the culture and how it works, because it's a great place.
So above the Whole Foods there.
I know exactly where you're talking about.
Is it still a pizza place?
I don't know, I don't go there. It's too crowded in South Lake Union anymore. Who would wanna go down there?
Yeah, it was terrible pizza.
So Neil, just to tell the story, it was about four years ago or something.
It was more than that.
But this guy pings me on LinkedIn or something, he's from Amazon. And part of our view of the world is, and the solution that we're building—we certainly don't compete with Amazon, but we're building a way for other companies to be more nimble and to give access to scale to other companies. Amazon has a unique capability on the scale-front in a lot of ways. So this guy from Amazon pings me and he says, "Hey, do you wanna get lunch?" I'm kinda like, "Do I wanna meet with this guy? What could he possibly want with FLEXE?" We went back and forth but he convinced me. It was a good lunch, and then he left.
I paid for the lunch.
You did pay for the lunch.
But what was interesting to us in a lot of ways is there was this guy, Neil, who had come from a mature company. A very mature company, gone to Amazon and spent three, or four, or some odd years there, maybe more. He saw that culture, and that speed, and that scale, and then came back to a more mature Fortune company in J&J. So he's one of these guys that has been super helpful for us as we've been on our journey because he understands, pretty deeply, both sides of that coin. Anyways, so that's my plug for Neil.
The question was on culture, I'll just share maybe two very quick thoughts. One is, one of the things you realize if you start a company, which I think is true if you have the ability to start a SWAT team or a B team in a bigger company, is you have the opportunity to create culture. You know, I've worked in big companies and small companies. And if you think of it one day you're like, "Well, what is our culture? What is our culture all about?" But if you start a company you get to say, "Wow, I get to try and create or shape culture."
And you know, the reality of this is that there will be a culture. It will happen. As soon as you have 5 people, 10, 50, 500, there will be a culture. The only question is, are you trying to be thoughtful and proactive about shaping that, or are you just busy on other stuff and it just happens, you know? So thankfully I had some people smarter than me early on who said, "You know, we should really be proactive about this," and so we tried to be very, very conscious as we scaled the company.
We have a set of values that we're very proud of, and I won't bore anybody with those here. One of them is around innovation and risk-taking. The other is, we just call it ownership, and what we mean is, sort of, own the outcome. And we emphasize that through the lens of our customer. If you're coding, if you're building product features, are you going to build that as if you were the owner of the company who's going to be using that? And then if you're in our field team, our Ops team, would you act and behave like you are part of our customer's team?
The absolute best compliment that I ever get, and I've gotten a handful of them, and I'm looking at some of our teammates in the back of the room here who have been on the receiving end of these, is when customers say, "I view the FLEXE team as an extension of my team." I think that is about the highest praise one could get in a leadership position in a company to be able to build a culture like that. But anyway, that's a couple quick thoughts on it.
I think that's a high-bar compliment.
And I've heard it about your culture, and if you don't follow some of these companies, all three of them, on LinkedIn or something, you really should. Just reading their posts and seeing their employees, not them, but their employees, and their pictures, and their events, and what they're about, it gives you great ideas about what to do with your team in these big companies that they're working with. I have shamelessly stolen their ideas about how to motivate a team. So really, thank you for the comments on that.
As we switch gears here, there was a question that I've got to ask because it's come up and we even heard a presentation on it. What we're really interested from all of you is, when you think about data analytics, really what is the crowning moment, the most proud you’ve been of your company in using data analytics in the most agile way? The moment that really had that, wow, that was super cool? Because we are looking for stories to share in our big companies about our friends and startups that just have that one crowning glory about how they used analytics, and man, that worked. You don't have to say the company name if it was [confidential], but we're so interested in what a good example of that is, please. Maybe Karl, we'll start with you.
I'm going to go with Joel to start.
Okay, we'll go with Joel.
I'll start, I guess. All right.
Demand is sexy, again, Joel, go ahead.
Thank you, yeah, I'll start telling people to refer to me that way. I'm sure there's a lot of stories I could pull from but the first one that came to mind is this. So we work with a lot of consumer products companies and in certain verticals, certainly consumer electronics, and apparel, holidays are half the business really, if not more. And I remember this customer that was in a pilot at this point in time, a well-known consumer electronics brand. I'm sure many of you have their stuff.
