Supply Chain Saga

Welcome to Supply Chain Saga, the podcast that takes you on a journey through the interconnected world of supply chain and logistics. Join us as we unravel fascinating stories and engage with thought leaders, innovators, and operators who are revolutionizing this dynamic industry. Each episode brings you fresh insights, explores cutting-edge trends, and uncovers the technologies that are shaping the way we move goods and ideas across the globe. Whether you're a seasoned professional or simply intrigued by the complex networks that power our modern lives, Supply Chain Saga offers an enriching and enlightening exploration into the ever-evolving realm of supply chain management. Tune in, and let's embark on this epic adventure together!

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Supply Chain Saga

#12 - David Miller

November 01, 2023 • Mark Taylor

David Miller is the VP of Strategy for Extensiv, a suite of software solutions that revolve around their Warehouse Management software. The discussion tackles the role of technology in helping 3PLs and brands with their fulfillment strategies, including integrations, utilizing a partner network, and data analysis in order to stay competitive in the evolving logistics landscape.

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Mark Taylor:

That's it. We're live.

David Miller:

I've been waiting for this all week. In fact, I think you've been asking me for months to get on the podcast with you. We had a bunch of stuff going on like user conference and everything else and board meetings. And now, I'm glad that we finally got a chance to circle up.

Mark Taylor:

Absolutely. We're sitting here in lovely Southern California, not far from the airport. Really nice offices of Extensiv.

David Miller:

We've got airplanes taken off, taken on landing, and all the other good stuff. So it's a good spot to be.

Mark Taylor:

A whole different form of logistics. So David, why don't you introduce yourself and we'll go from there.

David Miller:

Sure, Mark. Yeah, my name's David Miller. I'm the vice president of strategy here at Extensiv. We are concentrated on bringing together brands and 3PLs in terms of their fulfillment services and fulfillment strategies. I've been with the business for 13 years as we were talking about earlier. Everything from understanding it as a little baby startup all the way to where it is today with 250 odd employees and really just looking forward to sort of the next generation of fulfillment strategy in terms of how we're going to market.

Mark Taylor:

Okay, that's a great segue, because that's exactly what I'd love to talk about. Backing up, before we started, I asked how long you'd actually been in the industry and it's you came from an operating position.

David Miller:

That's correct, yes.

Mark Taylor:

So you've been here 25 years.

David Miller:

I have always been interested in technology, right? So when I was in college, I was a technologist and a little bit of development, a little bit of database administration. And when I was graduating, this was in the early 2000s and we were really just starting to see the, I guess, technology coming in and starting to revolutionize transportation, freight, 3PLs, et cetera. So it used to be a lot of phone calls, fax machines, dot matrix printers, and then all of a sudden, there was this rush to go ahead and modernize. So computers coming in, internet drops, mobile scanning, and all of those other things. So I actually sort of fell into logistics because I knew a guy who ran a 3PL, very small, and he needed someone to come and run his technology. So I started running technology for this 3PL that actually turned into developing, encoding a SaaS-based transportation management system.

Again, mind you, this is back in the early 2000s. That then turned into building out a warehouse management system, and we got the sort of the eye of UPS in terms of some of the cool things that we were doing. I moved on to a much larger 3PL after that, kind of doing some of the same things, but again, sort of the career in technology. I ended up working for C.H. Robinson for a number of years. And at the time, they didn't really know what to do with me and some of the warehousing things that we were working on, because a lot of it was technology enabled that we had built. So I actually ended up running warehouse operations for C.H. Robinson here in Los Angeles for a number of years. And after that, stint was up, I decided to continue on technology. I'd grown to love logistics in the industry. And then I thought coming to Extensiv where we could really enable 3PLs to do more, expand, grow would be a really good way to transition more on the technology side, but still stay within the industry.

Mark Taylor:

Very cool. So this entire time, it's always been some facet of the technology or the MIS or whatever in each of these logistics companies. So for instance, when you made the jump to UPS, was that an acquisition? Did they purchase the technology that you'd built?

David Miller:

Let me, I guess, rephrase that. I'll get back to that.

Mark Taylor:

Sure.

David Miller:

So we were heavy users of UPS and WorldShip and a lot of the things that we were doing. And in fact, we had put together a programmer, we were digitizing proof of delivery files, and then putting those online. And again, we were very early to market and how all of those things were working, and UPS saw what we were doing and they thought that was very interesting. My role with UPS was not actually working for UPS. They actually referred me into a number of their other customers wanting me to sort of replicate what we were doing on a small scale on a very large scale. So I ended up working for a number of other 3PLs, kind of translating the things that we had done and how we were leveraging UPS and sort of helping UPS's other customers grow within that capacity.

Mark Taylor:

So really the first half of your career was just going from place to place and really kind of helping speed up the way the industry is using technology.

David Miller:

I think that's probably a good way to put it, right? So always enabling warehouse operations through technology.

Mark Taylor:

That's awesome. Okay, so then fast-forward 12 years from, where'd you go to school by the way?

David Miller:

University of Southern California, right here in Los Angeles. Yep.

Mark Taylor:

Good. So you haven't had to travel far?

David Miller:

Nope, but I grew up in Detroit, so I think I've covered all the spaces between the Midwest and the West Coast.

Mark Taylor:

Okay. So fun question, do you have any Detroit style pizza here in L.A. that you like?

David Miller:

You know, I tend not to eat a lot of pizza these days.

Mark Taylor:

Oh, you're not eating. You do look fairly fit.

David Miller:

But I will tell you this, my parents still live in Detroit. And every time I make it back, there's a couple of restaurants that I always hit. You might laugh, but like a Coney Island Detroit style hotdog is just the guilty pleasure and that would definitely be the direction that I would go.

Mark Taylor:

That's awesome. All right, so the first half of your career is just bouncing around and seeing a lot of different operations. So that was the first 12 years and then the last 13 have all been with Extensiv, formerly 3PL Central.

David Miller:

That's right.

Mark Taylor:

So how did you find a home there? Because it sounds like it was very much a startup at that time.

David Miller:

Yeah. It's always about networking and just like who do you know in the industry that can be helpful and how can you help them. This is such a small world that we live in, especially back in the day and sort of everybody knows a little bit of everybody else. One of the gentlemen that was lead sales at the very first company that I worked for out of college, actually came on as a salesperson at Extensiv or what was 3PL Central. He saw some of the things that they were trying to do and get off the ground, and they actually called me looking to see if I wanted to come in and do maybe more like corporate biz dev, trying to land some larger customers. It sounded like, again, an interesting opportunity to come and do some technology and stay within the industry. Within a couple of days of being in the business, it was clear that there was a lot of work to do before we were ready for enterprise type customers.

And back then, it wasn't just talking about warehouse management systems and how we could enable operations. It was this is what cloud computing is and you access it over the internet. It was just a whole different buying mindset for those customers. But again, just as we saw 3PL start to adapt technology and understand that there's all of these things that are happening in the world and how do we take advantage of that to be more agile, to lower our costs, to just be scrappy in certain terms and then ultimately be able to scale, we found that to be a really good entry point for businesses trying to grow beyond their monolithic infrastructure. So again, I came in wanting to do biz dev or being asked to do some biz dev and very quickly took on a number of roles like product management, a little bit of finance, a little bit of sales, solutioning for sure, those types of things. We really took that from an opportunity to educate the market and grow something really new and special, and we've taken it all the way to here.

Mark Taylor:

So the way when you were going into these companies, kind of in the first half of your career, it was about bringing them up to speed with how they were interfacing with WorldShip and you were displaying tracking numbers and things like that. Is that...

David Miller:

Yeah, so that was part of it. Other parts of it were leveraging multiple UPS accounts to be able to not just rate shop necessarily, but sort of extend rates, understanding how really that small parcel shipping world really started to work and come together looking at some of the competitive forces that were sitting out there. But it really became an opportunity to look at the way that small parcel shipping can really empower and grow a business and how that's complementary to things like your LTL, your FTL. This again was getting into the very advent of really ecommerce to a certain extent, right?

