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!

All Episodes

Supply Chain Saga

Why Your WMS Is Broken and How Soapbox Fixes It: Unified Supply Chain Software with Danny He | Supply Chain Saga Ep. 014

January 31, 2024 • Mark Taylor

0:00 | 1:31:15

Danny He is the founder and CEO of Soapbox (soapbx.com), a unified supply chain platform that combines WMS, OMS, TMS, shipping, and returns in one native tool. After managing 52 CPG brands and discovering that every software solved only one piece of the puzzle, he built Soapbox to give 3PLs and brands real-time visibility across their entire fulfillment network — no integration headaches, no data reconciliation lag.

TOPICS COVERED: 
- From IBM and Royal Caribbean to managing 52 CPG brands — and why no existing software could tie the ecosystem together 
- Why the WMS should be prescriptive: standardize operations first, handle exceptions as exceptions 
- Soapbox as a unified platform: OMS, WMS, TMS, shipping, and returns on one data layer 
- The beverage company doing 10M units/month on pen and paper — and how Soapbox went live in five days 
- Why Soapbox started as a 4PL to drink their own juice — and why they stopped 
- The Shopify-Deliverr-Flexport theory: was Deliverr always a play for Flexport equity? 
- Why venture capital in supply chain creates unsustainable models: subsidized fulfillment and gig-work warehousing 
- 80% of Amazon third-party sellers are Chinese manufacturers — what that means for US brands and FBA capacity 
- Section 321 cross-border fulfillment: how it works, who lobbies against it, and Soapbox's first Mexico border warehouse 
- TikTok fulfillment, Walmart's infrastructure play, and the future of marketplace logistics

CHAPTERS: 
0:00 Introduction 
1:47 Danny's Background: IBM, Royal Caribbean, and 52 CPG Brands 
6:05 The Problem: Why No Software Tied the Supply Chain Together 
14:11 Standardization vs. Customization: What a True 3PL WMS Should Do 
25:01 Soapbox for 3PLs: Onboarding, Integration, and Real-Time Visibility 
33:28 Real-Time Data vs. Batch Updates: Why Seconds Matter 
37:25 The Beverage Company: 10M Units on Pen and Paper 
44:32 From 4PL to SaaS: Why Soapbox Stopped Operating and Went Software-Only 
50:00 Venture Capital in Supply Chain: Subsidized Fulfillment and Gig-Work Warehousing 
1:06:29 Industry Trends: Amazon, Walmart, Shein, Temu, and the Marketplace Wars 
1:13:38 Amazon and Chinese Sellers: The 80% Problem 
1:23:36 Section 321 Fulfillment and Cross-Border Logistics 
1:28:00 TikTok Fulfillment and Closing Thoughts

ABOUT THE GUEST: 
Danny He is the founder and CEO of Soapbox (soapbx.com), a unified supply chain platform. His background spans IBM, Royal Caribbean's digital transformation, and operations leadership for a $300M CPG conglomerate with 52 brands.

KEY TERMS: 
Soapbox, soapbx.com, WMS, OMS, TMS, unified platform, 3PL software, order management, inventory management, real-time visibility, 4PL, Deliverr, Flexport, Shopify, FBA, Amazon, Walmart fulfillment, Section 321, cross-border, Shein, Temu, TikTok fulfillment, venture capital, gig work, NetSuite, FedEx Consulting, API integration

Supply Chain Saga is produced by Mark Taylor, CEO of Warehouse Republic, a 3PL serving omni-channel e-commerce brands that sell through marketplaces like Amazon, Walmart, and Shopify, as well as retail partners like Nordstrom, Scheels, and Bass Pro Shops.

Website: warehouserepublic.com
Podcast: supplychainsaga.com
LinkedIn: linkedin.com/company/warehouse-republic
Host: linkedin.com/in/marktaylor

Have a logistics question? Email mark@warehouserepublic.com

Mark Taylor (00:00:03):
Welcome to Supply Chain Saga. Today we're joined by Danny Hee, a tech leader with an impressive background working at iconic companies such as IBM. His journey at a CPG company managing over 50 renowned brands revealed the complexities of logistics data. This insight led to the founding of Soapbox, an innovative platform that streamlines their client's supply chain data into an easy to use platform. In our conversation, we cover Soapbox's role in transforming logistics and discuss the latest trends shaping the industry. Let's dive in. All right, we're live. How's it going?

Danny He (00:00:39):
Thanks for having me.

Mark Taylor (00:00:40):
Absolutely. Absolutely. Why don't you go ahead and introduce yourself?