And we had gotten in, and to be honest, we had a couple pilots going on. This was a while back, and this was the one we were probably feeling the least good about, because they were too busy. It was like they signed it during the holidays. Nobody really wanted to spend any time doing anything differently than what they were doing before. We got in, we got connected and we were pulling a bunch of data from some of their leading retailers, and we identified that one of their major retailers was significantly under-ordering certain products.
One of the issues that they've had is they were having lots of out of stocks and they weren't really accounting for this in their forecasting. That was kind of the crux, the simple way of explaining what was happening where a retailer was under-ordering. So actually one of my co-founders went to their team and was like, "Hey, we found something." This was on the order of about $7 million or $8 million we thought more inventory they could push in at a single retail partner.
I remember he sent me a synopsis of this conversation that he had had where this director that was managing this account was like, "You know what? This looks cool and I can't really disagree with it at a high level, but I don't have time to deal with this." And so maybe this isn't a story of victory, but ultimately we watched their out-of-stock rate and we got a pretty good read of that, and we just watched it rocket up during the holidays. And they did lose on the order of $5 million, $6 million because this product was, like, 40% out of stock or something.
Something certainly I wish they would've handled differently. I think they would've wished they did that too. We actually signed a deal on January 2nd and showed that to their head of worldwide sales. But I think it was sometimes the things you find in the data are good, sometimes they aren't so good. Sometimes you act on them. I'm excited to be on this panel because we really focus on the data and the analytics, but fundamentally sometimes the way that you act on that, I mean, you are limited, right? You have lead times, you have warehousing tasks, you have trucking constraints.
And as we think about where supply chains are going, the whole thing is getting the insight. If I can't do anything about it, it’s kind of actually discouraging, probably. So I think what we really love is partnering. The hardest thing in this case is that they could have acted on it and they didn't. They've acted on it subsequently and it's been fun to watch how globally their inside percentage has grown as they've adopted it. I think for me, it's really about how you've gotta get the change management of people starting to trust the results, but you also need the physical infrastructure, the ability to respond, right? If I can forecast out further, or actually act on it. I think those two things really need to work in tandem. If you're just acing one but not the other, it's not going to give you the results you want.
Great, thank you.
No pressure. I have a couple. I'll just tell a couple quick stories that I think relate to certain things I'm really proud of. One is probably a year and a half ago. We were pretty small and we were growing very quickly with one of our customers. It was a beverage producer, manufacturer. And we did something in partnership with them in one of the retail customers. The retail customer said, "Look, we want to give you much more access to our stores. We want to preference you in certain areas, but we needed to prove that you can manage this from a supply chain perspective. We need you to actually, you know, instead of delivering from your manufacturing location to our distribution center, and then from there we'll take it to the store, we're going to do a direct-to-store, multi-drop from your manufacturing center to our retail stores. And we want 100% on time. We want 100% compliance and on time for, like, a month. Can you do that? If you can do that, you win it."
They could've picked any provider probably in the country. They picked us. We did that with them and we were successful. We came up with a plan. We looked at all of our data about how trucking networks work, where we need to have extra capacity, how we need to stage capacity to be able to deliver on this kind of unique situation. And that beverage producer is probably going to do over 100,000 truckloads alone this year, which is just insane growth.
It was simply because we proved ourselves that we could actually deliver on something very difficult for them that was getting them more business. We helped them win with their customer and that made them change their mind, and really decide to put us as a tier one provider. And being a startup, that's a big deal for someone to put you in that next level and say, "Actually these guys are really legit."
The second thing is—I love this story because it relates to customers and to our trucking partners. There was another manufacturer that really struggled in the CPG space. Several of their facilities were really backed up, and they were giving a really bad experience to carriers who were coming in and out of their facilities. Being a shipper of choice was extremely important given how tight the market was and how many options carriers have. So they came to us and said, "Hey, we want you to pay for someone to come fix this. Can you guys give us data that shows the impact of the inefficiencies of our warehouse?"