Mark Taylor:

Sure.

David Miller:

And so again, helping businesses understand how your small parcel shipping really does play an important role in the growth of you as a business.

Mark Taylor:

So you were in a very niche aspect, because it's like when you think of the modern WMS system, the first and foremost, it's managing the warehouse, making sure the inventory is coming in and flowing out in a normal way, and then there are ways to integrate your billing or your accounting function. The integrations that you build between marketplaces and the WMS and now your shipping platforms and the WMS, it's like if you look at the nucleus of a warehouse's technology is probably all stems out of the WMS. Did you look at it like that back then, or were you looking at it more down this pathway of all things shipping?

David Miller:

Yeah. We would look at it as the source of truth. What's the one source of truth of all of the data and all of the processing that's happening within our operation? I remember in one of those early on scenarios, we were working with a WMS, and what we ended up doing with that is really building tools on top of those other pieces of technology, on top of the WMS, on top of the TMS, extending those out into the cloud or over the internet. And really what that allowed us to do is understand that fundamentally all of the data lives in the WMS. How much product do we have?

How much are we selling it for? What's the rate for per pallet fees? And how much should we be charging our customers? All the way into understanding things almost like doc scheduling. We know what's coming in on a certain day. We know what's expected. We know how many employees we should have on staff these days, and so we can start to make all of these inferences, but understand that all of that data collection that happens in the WMS, and then our ability to manifest that in these other tools and utilities became really important for us to be able to grow and scale those businesses.

Mark Taylor:

Yeah. At the time was, I mean because OpenAI, or sorry, open APIs, excuse me, are pretty synonymous at this point. I mean, if somebody's got a piece of technology, most of the time, it seems like the APIs are open. When you were first starting to build on and bolt these modules, we'll call them for...

David Miller:

Sure.

Mark Taylor:

... yeah, these modules in the first half of your warehousing life, were the APIs open at that time or did you have to figure out workarounds?

David Miller:

So in a couple of these scenarios where we were building some modules on, we were using a WMS that was on-premise. So we had a database and we had a bunch of servers and things like that. I'll never forget, one of the tables inside... I don't know if everyone knows how databases work, but there's different tables inside the database that contain different pieces of data and one of those tables contained licensing information. So literally the business had named that table, "Do not touch," because clearly somebody had gone in at one point and touched it and clearly broke everything. But what we were really working with was, especially early on, it wasn't a lot of ecosystem connectivity. It was a lot of like, how can we empower ourselves to really be efficient?

Mark Taylor:

It was your competitive advantage.

David Miller:

It was our stuff. And then eventually some businesses came out with API enabled small parcel shipping. It's like, well, how do we get involved in that? Let's go run at that really hard because I think this is going to be really important. And then you started to see more and more of the shopping carts come online, the marketplaces come online. And again, those things became really important for us to be able to absorb. And then when we built the Extensiv platform, it was all predicated on API accessibility.

So we understand the importance of that platform and how you connect and the importance of the entire ecosystem. We got to the point that as we were developing, we built the API first and then developed on top of our own API. So now as we allow people to come in and connect and use our systems, they're using literally the same API that we use to build our own technology. So if you think about the scope of how that works, going from an on-prem system where people don't want you touching specific databases because it's going to break everything to, we've really opened up the entire ecosystem for you to do whatever you want with it. I think that it's just a really fun story arc in terms of being able to understand, hey, in the last 20 years, look how far we've come on the logistics side.

Mark Taylor:

Right. But the way it sounds, and correct me if I'm wrong, but the way it sounds in the story is that whoever built the WMS to start with and licensed it to the 3PL you're working at, they probably had no idea of all the little ways and little tools that you'd built to interact with that WMS. And even though Extensiv is as open as it is today, it's almost impossible to track how each one of your customers is building their own tools, integrating with other tools. So it's like, I'm sure you see patterns.

David Miller:

We see some of our customers today are building some amazing things on top of our technology, whether it's robotics and automation on top of it, whether it is small parcel shipping platforms, whether it is BI analytics. I can go into almost any number of our customers, and I can look at some of the things that they're trying to enable additional to what we do as a WMS. I mean, there's so many use cases out there that would just blow your mind in terms of what they're trying to do.

Mark Taylor:

From, let's say, even 15 years ago to today, I feel like the number of developers out there that are specific to supply chain and logistics has probably just gone through the roof. So you've actually got so many more sets of eyes and minds working on. Well, what if we did this? Or what if we did this little unique thing? So I am jumping about 20 steps ahead, but if you look at, there used to be, it feels like even just five years ago, there's such a disparity between what your giant systems could offer. And not only how long it would take to get them up and running, but how long it would take to configure individual modules and the amount of consulting and everything like that it would take. It feels like the gap of what that system's capable of versus what your systems kind of where Extensiv plays is shrinking by the day. Is that...

David Miller:

Yeah. I mean, there's definitely some just general blocking and tackling that has to happen within a warehouse. So as an advocate for 3PLs and lifelong in this industry, all of our customers, meaning all of the brands or the shippers that 3PL service, they're all a little bit special snowflake. They all have a little bit of a different need, and they all want to do something a little bit differently. But at the end of the day, we have to understand how do we take everything at the top of the funnel and understand how do we get that into a workflow that the warehouse can actually execute on. And as a fundamental building block, we feel like we do that very well at Extensiv managing what happens within the four walls of the warehouse. And then we start to think about all of the other things that people want to do that are maybe specific to one of their customers or specific to one of their verticals and all of the other applications that somebody may want to sort of bolt on or integrate with the system.

So I think that we've got to the point now where there are businesses that are building their own business on top of the Extensiv platform or on top of WMS technology. It's definitely been something where I think about anytime that somebody can go and build an entire successful business around one small component, it's tough to always just be best in breed in that thing. So I think about it from a finance perspective. QuickBooks has kind of gone and they've built an entire market around accounting. Will we ever necessarily be best in breed at accounting? I don't know. But the idea is that there's all of these other players that are out there that are building some really cool components that we are starting to work with that are really starting to expand the functionality of the system in the customer specific ways and the vertical specific ways that really just continue to uplevel and upcycle the functionality of the WMS. It really becomes more of a, again, really more of a fulfillment solution and fulfillment strategy solution as opposed to just simply a warehouse management system.

Mark Taylor:

Right. That makes a lot of sense. So if you look at, let's just go through kind of backing up beginning of your career phases. I would guess that early on, it was a lot of pallet in/pallet out and it has increasingly become smaller, smaller case pick to each pick.

David Miller:

Yep. The first business I worked for, they specialize in what we called express LTL, which is sort of three to five business day delivery of LTL loads. And that was almost exclusively what we did. And then we got into some of the early ecommerce, and that's kind of where we started to build out some of the really cool stuff that we were doing. The next phase that I went to, we were actually doing asset management for some large mortgage brokers back in the day. So this is pre 2008 crash, et cetera. But if you think about all of the documents, the laptops, the computers, the printers of thousands of offices and having to be able to recondition them and then trade them in for new ones and all of the logistics that was involved in that, that ended up being a pretty big customer.

And that I was very much predicated on the UPS programs and the small parcel, but it was sort of at that point that we got to really start talking about things like retail compliance and EDI. And understanding that EDI, even though it's been around since the '50s or the '60s, still even back then, no standardization to what was happening. And trying to figure that out and trying to figure out how do we take an EDI feed from a retailer and get that into this on-premise WMS and how do we parse that data out and get them back what they need, that was one of those times where it was nice not to be, I guess, married or have a social life because it was very much 18 hour days just trying to figure out how to ingest this EDI and spit it back out, because the whole business was just reliant on us being able to get all of that data moving.

So just coming up from that perspective in the career and trying to learn these things and how much that really impacts what we still see today, I think all of that was just, it's always great to be able to dig in and roll up your sleeves and just learn it to some extent. I find that to be very interesting as we exist today. Though now a lot of what we do really is on the ecommerce side of the fence. So we still have plenty of pallet in/pallet out out customers. We still have lots of retail compliance and EDI and all of those other things. We have a portion of our business that really is about servicing brands, and a lot of those brands are ecommerce sellers. So they're selling on multiple channels, multiple marketplaces. Some of them are doing their own fulfillment. Some of them are leveraging 3PLs.