Danny He (00:00:45):
Sure. Yeah. My name is Danny Hee. I'm the founder and CEO of a supply chain fulfillment logistics software company called Soapbox. We started in 2019, March of 2019. So this will be our fifth year coming up in March of 2024. And what we're building is a unique way of looking at supply chain technology by looking at it comprehensively. Okay. And because of that, I think we've been able to move in a way that is a lot more interesting enough, a lot more agile than a lot of other companies that are constrained by just staying in their lane, so to speak.

Mark Taylor (00:01:36):
Okay. So let's start at the beginning. So give me a little bit of your background and what was the genesis of how did you guys get started?

Danny He (00:01:47):
Sure. Yeah. So my background is on the corporate side. So I worked for IBM managing a large blue chip customer. And that's where I really cut my teeth in the enterprise space with software services, hardware, support, cloud, everything. Cut my teeth in app development at Royal Caribbean. So for their multi-billion dollar digital transformation initiative, I was one of the product managers that helped with the guest facing experience and guest facing apps. And then prior to starting to soapbox, starting Soapbox, I was brought in to lead the operations for a private equity-ish group. And not only say that it's private equity-ish because it's like one of those Chinese conglomerates where it's kind of like a headless dragon. You don't really know what's happening there. And so I was brought in as really the first operations person for this company and been around for 25 years or about 300 million a year in revenues across 52 brands, all CPG, B2B business.

(00:03:12):
And so I was brought in to modernize their technology stack and to launch their e-commerce for their major brands, which is a really interesting and unique prospectus to be able to do this with a company that's well funded. It's also not a unique problem that larger companies have because I think as we're all seeing this, a lot of companies, while they invest in supply chain for the manpower of it, it's not really the technology investments that they make. So I was brought in to really kind of revamp their operations, launch this internal 3PL process for them. And

Mark Taylor (00:03:54):
This was what year was this?

Danny He (00:03:55):
This was in 2018.

Mark Taylor (00:03:58):
Okay. Yeah,

Danny He (00:03:58):
2017, 2018. And so this is right when e-commerce was starting to really pick up steam in a major way. They had some pretty major brands into big box retailers. They were also selling online, but exclusively through resellers. So they'd sell to another party that would then sell online, so nothing direct to consumer. And so one of the initial pitches I had for them was, "Well, if you want to be able to do e-commerce, you have to own your customers. And if you have to own your customers, you have to have your own site." Because if you're selling your products on Amazon or eBay or Walmart, those are their customers. When you're checking out your products, it's on their website. When there's an upsell opportunity, it's for their products, it's not for your products. So to have a meaningful e-commerce ecosystem, you have to own your customers.

(00:04:54):
And so they bought in, we launched pretty successful, I think, e-commerce campaign there fairly quickly. And through this proliferation of growth in this space, we were looking at different technologies and they were using this really old Microsoft Nivision install. It was on- premise in a server room in the same place they had egg cartons. It was like a wild ... It's very, very legacy business.

(00:05:24):
And so as we were looking at revamping their technology and what we needed to do, what really kind of stuck out to me was there were just so many moving pieces within supply chain, logistics, fulfillment, order management, inventory, warehouse shipping, returns, support, and then all of the nuances in each of these workflows. And it's kind of a little bit overwhelming and you can't really ... There's only so much research you can do. So we actually brought in FedEx consulting to help us with identifying best in class solutions that can help us tie everything together. So

Mark Taylor (00:06:05):
I'm going to pause you for a sec. So they had, you said about 50 CPG brands?

Danny He (00:06:09):
52. Yeah.

Mark Taylor (00:06:10):
Okay. So 52 CPG brands and you were brought in to kind of help with the transfer from ... You had this experience with the digitization, I would say, of, you said Royal Caribbean?

Danny He (00:06:24):
Yep.

Mark Taylor (00:06:25):
Yep. And then, so that was a nice feather in the cap. Okay, so this guy can probably help us become more technologically advanced from the logistics and supply chain side. And so your first pitch was effectively, we need to manage our own internal 3PL and bring in all 52 of these brands under one roof. And then you brought in FedEx Consulting to help with that and say, okay, well, we've got these things. We're on this old system. We recognize the system is old. What are our options?

Danny He (00:07:00):
Yeah, that's correct. And it's really interesting when you talk to different consulting groups. We also talked to UPS Consulting, but ultimately we had enough spend with FedEx where it was free for us and we started to pay for UPS. We went with FedEx consulting for this. And we wanted to be able to bring a logistics leader to be able to do this service. It didn't make sense for us to go to a management consulting group that was in the space of theoretically what you should be doing. We need something a little bit more practical. So we brought in FedEx consulting and naturally they brought in their preferred technology and compatible technology partners, basically pre-vetted technology to help look at our tech stack, look at our requirements. And through this process, it was really interesting because we went through probably 25, 30 different vendors and they all solved a specific problem within our workflow.