We looked at all the shipments we did for them and we said, you know, "This is how many times there was a delay that caused you to have potential pains. This is how many times there was a delay that caused you to have a layover until the next day. You're significantly less attractive than the other warehouses in your region. We can look at all of the demand in a region and which freight the truck drivers want, and which freight they don't want. And the freight they don't want, you have to pay more because they're not going to pick you first. You're going to get whoever is left over."
So we were able to quantify that, show them a dollar amount per quarter that they were spending based on this inefficient warehouse situation they had on several warehouses. We then fixed it with them. We ran a bunch of programs to improve their experience and make it better for carriers. We then went full circle, sent a marketing email back to all the carriers in the region saying, "Thank you for your feedback and input. Because our carriers give us feedback on every load, we have made these improvements. Come back." It was like a full-circle marketing campaign that we did with data, which was really cool. They said that no one had ever approached them with a concept like that, and had a truck-load of data to help them improve a facility. I was really proud of that because I think that was the first time we had ever seen that.
That's really cool. Have you been able to do that for other customers, too?
Yeah, I just saw a new report we produced yesterday. Starting to make this more mainstream as well. So, for a lot of workers, how we think about insights into their warehouse operations, but trucks have a really good sense. Like, how long are you delayed? How orderly are things? What's the ratio of drop to live? That usually indicates how the facility is operating. Does the truck driver rate it as a high-quality facility or low-quality facility based on your staff? What time of day for short runs or long runs? There's all these factors that give you insights into how that warehouse is functioning that you can glean from the transportation experience at your facility. So we found that that is a really good way to give upstream value to our customers.
And for both of you, telling a use case and sharing a story tells you so much about the company and about the culture, how they think about data, and even how they interact with each other. You can almost see their reactions, and I encourage you to see how they interact and talk together, the startups. They're really a great community. Go ahead, Karl.
I'm so glad I asked Joel to go first because I want to riff on what he said. In our business, and for our customers and our warehouse partners, we capture lots of data. We capture supply, availability, and cost of warehousing providers by region. There's a lot of rich data there. We capture quality data for our customers, benchmarks across all the different FLEXE nodes they work for. So the classic warehouse KPIs that we measure in an apples-to-apples basis across all the providers they use, that's helpful. We also capture effectively economic data, think cost per order, and the variance around that, again, in an apples-to-apples way for our customers across any of the providers they're working. That's a sense of the data, and we have metrics, and reports, and we'll do custom analysis on that.
I think probably the biggest pop people get though is whether they crunch data on their end, or part of that data might be their data through FLEXE, and part of it may be from another source inside, or it's all FLEXE data, or in some cases it's all their data. They can actually do something about it, and that's the, sort of, the light bulb that is the delight moment for a lot of our customers. Because, again, coming from the warehousing space, for most companies your warehouses are where they are. Your planning team probably has a subscription license, and every couple years you'll do the network planning, and you should keep doing that, that's important.
But the reality is, waiting multiple years to reconfigure your network probably isn’t sufficient anymore. We actually have a data partnership with Starboard where we pass to them our marketplace data. So it's partnered data services. You can actually go and do your network modeling and then say, "Well, what if I need a capacity in St. Louis around the Thanksgiving holiday?" It's like, “Boom, here's some choices that you would have there.” This is the, sort of, “Oh, there's 17 FLEXE facilities and they're at this price point.” You can actually take action on it.
So that's part of that. This is somewhat unique not just about our model. But I was talking to somebody earlier today and I was explaining to him what FLEXE did. He's from South Dakota, as are my parents, and he said, "Oh, it's kind of like CH Robinson but for warehouses." And I said, "Yes, exactly." So we're not reinventing something that hasn't been done anywhere ever, but for warehousing it's relatively unique. You can kind of turn a dial, pop up capacity, and then that capacity may be just something you need for a season, or you may not know how long you'll need it.
So you'll just turn a knob and let it run, and then if that market ends up being a source of lots of demand and you want to pump more volume in there, there's 2, 3, 5, 20 other warehouses that you can point your inbound trucks to in that same market. And then we assure the quality of those different providers because you're looking at an apples-to-apples comparison of, “Are we shipping on time? Are we shipping accurately? What's my dock to stock, etc., etc.?”