They have a whole different set of needs than our typical 3PL customer would have. But a lot of what they're looking at is, wow, should I start looking at distributed inventory? I've got to ship all over the country, all over the world. What are my costs looking like? Oh, what if I opened up a second warehouse? Or what if I outsource to a second warehouse or even a 3rd or a 6th or a 10th or whatever it may be, and what does that start to do? And so again, we look at brands as having these fulfillment needs, especially around small parcel, and how do we get those historically business to business 3PLs to sort of start to act more strategically with those brands to be able to offer something that's going to put product closer to the point of consumption.

It's going to minimize our risk, minimize our time in transit. So I think that as businesses start to think about where they want to go next, especially in this market, nearly everybody that I talked to says we either need to be able to execute better on the ecommerce that we do today on behalf of our customers. Or what they're really trying to do are build out programs that they can actively sell to brands that need a small parcel shipping solution or really more of a small parcel fulfillment strategy. So yeah, the world just keeps getting smaller. It went from full truckload to LTL, and now we're definitely getting in our position where almost half or not more of the business that we see flowing through the system is ecommerce.

Mark Taylor:

Yeah. If you think of 25 years ago to now, and you were opening up your own warehouse, your own 3PL, and you look at the components of technology that you deploy in a linear fashion, what comes first, second, third, how would you think about that?

David Miller:

Yeah. So I think some of this goes back to that source of truth. So I think the WMS, especially in the 3PL world, that just really becomes the core component to everything that you do. All of the other systems that you're going to put in place, they're all going to feed off of that WMS, whether that's contact management, whether that's your accounting, whether that's going to be your transportation management or whatever. All of those things kind of happen externally to the operation. So as wanting to be as efficient of an operator as possible, I would definitely start with the WMS and then start to build out from there. I'm not sure if that answered your question specifically.

Mark Taylor:

Well, no, I think it does. I mean, I look at it as regardless of what it is. I mean, a lot of people start doing their own stuff and then open it up to start handling other people's goods.

David Miller:

Yeah. So we see that progression. The things that I see businesses being successful with right now, especially as they're starting to grow and kind of once they hit that scale point is looking for other 3PL partners that can help expand their operations and expand the services that they can provide. What I'm finding now is more and more businesses, they're trying to specialize in certain avenues, whether it's a certain vertical of product, whether it's garment or whether it's FDA compliance or whatever it may be. But again, as we see the customers of 3PLs, they have more needs than just that. So what I'm finding that successful 3PLs in the startup phase today are the ones that know how to work with and leverage other 3PL partners to really be able to cover all of the needs of their customers and make sure that they've got expertise in all of those different areas.

And then secondly, that really starts to talk about how do we expand our scope beyond just our basic footprint. I mean, Mark, we know it's expensive to set up a warehouse and so all of the things that go into that. How can you actually grow as a business without taking on all of that risk or without having to borrow all that money or invest all of that capital? Or really more importantly, how do you invest that capital in things like marketing and sales and automation and customer service that really differentiate you as a business as opposed to spending that all on the footprint of a building? And so again, I think these synergies that I see of multiple 3PLs starting to work together actually starts to be the way that I see businesses growing faster today.

Mark Taylor:

I think if you zoom back out and you look at everything within this industry, I think there's been much to do or much said about and written about Amazon logistics services recently, and that's, of course, a threat to everybody if you compete exactly where Amazon competes. But they have a very specific, I mean, it is the everything store, but there is a level of specificity that they have to they're going to interact with. So you think, okay, well Amazon warehousing and distribution might not, I mean I don't even know if they do, maybe they do.

But to the point you were making earlier of going FDA or hazmat or very large bulk, those are little places of differentiation like getting work, stuff where it's like you actually have to do things that kind of require an amount, things that are harder to standardize. Those are nice points of differentiation. I think what's going to set good operators apart in the coming months, years, decades, whatever, the people who can be very, very specific about the exact customer they serve. Because as I've established with other guests on the podcast, when you go down a pathway of automation, you are determining the product you can handle.

Or you have to have a hybrid warehouse, and then it's like, so then you go half in on, one side of your warehouse is designated to this and the other side is designated to something else. So if everybody could get extremely specific about what they do and just focus on that customer and be as good as they can be at that, and then, but wait a minute here, I've got these other customers because now we've got this reputation and we need to send it to Mark warehouse, needs to send it to David warehouse, that kind of thing.

I like, I mean, I love the idea of the community and the network and everything like that. It will always come down to the people within the community, building the relationship with that other warehouse, having trust in that other warehouse, and then agreeing on some kind of a rules of engagement with customers that are sourced. In many cases, I think the way that it's done amongst me and colleagues who have referred us business and we refer them back business, it's just kind of like, "Hey, I can't deal with this right now. Can you take it?" I think because of the relationship I have with those particular individuals and operators, that works. But as you start to go look at a network, more of a network, the way you're talking about it, I think you have to get very, very good at establishing those rules of engagement and how am I going to act with people and how do we vet people, vet other operators.

David Miller:

Yeah. So a couple of notes on that. We would call this the ideal customer profile or the ICP. We talk about that a lot in terms of the business and not only who do we want to serve, but then that extends very much to what we would say our customer's customers. So the brands that a 3PL would service, and what are their needs and how do you get them to look alike. And then when you talk about scalability and automation, that becomes a, to your point, a very important part of how some businesses are growing. We've got two customers in the Salt Lake City area and one of them is only business to business. That's all they touch. And then we have another, they're sort of another facility or another 3PL customer that all they do is ecommerce.

And so the two of them, they partnered together and they service the same customers and they simply say, "All of the B2B business goes to 3PL A, and all of the ecommerce business goes to 3PL B." And to your point, there's the rules of engagement, but they've drawn those lines that say, "Hey, this is how all of this is going to work." I think what becomes important, especially as you start to look for partners in that world, you need someone that's going to represent you and your business to the best of their ability as well as you would represent your own business, and that becomes the hardest part.

Mark Taylor:

Well, that's like a traditional relationship. I mean, somebody's going to care more. And as always, there are a lot of different relationship dynamics you can get into, but I mean in each relationship, somebody's going to be better, right?

David Miller:

Yep. I've seen opportunities where partners are actually better than the what I would call the owning 3PL in certain circumstances. And that brings up its own set of problems, quite honestly. So those are things that you need to think about. It's a sad story when you see a 3PL that actually works very well, right? They've got good people. They've got good process. They hit their SLAs to the point where their customers say, "We want you to do more for us. We want to give you more business. We want you to help us expand. We want to build our fulfillment strategy off of everything that you've given us because you're doing so well at it." But for that 3PL not to have the option to be able to go out and do it. I don't have more people. I don't have another facility. I don't have enough room.

What do you do with all of those things? So we do find that partnership aspect to really be able to give some optionality to those 3PLs to maintain that business quite honestly, because what brands... And again, these are the customers of 3PLs. They're really starting to understand that they need to approach their fulfillment with a lot of scrutiny these days. Where are my cost savings coming from? How much money am I spending? Where am I going to get the better service? And so quite honestly, in certain circumstances, if a 3PL can't continue to operate and meet the needs of those brands, sometimes they end up losing the business. And again, I think that's a tough story, especially because I know how well the 3PLs are operating and I know how invested they are on their customer base.

Mark Taylor:

Well, when rising tides lifts all boats, there we go, it's hard to talk. And so when markets are going up and demand is outstrip supply and all that sort of stuff, it's much easier to want to engage with a bunch of partners. But when we find ourselves in a market like today where everything's starting to come down, excuse me, I think it's a lot harder to... I could see some strain being in some of these relationships where I could really use that customer now.

David Miller:

Certainly when business is good for everybody, that's good.

Mark Taylor:

Conversation. There's not a hard conversation.

David Miller:

Right, exactly. I think a couple of things that we see here. One is there's a lot of international opportunity that I think a lot of businesses have not explored prior until more recently. This is both businesses that are trying to break into the U.S. market as well as we've saturated the U.S. market and we want to go sell internationally. There's a lot of barriers to that that I don't think everybody really thinks through. So having international partners that know how to help American companies operate overseas actually becomes really important, especially from an ecommerce perspective. And again, I think the other thing that we start to see here really comes down to, what's the competitive advantage that I'm offering to some of my customers?

It doesn't always have to be about partnerships and network and things of that nature, but at the end of the day, those businesses that can really provide a high level of service at a reasonable cost, I think, are the ones that are going to win out, especially when they've sort of identified that ideal customer profile, that ICP, and then they can operate really well within that niche. The businesses that continue to operate the way that they've always operated, I think some of them are going to struggle in a world where it's moving very quickly.

Mark Taylor:

It is, absolutely.

David Miller:

So I think that just everybody looking at the options that are out there on the horizon, trying to think a few years ahead about what's this market really going to be like in the future. I think that that's going to be an important part, even while you're protecting your flank quite honestly. So if you as a 3PL are worried about your customers and their health and their viability and your viability, I mean, your customers are also looking at their bottom lines and trying to figure out like, what are my other options here? So we just need to make sure that we're in a situation where you don't necessarily have to race to the bottom in terms of your pricing if you have better value that you can offer in other ways.

Mark Taylor:

Yeah, as the saying goes, what got you here won't get you there. I think it's important to note at this point. We're talking about this network thing and Extensiv does have a tool called network manager that allows me as a customer of Extensiv to install and pay to basically get the installation and everything, get my system integrated with it, and then a partner warehouse that's also on Extensiv, they do the same thing and then we basically pay for that connectivity in the network. And then it's almost like their warehouse is now an extension of my warehouse. And then you can kind of go in there and I can say, "Okay, well, this customer needs to be seen here," and you can slice and dice that however you want. But I think the point is and I think it's important to say that, because we're not talking about a nebulous, oh, it would be cool if this could happen. I mean, this is one of the things that you guys are working on and offering and improving upon day in, day out right now.

David Miller:

And again, I think we talked a little bit about it earlier like networking, just people networking and who you know within the industry becomes that's just paramount to what we do and how we grow as an industry. What we've always known is that our customers, they work together organically all the time, right? You mentioned you've got a couple of partners and that's not a unique situation. And ultimately, we never had a lot of technology that really enabled our customers to be able to work better together, and that seemed like a major oversight. So we definitely spent some time and attention on building out this network manager program and platform to allow our customers to be able to work better together more synergistically and service those customers almost in a 4PL regard to a certain extent. But the idea here is that now there is visibility across multiple different 3PLs. The experience is very much curated and consolidated. So it all looks and feels very, very similar across the entire ecosystem.

I think some of the really important things that we've put together recently that are game changers is our 4PL billing. So if you think about multi-party billing as exists today, and Mark, maybe you can talk about this a little bit, but you're partnered with the 3PL and they're charging you to service your customer on your behalf and then you've got to take their charges and you look at them and you say, "Okay, now I've got to audit it and does this make sense?" And once you go back and forth three times, you say, "Yes," and then you've got to mark that up and you've got to bill your customer. And then your customer looks at it and says, "Well, I don't know. I got to audit this," and they come back to you three or four times and all of a sudden you've extended your billing cycle quite a bit. All those other things.

What we've put together from a 4PL billing perspective and a multi-party billing perspective is you can see all of the charges that are happening at your partner warehouses in real time as they're billing to you. And simultaneously, you can have your tariff involved that is automatically applying those markups to whatever you would be billing to your end customer. And then at the end of your billing cycle, you can merge your charges and your partner charges all within one invoice and then bill that to your customer. So what it really does is it puts your billing cycle back in terms of, hey, I'm one entity billing you at one time on one invoice for all of your stuff.

Mark Taylor:

It allows you to contest charges as you see them, as long as you've got somebody paying attention to it.

David Miller:

That's correct. Yeah.

Mark Taylor:

So one of the things that I think has been interesting from Extensiv's perspective as you guys have done a couple major acquisitions, I think CartRover was one of them and Skubana was another, and those both seem like fairly complementary things. But what that has really allowed you guys to do, I think as you think about a WMS, we get customers all the time that are asking for crazy this marketplace or that marketplace. And most of them will say, "Well, I've got 10 orders a month coming from X, Y, Z, A, B, C marketplace," whatever. And you'll say, "Okay, great. It's $2,500 to get that built." And they say, "Well, we don't want it that bad."

But if you go to the Extensiv website and you look at all the integrations and you guys have got something also called integration manager, which is the step between network manager and everything and that will integrate with not only a lot of different marketplaces, it integrates with some other, even like WMS servers or services. ShipHero is a great example. So ShipHero started kind of as a WMS and now they do ShipHero fulfillment and they've become their own fulfillment center. So now you've got the ability to integrate with, even though it's more for the fulfillment center, it's still with their WMS. I think Red Stag Fulfillment's another one that's listed out there. So there are actually some. It's pretty interesting how many people, how many flexibility you kind of start to see.

David Miller:

Yeah. I mean we talk about things like order sources and order destinations. That's usually the big one when we talk about integrations. We know that while the warehouse management system really drives what happens inside of the four walls of the warehouse, the connectivity to the rest of the ecosystem is starting to become just as important. Those are marketplaces or those are accounting packages or those are individual shopping carts or whatever they may be. So we did make the acquisition of CartRover, that's become our integration management tool within the Extensiv platform. Similarly, you mentioned Skubana, and the idea behind that is these are things like order management tools that can extend out beyond the warehouse. And so these are tools that brands can use to really be able to do all of their order management. So whether that's routing between multiple warehouses or whether that's doing data transformation or that's putting some hold and other logic into their order flow.

All of those things become really important to what we do from a network perspective for sure. But just in terms of us being able to offer more value to our customers, it becomes really important. It is the things that they're asking for. What we really like about that setup between the order management with formerly Skubana, now order management and then integration manager, they're all really built to work very well with the 3PL warehouse management tools here at Extensiv. And so if you think about data and everything sort of being one source of truth, we've got everything inside of one technology stack that can now do all of those things. And yes, it can connect to other things outside of our specific ecosystem, is that's really what's designed to do. When you think about though it flowing just seamlessly all the way through our pipeline, that's kind of where we've got it. I think that that's what we are bringing to the ecosystem as our true business value.

Mark Taylor:

Yeah. I mean if you think in 2018 when I got started, I mean the OG was ShipStation. I guess their repository of integrations was just incredible. I still, to this day, think it's probably pretty smart and it's kept them out of a lot of, I mean, public. I feel like it keeps things a lot easier is that they're like, "Look, we print labels. That's what we do." And there's an amount of brilliance in that kind of simplicity as we talk about. So I think going back on that, narrowing, I guess in investing, it's called narrowing the region of darkness or whatever, but it's narrowing the difference in capabilities between extremely your enterprise systems, WMSs, your enterprise systems versus an Extensiv and modules that you can build that up with as well for a fraction of the cost.

It seems like the competitive advantages of the larger ones are less and less every day. And it seems like, and I don't want to illustrate it as like a race to the bottom, but it seems like you get to that core nucleus, that core functionality of all data has to originate from here because this is where the humans are actually touching it and storing it, what goes on within the four walls of a warehouse. Once you get to a certain point, there's only so many rifts you can do on that. So that's when you start to go out and start to build these big plugins as Extensiv anyway. And then eventually, that starts to kind of compete. I mean, it's its own form of market consolidation, but it's like information consolidation.

David Miller:

Yeah. Actually it is good that you say that because the way that you were tracking there, when you think of some of those larger WMS platforms that are out there or ERPs really, and then they have a warehouse component to their entire ERP is kind of what the way that I think about it. The expense that goes along with just opening up a new warehouse, or sure, it can do everything you want it to do, but you're consulting fees for that far surpassed what you're actually paying for the software in certain circumstances. Sure, if you're a Fortune 500 company, maybe that works for you. But what we find is that, number one, our type of platform slots in very nicely as like a tier two and a lot of those ecosystems. So we have plenty of customers that are running Manhattan ERP, but they use us for the subset of their ecommerce WMS platform, because they can extend us out to all of their locations in a couple of months and for a very low cost as opposed to trying to...