I was in an Amazon meeting, I don't remember when, in the last couple years. And there was talk about, "There's all this empty warehouse space and maybe the Amazon fulfillment centers are taking all this space. So there must be all this warehouse space. What's happening to it?" And immediately I thought to myself, "Oh, they don't know that there's this whole world out there that FLEXE is engaging to not just fill this space, but find it effective, efficient for all the companies that have to have the new expectations of the consumers and manufacturers for this one day, two day, whatever it is."
And I think that what you'll find is, from all three of our friends today, they all found unique areas they can dig in, go deep, solve a problem that customers want, and deliver value at the end. And they're showing you how they're scaling it all through the U.S. Of course, the challenge is when I ask them to scale something into Europe, we're getting there. But I can tell you that they're definitely focused on international and always trying to figure out the best way to meet the needs of customers. We have about 8 to 10 minutes left. I know I didn't get to all your questions but I'm sure you have questions, so we're going to open up the floor to our peers here to ask away. There is really nothing that you can't ask. If you just wanna ask about how they got started and we'll go from there. My friend?
I'd be curious to know what is the geographic of expansion scale footprint plan for all three of the companies here? Is it expanding globally? And if there are various global expansions, is it driven by market size, large venture capital, not necessarily incentivizing global expansion? Thank you.
Great, so I'll start, I have the mic. We operate internationally in the U.S. and Canada. We're dipping our toe into two other markets in a pilot format which we haven't announced and we don't talk about much yet, but it's super early. We're testing the waters. So our barrier to expansion fundamentally is just focus. And really, said the other way, is we don't want to dilute our focus by going to other markets. Happily, we have a lot of demand from other markets from many of our existing customers. When we are ready we will be customer-led and partner-led.
A lot of our big warehousing partners are global companies and they've got under-utilized capacity in Europe just as they do here, and we've got customers. When we're ready to expand, that's how we will do it. I've been in B2B enterprise software companies most of my whole career. It always seems easier than it actually is. So there's the focus thing, you know, this is a big market in the U.S. and we're just barely scratching the surface. But then also there's local market expertise. Which is sort of a generic term, but it is so real in so many ways. It is, how are the needs of buyers and providers different? What are their expectations? Just on, and on, and on. We never want to underestimate those differences, which means when we're ready to go we want to invest properly so we get it right, and that takes resource, which, again, we'll get to in the next year. We'll be pretty active in some other markets very likely, certainly within two years.
Yeah, certainly echo the focus aspect. I mean, our platform is certainly global in nature. I think that's been driven by just our customers, and I'm sure everybody here has global operations. So once you often start, maybe here in the States or North America it tends to grow. We don't necessarily do that super intentionally. I think we do try to focus more on the domestic market just from a, kind of, focus and where we should spend our energy, but we get pulled that way.
Certainly the localization is something that happens, and in software it comes up in a number of different ways. I would say more broadly speaking, data cleanliness and availability tends to be a little bit better, certainly, in the United States, Canada. Europe is probably next. That's something that I think is changing. There's other areas that are catching up rapidly, and there's just different data, whether you're talking about brick-and-mortar versus eCommerce. But that's a real thing that we deal with. Just that the quality of information usually is a little bit better here. It's just a good place to start, but you do get pulled globally all the time for sure.
Very similar answer, and particularly with Karl. We both operate a physical business. We're young, it's early, it's a global business. The problems that we're solving in the United States right now or North America are global. Very same, similar dynamics across most markets in the world. We want to go approach those markets and solve the problems there as well. Many of our customers are in those markets and we do plan to go do that. It's simply a matter of resource focus and making sure we're not compromising success here just given how early we are in this market before I'm spreading our attention, and time, and effort. But 100% want to go do that.
Any other questions for our friends? Yes, sir?
Yeah, hey, Jeff with Coke. There's probably the usual demand that is a large component of the system supply chain transformation effort leading globally. I'm glad to hear about global, because it's definitely global for us. I was just curious if you talked about sharing across disparate systems, and how did you find the ability to align all the different systems from a data perspective? Was there a common element that you had to define, or how did you get them to be able to talk to each other at a data level?