Mark Taylor:

Well, and the interesting thing is if you speak to someone who runs Manhattan, it's the effort just to onboard a customer, it's very high effort and it might require either an internal team or outside consultants. When we bring on somebody, we can have somebody on board within an hour if they're ready with the information. And with our people, it does not take long, that much.

David Miller:

That's great to hear. I know you guys are super users and so.

Mark Taylor:

I don't know about that. But I mean the time it takes to onboard and get somebody introduced to the system, able to log in, be able to see their SKUs, we've had multiple people where the same day, they've signed the contract, they're actually in the system. Yeah.

David Miller:

I think that's phenomenal. The more customers we can onboard, the faster that goes. It just benefits everybody. You had mentioned sort of the data consolidation. And so really where this takes us is we've got all of the data that exists now within the warehouse management system. And then as we've added on some of what I would call these core and critical components, the order management, the integrations, we now have this whole pool of data that we can really see across almost the entire ecosystem. We can see, hey, how's your fulfillment doing? What rates are you paying? What carriers are you using? How successful are those carriers? We also can see sort of what I would call the brand side of the business.

Well, how much are they selling? Of what items? In what season? Month over month? Year over year? And what we can really start to do now is we can take all of that data from the time of point of sale to the time that it gets delivered, and we can really start to make some really good machine learning inferences about the types of decisions that you should be making inside of your warehouse and from a sales perspective in probably ways that a lot of other businesses aren't able to do. We just have so much data that we're able to put together all in one pot in terms of not just benchmarking, but also really being able to bring to market something that says, you should be doing something different. And let me tell you why or show you how or if you made this change, what would that really do for you? And again, by virtue of having the core WMS as the source of truth, and then within the one technology stack now having order management and integration control, we have visibility to almost the whole thing right now.

Mark Taylor:

So I don't know if this is something that you want to share or you can share. And if you don't want to, it's fine, but I start to think about Amazon's logistics solution. And then you kind of think about, okay, well, how does an individual operator like me make sure that I'm able to keep my doors open? So it feels like the answer is strength in numbers, automation, focusing hyper niche. It's not a single thing, it's a suite of things, but where do you envision the Extensiv or how do you envision the Extensiv ecosystem helps the individual operators basically compete against the behemoth?

David Miller:

Our tagline used to be, or it's kind of silly, it is, "For 3PLs on the grill."

Mark Taylor:

"For 3PLs on the grill." It's kind of awesome.

David Miller:

It's a little bit throwback, and I'm sure my chief marketing officer is going to make me cut that. But it ends up being one of those things where we're strong advocates for fulfillment services and solutions and definitely on the 3PL side. And as part of that, we are very in tune to helping our 3PLs maintain their existing customer base, grow their existing customer base, and then also sort of onboard new clients. So as part of that, we now have a whole brand side and marketplace sort of division, I guess I'll call it, that really is designed to help.

Mark Taylor:

There's a yellow page, it's called marketplace.

David Miller:

And the whole idea here is how do we feed more sales and brands opportunities to our 3PLs, right?

Mark Taylor:

Is that just organically happening or are you guys actually out there advertising for those?

David Miller:

Yeah. So a lot of what we do from a marketplace advertising perspective, I mean a lot of social, we've gotten much more into social. We have a whole marketing division that puts together content for what we would call thought leadership. So we don't always necessarily go out and say, oh, buy Extensiv services or buy Extensiv services from our customers. But we talk about, hey, these are the things that you should be thinking about to grow your business. As a brand, do you know that if you were to use a 3PL that had two warehouses, you could cut your expenses 32% or whatever it may be? And then the idea is that, hey, that brand clicks that link and they say, "Oh, that sounds interesting."

And then they end up, "Oh, well, we can help you with that." And it's not that Extensiv helps you with that specifically because we don't do operations, but guess what? We have a whole listing of really great customers that can help you do all of those things. Let me make an introduction. Let me get you over to Mark, and he's going to go and he's going to tell you how he's going to make you really successful. So all of those things become really important. So really what we've got here is there's some segmentation that says we need a strong 3PL base. And the way that we do that is we help them acquire new customers and grow their customer base. So that's a lot of what we're focused on today.

Mark Taylor:

So a lot of what I hear is a lot of the power that you guys are kind of, and I don't mean power in the negative way, but I actually mean a lot of the ways you can benefit is almost like market insights. You spoke about machine learning stuff earlier, and I can't remember. It's not because I don't want to call them out, because I literally cannot remember who it was, but they had this very informative thing they said. I think it may have been ShipHero actually, but they were in a warehouse and they said, "Look, from here when you add this warehouse, shipping times across the country, looking at all of our orders, reduced to this. And then if you add this third warehouse in this location, and so you start to see the graph of what three warehouses gets you to four warehouses, five warehouses, and then kind of starts to locate them."

And so being the gatekeeper, not even the gatekeeper, but I mean having the repository of like, well, you're located in Des Moines, Iowa and you've got a great customer base, but you know 40% of your orders are going to Southern California? If you went to a partner thing, this is what would help your customer save. I mean, really kind of looking at it from that consultative approach.

David Miller:

So maybe it was our stuff that you saw, because we definitely have options like that.

Mark Taylor:

I'm sure.

David Miller:

Where, hey, add a warehouse and where should you add it and add it to your ecosystem. And really where we want to be helpful is just removing the friction in that process. If you think about onboarding a new customer, even with the sales cycle within a 3PL, you take an intake sheet, you have a couple conversations, they want to do a site survey and tour, and they want to do all of those things. That just adds time and complexity and again, friction to that sales cycle. So everything that we can do from a technical platform perspective that can reduce the amount of friction in that process for a 3PL and a brand to start working together, that's definitely the thing that we want to be able to do.

Mark Taylor:

I think that's good. One of the examples, I mean, when I think about what it means to remove friction is if you were to look at our on time order close. We don't close an order, and I think this is how everybody does it. I'm sure somebody does it differently. We don't close an order until it leaves the building, and that's just what we do. But what that ends up doing to our order turnarounds, especially for Amazon Freight and LTL stuff, I mean, from the time you get the dimensions of the freight, it might be two days if you're lucky to get it.

So it looks like we've got a bunch of orders that have been sitting there two, for 10 days sometimes. So if you look at just all of our average time to close an order, well, if it came in by noon and it's a direct to consumer order, it was probably closed within an hour or two. But if it was something that's been sitting on the dock waiting for a truck to come up, we're not differentiating. So our dashboard is actually looking like we don't close orders very often or very quickly I should say.

David Miller:

So you almost need some sort of segmentation about what type of order this is, and then almost like an SLA buy that order type to some extent.

Mark Taylor:

Or even if you start to look at it from the perspective of time to order to complete, maybe not ship but order to complete, and then our numbers start to look a lot different, a lot better. But when you're doing that blended strategy of serving some direct to consumer, some carton pick, some pallet in/pallet out, it's going to be all over the place.

David Miller:

Yeah. I think that's good feedback, right?

Mark Taylor:

Oh, it is just an observation, but when you start to talk about, I mean, when the original goal of how to vet, you guys can certainly make it. You can answer some of the questions, but I still think getting on at least having the conversation.

David Miller:

For sure. I think the way that all of those dashboards, I know that everyone has had a chance to see it necessarily, but the way that all the dashboards are powered, it's through QuickSight, which ties in nicely to our platform. A next level of what's offered there is the ability for customers to use the data within QuickSight to build out their own dashboard.

Mark Taylor:

Their own dashboards.

David Miller:

So when you start to think about the different status, isn't... We're probably getting too deep here.

Mark Taylor:

No, not at all.

David Miller:

But when you start to think about the different status of an order, it's come in, there's some aging that goes along with it, maybe it's now been put into a batch, and there's a pick that goes along with it, and then there's a pick complete, and then maybe there's a pack function or a palletization function. So all along, there's all these milestones that need to happen. I think it sounds like maybe in your case and maybe in everybody's case, different milestones are going to mean different levels of finalization, I guess.

So for you on your B2B orders, like a pack complete, maybe the thing that says, hey, now there's nothing else for me to do until the carrier shows up and that's two days from now or whatever it may be. But I think the granularity of how we can start to capture and how we do capture data within the system, if you're using the mobile scanning and all of those other pieces, you will have the ability to build out your own forward facing dashboards that really show you the things that are relevant to you, which I think is going to be really cool for our customers to be able to really gamify their operations. So we have a number of customers that they put up the dashboards on the monitors. And the amount of efficiency that people can find when you make it a little bit of a competition, it's mind-blowing.

Mark Taylor:

Yes, that is very true. As I think about, and I don't know if it's called, if it's low hanging fruit, but one of the things that we constantly get customers that'll either say, "Hey, we need you to liquidate this. We need you to destroy it," those are the ones that really kind are gut-wrenching because those are resources that are just going to end up in a landfill most likely. But we have a lot of customers that say, "Can you liquidate it? Can you send it to Goodwill? Can you do anything like that?" And actually giving maybe even a marketplace type thing where everybody can go and you can just, the Extensiv marketplace.

David Miller:

I like it. And now we do just throw up a bidding site and people can bid on all the great stuff that...

Mark Taylor:

It's like eBay and then everybody's equipped to fulfill it already.

David Miller:

I'm curious, again, I was an operator for a long time and saw a bunch of junk that never sold, sit in the warehouse forever. Sometimes you can just liquidate it because you own it, because your customer didn't pay a bill and you're going to do something with it. Other times, they go out of business and they stiffed you for tens of thousands of dollars and you're trying to recover it. I've always heard of other scenarios where you can't, for tax purposes or whatever, you can't liquidate it. You've got to donate it or you've got to destroy it or whatever it may be. I'm curious...

Mark Taylor:

You finish.

David Miller:

No, go ahead.

Mark Taylor:

No, you said you're curious.

David Miller:

Well, it sounded like you were going to answer my question before I even asked it, which was awesome.

Mark Taylor:

I'm not even sure that I know the question you're asking, but my assumption was that you were going to ask how do we look at it. There's a lot of different ways. Rarely is it that the customer just stops paying, but that's a very universal commercial code, the UCC. And I think it's, I haven't had to look at it in a while fortunately, but I think it's 7210., I think A or B or .1 or 2 or .2 or 10. I believe it's commercial UCC 7210.something. Actually allows you to follow a very specific process which includes, not everything, but I mean it includes you have to provide notice, you have to notice to the customer, you have to publicly list it for auction, and then you have to do all these other things that it's held at public auction. Specific day, time has to be depending on which section you go after.

The one that we do is we try to be more very thorough about it if we have to do it. And that is you have to, I believe it's listed in the classifieds or public radio or a commercial at least twice a week apart but 10 days before you're going to sell it. It's all these things you have to jump through. But what it does is it does allow you to recover what's owed to you, not a cent more. It allows you recover what's owed to you. And anything else over and above that, you have to remit back to the customer. Now, we have gone through the process and never had to go through the actual auction piece. We've been very fortunate with that. In other cases, what we'll do is we will dispose the product for an amount per unit. And that amount per unit is usually enough to get the trash can.

David Miller:

Yeah, exactly.

Mark Taylor:

And some customers, we've had customers unfortunately have manufactured defects or things like that where it's actually not. They don't believe it to be safe. Amazon flags it for whatever reason. And those are not only do you have to destroy it, we have to send them photographic evidence that it's been destroyed or to a best effort type of deal. And then there are other customers that say, "Hey, do you know any of liquidators?" And those are the ones where it's usually you try to help them in any way if you can find somebody who's willing to come pick it up. But even then, I mean most of the liquidation companies had a lot of options in the last couple of years. And so you'll say, "Well, I have nine pallets of bobby pens or something." I'm just making something up. We don't have any bobby pens fortunately. And they'll just say, "You got anything else?"

David Miller:

Yes, exactly. Even we can't sell that and we're professionals at it, right?

Mark Taylor:

Right. So there's a lot of different ways to look at it. I know some sites or some people, they'll auction it off to their employees or deploy it, whatever. But most of the time, it ends up if you try to do anything other than throw it away, it sits in the corner of your warehouse and starts cluttering up everything. And then you start to try to get an account on like, "Well, why my revenue doesn't seem right? I mean, I should have more storage revenue because we only have 50 spaces open," or whatever it may be, a thousand. Anyway, depending on how big you are. And then your numbers are off because 300 pallet spaces are junk that you should have thrown away.

David Miller:

Yeah. We used to call that the boneyard and once something ended up there, it rarely ever made it out. It sounds like you've got quite a bit of experience in all of that.

Mark Taylor:

Well, I mean, the other piece of it though is that if I personally know people who have made great businesses out of doing returns, refurbishments, reselling items and things like that, and I think we've gotten to where I think returns as of... We're members of the IWLA. I know you guys...

David Miller:

Yeah, we are too. Well, we're...

Mark Taylor:

Partner.

David Miller:

Yep.

Mark Taylor:

That you guys are partner. At the last one, I think I heard somebody at the Reverse Logistics Association, which has since been bought by somebody, so I don't know what it's rebranded to, but he was saying that it's a trillion dollar problem now that returns. So if you think about bringing that stuff back, I mean, I've seen people try to do all sorts of business models. I saw there was somebody doing a business model where they would relist the product and the customer would hold onto it. And then once it resold, they would give the label to the customer to put it on there, and then ship it down to the next customer.

David Miller:

This is semi-funny, if I have two minutes to tell a story.

Mark Taylor:

Oh, you've got plenty of time.

David Miller:

This is again, back in the operator days, and there was the early stages of the Red Bull energy drink really starting to be really popular. And this person put together a new energy drink that was geared towards women and it was like pink and it was like pink lemonade and all this. And I'm like, it's interesting. I don't know where they were funded from, but they ended up sponsoring a car in the Indianapolis 500. And it wasn't a fast car, but just by virtue of where it was in traffic, it just got a ton of screen time for the whole race. I'm like, this is amazing, right? And sure enough, they sold a bunch of product. So they reordered and we ended up with just dozens of pallets of this stuff. Well, after that initial splash, it just didn't sell.

So we ended up with these dozens of pallets or whatever. I remember one of our warehousemen asked if they could try to sort of resell it or sell it to distribute it to local bars that they could then mix with drinks and the thing. And when you think of creative ways to solve the problem, I don't think that went anywhere. I don't think any of that ever actually moved, and we probably ended up just throwing it all away. But yeah, I can only imagine now that we're talking about dozens of pallets, I can only imagine when you get into hundreds and thousands and tens of thousands and what that ultimately means for the business.

Mark Taylor:

Yeah, it is interesting. You see, usually the customers who make the decision right away, it's like, this isn't selling. It didn't pass our hurdle, get rid of it. Those are typically the smartest operators, but that's also, it seems like such a waste, but they know they're not going to... If we're not seeing these early indicators, we ordered enough to sustain us if it went really well to get another batch of it in and not sell out, which is one of the ecomm cardinal sins. And if it doesn't sell and they just say throw it away and just like, ah, that's a bummer. But look, I do respect the decisiveness on it, but going back to the idea that there's still just so much out there, it's fine, it just didn't sell very well. And maybe, I mean for a lot of the product, hey, if you pay our fulfillment fee and shipping, it's yours. And that would be a better use than just putting it in the landfill in my opinion. I think there's a lot of interesting things you guys could do.

David Miller:

Well, I'm taking notes and so I've got this all down. And when the transcript comes out, I'm sure we'll start iterating and get this on the product roadmap for you.

Mark Taylor:

Sure. I've heard that before. It's on the product roadmap.

David Miller:

It's on the roadmap.