Right, yeah. So the way that we went about solving the problem to start is, weirdly enough, and this is somewhat counterintuitive, when we start working with a customer we'll say it's a lot faster for us to hook up with your external partners than it is for us to hook up with your own systems, right? And that seems counterintuitive, but the reason for that is, if you're a partner. If you're Coke, right? We work with, you know, Walmart, or Costco, or whoever. I mean, they have a method by which they're sharing information back with you. We can build and connect it with them, we can reuse it across all their customers so it becomes this kind of turnkey way of getting data now. It's going to be more limited than what you can get from your own systems.
So that was kind of a starting point. We said, "Hey, let's focus on data that is already being shared with you." I think somebody from Nordstrom was talking about all the data that was being sent to Nike. All that information is being shared, but how do we make it more useful, and then normalize it so it doesn't matter whether it's coming from Nordstrom, or Dick's Sporting Goods, or whoever? So that's kind of the starting point. Particularly when you're talking about demand data. I mean, Coke, as far as I'm aware you're not running your own stores. So it's all through third parties. How do we collect all that? We can kind of normalize through those connectors and then you have one single view of demand, channel, inventory, etc.
I think more broadly this is where really good technologists come in. I know I talked about that being a part of our culture. How do you model all the different types of information that's coming in? Some of it is snapshots of points in time of inventory levels. You have all the transactions of things that are in transit. How do I make something that is flexible enough that can handle the data that's being shared in so many different ways, often times with different levels of granularity? That's a huge part, and I don't wanna throw away data that's less good than another place. I wanna take what's useful, and I don't think there's a simple explanation, other than saying you spend a lot of time thinking about exactly how you build those data models to allow that.
But fundamentally, a lot of where we start is when we go into a new customer it's like, “Let's pick your biggest partners. They're already ready to go. Let's show you at a level of detail you probably didn't even know possible, next week what that looks like.” And usually that starts to be like, “Okay, this is insane. I didn't even know I could do this.” Then you start to work. Often times that's external data, and then it's like, okay, now we gotta figure out how we collect your data which is probably going to take us 20 times as long.
Yeah, I think you can all relate. All right, so we have run out of time. I hope that as you reflect on where we are, hopefully they got you thinking about the different aspects of innovation. We were then really able to bring it home and talk about our own problems together, and a lot of our problems are similar challenges. Very quickly through our ideas there are some ways of resolving that. And hopefully the startups can use some perspective on how they think about it. I'm about to hand it right back over to my friend from Slalom, Harshad, as we sort of over the next hour wrap-up this particular day. Perhaps you guys can network, and exchange cards, and get ideas through each other. That would be great.
I want to thank these folks for joining the panel. It was terrific. It's so motivating when you guys are here and hearing about all your great stories was awesome. Good luck with everything. Thank you.
Alloy is a digital-native company built for the way today’s consumers buy and expect to be serviced. Inspired by the complex and unpredictable $20T consumer goods market, Alloy aims to equip brands with a modern technology platform that helps them become more demand-driven, compete, and grow in a rapidly changing world.
Convoy is a nationwide trucking network and platform that’s transforming the $800B trucking industry. With Convoy, carriers get access to a free mobile app that allows them to find loads they want, save time, drive fewer miles empty, and get paid quickly. Shippers use Convoy’s data-driven insights and industry-leading service levels to book loads, improve their supply chain operations, lower costs, and reduce waste.
FLEXE is the leader in on-demand warehousing, helping forward-looking brands create structural flexibility across their warehousing and fulfillment networks. With the FLEXE technology platform, a network of more than 1000 warehouses, and a team of logistics experts, retailers and brands use FLEXE to create dynamic eCommerce fulfillment networks and resolve warehouse capacity constraints. Based in Seattle, the FLEXE team is dedicated to transforming the supply chain industry and helping clients create exceptional customer experiences.
Slalom is a modern consulting firm focused on strategy, technology, and business transformation. In 27 cities across the U.S., U.K., and Canada, Slalom's teams have autonomy to move fast and do what's right. They're backed by seven regional innovation hubs, a global culture of collaboration, and partnerships with the world's top technology providers.