Mark Taylor:

That's always the joke. So if you look into your crystal ball and you say, what do I think is going to happen in the next 2, 5, 10 years? Let's approach them all separately. What do you think we're looking at?

David Miller:

I think over the next two years, we're going to see a little bit more contraction or consolidation of the market. So this is where I think that if you do have capital sitting on the side, you're going to see smaller warehouses get bought up just because in this course of business, it's time for ownership to sell and that's the opportunity. For those businesses that don't want to sell, I think that this becomes a really interesting market to prove your value that's going to show how far ahead of the curve that you're going to be in the next couple of years. I've always thought about logistics as being a couple of years behind the technology curve. In most things, I have seen that window is starting to shorten quite a bit.

I think that even in the next two years, we're going to start to see the advent of more automation, more robotics, the machine learning, and AI. And really at least like directed analytics, I think are going to become a real reality in terms of what people are going to start looking at to make their decisions. We are seeing a slightly younger generation of warehouse operator come up. And again, when I started there was sort of the old guard, right?

Mark Taylor:

There still is the old guard.

David Miller:

There still is the old guard, but now we're starting to see parents hand off their businesses to their kids in certain circumstances and there's just a different lens in which people are starting to operate or 3PLs are starting to operate at least in the world that we look at. I think that they really are starting to embrace more and more of the technology that's sitting out there. So I would expect in the next couple of years, businesses going to look relatively similar to what it looks like now. Just we're going to have way more automation, much less paper, more decisions being made through technology, and really just the bringing together of all of the things through platform. That's probably where I see us in the next couple of years.

Mark Taylor:

I want to make this distinction because when you say automation, you're not necessarily talking about robots, you're talking about automated reporting.

David Miller:

There's two levels of automation. So I think the table stakes and very quickly table stakes is you've got to be able to have automated reporting, you've got to be able to do automated data collection, you've got to be able to sort of be paperless within your warehouse. You just won't be competitive as a business if you're not there or you're not there very quickly. So that is definitely over the next 12 to 24 months. Those things will have to be there. The automation that we see our customers being successful with today are the more, I guess, the less exciting type of automation like conveyors. So things that have already proven their value, so it's conveyors and pick-to-light.

So automation in terms of yes, we can bring in some hardware that enables us to be more automated in terms of how we do stuff, but this is hardware that's grown up over the last 30 plus years. So it is pretty well. It has now got to the point where it's become inexpensive enough that smaller warehouses can now really start to look at that in terms of implementing. I think that's the change. To your point, robotics and automated warehouses, that's not going to be a thing in the next two years. I think we're going to continue to see trials and someone's going to find the business value somewhere. I just haven't seen a lot of real success in that world at a small scale at the moment.

Mark Taylor:

Yeah. I actually think I completely agree with you, and it's not really a caveat so much as it's an observation. There are so many more robotic like robotic companies out there tackling automation than there have been in the past. And what I'm finding in my discussions is that they're coming out with more and more interesting financing options because there are only so many operations out there that can say, all right, look, we're going to do a $20 million pilot.

There's only a few. Then after that it starts, you have to go down the value chain. So after they've gotten their efficiencies and all that sort of stuff, then you just go, well, we still need more customers. We need to keep on feeding the beast and offering new offerings and this and that. So as they move, as the automation, the robotic companies move down the value chain and start talking to the smaller operators, more and more the operators saying, I'm not outlaying a million and a half bucks. I'm not outlaying $3 million, whatever it is. I'm not even going to outlay 400,000.

So the robotic companies are really starting to get creative with their financing options, and they're starting to offer more lease options and paper pick and paper presentation options. So I think for operators committed, because one of the big things about automation is even for the big boys, it doesn't pay off for a long time. So you really as an operator, let's say in our Ontario warehouse, got 50,000 square feet. So if I want to put automation in there, I have to really mentally be signing up to staying there for at least five years. So if you've already achieved that scale of, I think, I've had some people say that they believe that the perfect 3PL is 250 to 350 in terms of square feet.

And that's you can get all the efficiencies of scale, you can get everything you need out of it, you can move it to multi-shift. There's a lot you can do with that amount of space. So it's like if you're already in that kind of a footprint, then you might plan to be there for 4 or 5, 10 years, and that's when it starts to make a lot more sense to make these bigger investments. But with these new financing models, it'll be very, very interesting to see how many people bite and figure out that you're limiting, that you're going to be in that facility for at least five years.

David Miller:

So you're signing up or you're not signing up for some of these trials?

Mark Taylor:

Well, I'm looking at them. I mean, in fact, I'm very, I think especially in Southern California, we have to figure out how to get more out of less or more out of the same. So there are a lot of options out there that allow for it. We're looking at everything that we can right now, and I think we shall see. I mean, it's got a paper out, and I think if you're towards the end of your career or you're two to five years out from saying hanging it up and being like, "I want to be out of this," then you probably don't want to complicate those years with that kind of thing.

But if you plan, so for me, I mean, I plan to be in here the next probably until I die, because I can't imagine quitting and not working. And then I think of it on a much longer timeline, and eventually I think you go at it long enough. I mean, I don't want to do anything that doesn't make sense from a math perspective, but if you just keep on lengthening out the timeline and you want to be in the industry for a long time, I think it makes a lot more sense.

David Miller:

Awesome. Well, when you get something going, I'd love to come by and take a look and see how it's going.

Mark Taylor:

Yeah, that'd be fun. That'll be a good milestone to celebrate.

David Miller:

Yeah, for sure.

Mark Taylor:

Yeah, so anyway, okay, so that was the two year, so five years.

David Miller:

Yeah. So what'd be interesting, and we just saw some antitrust lawsuits against Amazon and whatever. It'd be fun to see how all of that plays out. I'm sure that will be tied up in litigation until the 10-year mark of what's coming, but I think that there's going to be a need for businesses to be at least more competitive around the next day type deliveries. So we hear a lot about the convenience factor of scheduling. When do I want something to arrive? Two days is no longer fast enough. I need it next day, same day, those types of things. And so I really think that we're going to see over the next five years, this whole idea of delivery as an experience becomes that next differentiator of at least ecommerce fulfillment. Like B2B, I think is going to be its own thing. I mean, we'll see how some of these retailers fare.

Mark Taylor:

And that's a great niche, by the way.

David Miller:

Right. Exactly. Yep.

Mark Taylor:

I mean, because if you look at ways to differentiate, Amazon doesn't want to come up with a thousand ways to wow somebody. Nope, exactly. Yeah.

David Miller:

Yeah.

Mark Taylor:

Go ahead.

David Miller:

No, go ahead.

Mark Taylor:

I was also going to say when you start to see some of the new buying behaviors emerging with live commerce being a big one, and there was actually a warehouse that was doing not only a live commerce experience, it's a cosmetic company, but when you put an order in, I think if you, and I don't know if it was through TikTok or whatever, but you would message them your order number and they would actually live stream them going and getting and fulfilling your order.

David Miller:

Ah, that's cool. That's fun.

Mark Taylor:

I mean, that is not sustainable.

David Miller:

No, of course not.

Mark Taylor:

But it is fun. And so I think it's an interesting point to bring up the five-year horizon is differentiating the delivery experience.

David Miller:

Yeah, I think so. This might extend into the tenure just a little bit. We've been hearing about sustainability and green delivery and things of that nature. So I do find it interesting to figure out when and if all of these new regulations that are coming into play, especially in California and some of these other areas around trucks and fleet and electric vehicles and all of that other stuff. I think that starts to become really interesting. The two things that I've seen, one is brands that talk about sustainability as part of their overall messaging.

They sell a lot more stuff. It's like consumers, people that are spending money, like that demographic, they love to hear, I've got sustainable products and this is ethically sourced. I think all of that's great, so they sell a lot more stuff. Where we've been is from a transportation perspective and a fulfillment perspective, we care and we like our leads buildings and our gold standards and all of that's great, but it's never the leading story that my transportation and fulfillment is green. A lot of it's predicated on I can save you money or it's lower cost and all of that other stuff. I think it'll be interesting to see over the next 10 years with more maybe echo friendly transportation options coming online, does green and sustainable really become a leading story in transportation? I think that that's going to be an interesting one.

Mark Taylor:

It's a good question. I had a gentleman by the name of Chris Shimoda on the podcast. It was probably, I think it was around June is when he came on, and he's vice president of the California Trucking Association. And it is, if we're lucky, it's a 10-year thing, because right now, the grid won't support the charging. It just won't. I mean, you can talk about how cool electric is until you're blue in the face, but it physically, I mean, it's one of those things that does not overcome gravity or the physics of what's required. So there's a lot that has to happen in the State of California alone because I mean, this is already one of the most rolling blackout, gray out, whatever they call them these days, brownouts state that there is.

So to just completely add the capacity that it would be required to move every single fleet vehicle to electric and sustainability, so that's a big thing. But to that, now that being said, Amazon is absolutely leading the way in terms of their, if you see their little delivery vehicles, so many of those were electric. So they're trying to lead the way. And as you briefly mentioned, the FTC thing suit with them, it's my opinion that Amazon isn't really worried. So this gets into a lot of conjecture on my part. So this is, and I think a lot of that FTC suit revolves around the fact that Amazon's now starting to compete with UPS and FedEx who are unionized and who have to pay, I mean, it's like what it costs them to deliver a package now, point to point. I think they said it's like eight bucks, your basic ground, versus what Amazon's being able to do for $5.

And so there's like a massive labor. There's a labor delta there, where if you're UPS, you're like, "Okay, look, I just did all this stuff and I'm trying to play nice and we're trying to give our employees. And you're letting these guys do this for what? They're just eating their lunch." So I think a lot of that FTC suit comes from those kind of powers working the way that they're working. I've long felt that there was a graph that came out long and during the pandemic as the first time I saw it. In 2019, Amazon's number of robots and number of employees converged. And from that point, it exponentially just went, like employees are here and it just exponentially went up. And so they're not worried about unionization. They just need to not be unionized for long enough. And then you get into, you saw the humanoid? Did you see that humanoid...

David Miller:

I did, I saw that.

Mark Taylor:

... video?

David Miller:

Oh, my goodness.

Mark Taylor:

It's pretty slow, but that's today.

David Miller:

That's Today.

Mark Taylor:

Just wait.

David Miller:

Yep. I mean, we talk about Amazon here. I've got a couple of thoughts on that. One is our brand's customers, they look at Amazon and they say, it's a necessary evil. I have to be on it because it just generates so much sales. And then we have our 3PLs that we say it's just evil.

Mark Taylor:

I wouldn't be here talking to you today if it weren't for Amazon.

David Miller:

So it's a little bit of a hyperbole. Our talk track around this is Amazon just, they make everybody have to be better. So we have to learn how to accommodate these needs. We need to think more strategically around what they're not offering that we can perform better at, all of those different things. And so quite honestly, we look at Amazon as being someone that just makes us work smarter, better, more efficiently to come up with new things. So from that perspective, I mean, we actually appreciate the coopetition that happens within that space.

Mark Taylor:

Coopetition, huh?

David Miller:

That's right. I'm sure Amazon's like, "Who's Extensiv now?"

Mark Taylor:

No. They're on their stuff. They know who everybody is. Somebody out there knows exactly who you guys are. So then anything you want to add to the tenure?

David Miller:

It is such a big horizon. I think I told this story once or twice before, but I got asked by one of my daughter's teachers, does your daughter know what she wants to do when she grows up? And I thought about that a little bit. And really when I think about it, the stuff that she's going to do in 10 years when she graduates, it doesn't even exist today. So it's hard. It'd be impossible for me to say with any certainty she's going to do this thing because that hasn't even been invented yet. I think the things though that we are going to see in the next 10 years, and again, now I'm just hypothesizing, is the collection of data and the usage of data to get way more efficient in all of the things, that is going to be where we have this intersection of optimal logistics.

So I think about as a brand or as a 3PL, you can see within your own little microcosm today, but eventually, we're going to have visibility to the entire world and all of the things and all of the products that do exactly the same thing that yours does or is the same product as yours, and where is it. An order comes in from San Francisco, and we would never ship it from New York, but we know that some store that's maybe unrelated to us exists in San Francisco, and so let's buy that product and ship it. And maybe we do that on the blockchain. Anyway, I think that we are going to have much greater visibility to all of the things. I think that the technology's going to be in a spot where it's going to action on those things automatically.

Mark Taylor:

I couldn't agree more. And it's interesting, everybody associates, or not everybody, but it seems like mainstream associates blockchain with cryptocurrency and blockchain is the technology of it's the best, most transparent accounting out there. And it's something that you don't see a lot of warehousing people talk about. And yet it offers such interesting things because it's like if you get everybody in, I mean, this is an example. We spend a lot of time educating customers on things like, well, it says that it's closed, but the tracking is not updated. So we have to say, well, we're in busy season and it went out on a trailer, and they don't scan everything. Those drivers don't even carry scanners.

So what ends up happening is there is a time when we don't know where your package is. So what that made us do, and this was recommended by a colleague, is it's what they do. It's like we maintain, we have our own little Google Sheet, it's by day, and we scan every single tracking number, and then we assign it to the truck. We basically look at the truck number, the trailer number, and we say, at this time on this day, this tracking number was put here. And when you can offer that level of transparency to your customer, it's better. But when you start thinking about putting it on the blockchain, and I mean RFID technology could be used in this way too, but that's a lot more complex and costly, I think.

David Miller:

There's definitely a lift to it.

Mark Taylor:

There is, and then you have to, everybody's got to be on the system, but I mean, everybody would have to be on the blockchain system as well. But as far as tracking and transparency in real time, this is what's happening. There are some things that we haven't even began to explore. I think in 10 years, I think that's actually a great thing. I think we will see something. I think the blockchain will be much more ubiquitous in everyday life for that transparency that you're talking about.

David Miller:

And you're right, blockchain was actually a big story. And then crypto took over because it was on the blockchain and then crypto sort of melted and then blockchain disappeared as a thing. But I mean, when you think about just banking in general, basically all of that is built on some version of it, right?

Mark Taylor:

It is. Well, I've enjoyed this. I really appreciate you being here and making the time.

David Miller:

Thanks for having me. I'm sorry it took us so long to get together here.

Mark Taylor:

Not at all. I mean, you're busy. Once again, I just appreciate you being willing to jump on with me.

David Miller:

Okay. Well, no problem. Mark, thank you so much for having me, and if there's anything else I can do for you, let me know anytime.

Mark Taylor:

Oh, last thing. Anything you want to plug? Website? Do you guys have a YouTube channel? What's the best way? Like you said, you're doing social media.

David Miller:

Yeah. So best spot for us is Extensiv.com. It's Extensiv without the E. And so take a look there, whether you need warehouse management, order management, brand software, integrations, all of those things are things that we're supporting now.

Mark Taylor:

It's not just 3PLs, it's individual brands themselves.

David Miller:

It's individual brands themselves. A lot of new things on the horizon, whether you're a 4PL looking for software to build out your own network, whether you're looking for automation and billing, all of those things are definitely in play now, and we're seeing quite a bit of success on that front. But at the end of the day, we are here to help you with fulfillment strategies. So if you need a trusted partner and thought leader in this space, whether you're trying to identify, do I want to start my own 3PL? Do I want to do my own warehousing? Am I looking for partners? We have groups that help with all of those things. So definitely check us out Extensiv.com and hopefully get to talk to some of you in the future.

Mark Taylor:

Yep. And then the other thing, do you guys have a YouTube channel or anything along those lines?

David Miller:

Oh, I'm sure I'm going to get chastised for this. I don't believe that we have a specific YouTube channel. Definitely just look up Extensiv. You'll see what you'll see there. But if you want to get involved in sort of our community, those would be some options that you could have. Again, all of that's going to be driven from Extensiv.com.

Mark Taylor:

Great. All right. Well, hey, once again, appreciate it very much.

David Miller:

Cool. Thank you.

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