(00:08:07):
But here's the thing, as operators, and you know this, running a 3PL, even though you have different tools to do different things, from an operational workflow perspective, it's just all a day in the life. There isn't a single day where you're like, "Well, today I'm just going to use my shipping software and just focus on shipping, not worry about my inventory." And tomorrow's going to be an inventory thing. And it's just like one of you and a lot of boutique 3PLs, it's just like the head guy, the owner, and he's doing everything. There's only so much you can do.

Mark Taylor (00:08:41):
It's a whole ecosystem.

Danny He (00:08:42):
Right. It's a whole ecosystem, but at the same time, these technologies didn't really operate that rate. It's like everything was in a silo. But here's the thing, the data source was the same all the way through. So if I was to get a shipping software and then an order management and then a storefront management and WMS and then ERP, I would just be plugging all of that into my Amazon store into all of those software. And then I would plug in my Walmart store into all that stuff and then my Shopify. So the order origination of the data remains the same. And then the output was the same as well. So they will all try to figure out their piece of how it manipulates the tracking or the inventory, but it was like the same set of data, you know what I mean? And so it was kind of weird for me to look at this landscape of these disparate tools that focused on a subset of the metadata within the data.

(00:09:42):
So that was the kind of the first, well, what's happening here? The next part was that we didn't have any tech resources. Like most companies in this space, whether you're a brand or you're a 3PL, even if you're tech literate, tech savvy, in 99, I would say probably 99% of the case, most people are not going to be able to figure out how to do an API integration on their own. So then you had all these technologies that you'd have to figure out how to tie together to make your business run effectively, efficiently, have a little bit more visibility and transparency in the operations, the workflow and such. But then you had to figure out how to get that done. And if you're not a technical person like that, you don't even know what you don't know. You don't even know where to start, right?

Mark Taylor (00:10:33):
As me not being a tech person, that is affirmative.

Danny He (00:10:39):
Right. So then we're like, okay, well, you have this set of data that's the same. You've got these technical integrations that they have to talk to each other. You can't not talk to each other. They do. And I think the final straw for us was we couldn't find something that just worked. We had to try to figure out how to make it work, which was a really frustrating experience. We had to figure out how to make it work and we didn't know what we didn't know. So they're like, "Well, why don't you look at something like a NetSuite?" Okay. So then we looked at NetSuite and it was like a seven-figure implementation project. It would've cost five figures a month to be able to figure this out. We would've had to hire people that know how to run this software in addition to all of that just to be able to do this.

(00:11:32):
Oh, and by the way, there's still implementation and integration. It's just now that there's a central hub and there's an ecosystem that you knew of known technologies that work together.

(00:11:44):
And we're thinking like, "Okay, yeah, we're going to grow this, but we don't really know how much of this we're going to grow." And more importantly, that's kind of like a stop gap measure. It still didn't solve a really kind of critical point in what we needed to do, which is that 3PL management piece. So we wanted these brands to operate autonomously because that's what they are, they're independent brands, but we wanted to be able to take advantage of the economies of scale that this group having being the owner of these groups have. And so when we're looking at WMS specifically, we couldn't really find something that made sense. They were all just legacy WMS and they would have the name like, "This is a 3PL solution and you can centralize this 3PL solution, but then you look at it and it's just another WMS.

(00:12:36):
What's the difference between this and literally any other WMS?" And there wasn't anything. It was just like a name basically. And so that's where I had this idea, well, why don't we just create a software that's built off the entire ecosystem because it's the same set of data all the way through. In many cases, it's the same or similar team of operators. You might, in large cases, obviously you have dedicated teams for shipping and logistics and warehouse and fulfillment, but it all falls under operations. And when we talk about transparency and data and transparency in supply chain, I always see these tools that we're going to give you full transparency in this piece, but that's like shining a spotlight in the ocean. What are you going to be able to find? So what we've built is this layer where we are as a proprietary tool, the order management, the inventory management, shipping, returns, 3PL, WMS, TMS, in one native platform that ties in all of the stakeholders within this ecosystem and have them all use a single platform that's seamless and easy to use, low effort, low integration, and low configuration because as a 3PO operator, how often do your customers, number one, know what's happening in your warehouse, number two, care about what's happening in your warehouse?

Mark Taylor (00:14:11):
Well, they care about it all the time.

Danny He (00:14:14):
I

Mark Taylor (00:14:14):
Mean, theoretically, but I mean, they care about it in the sense that I care that I breathe. So it's like it has to work.

Danny He (00:14:21):
It has to work.

Mark Taylor (00:14:21):
And then how often do they know exactly what's going on? I mean, certainly there are customers open tickets all the time requesting an update about this or they've got a specialty thing here on this order that needs to be called out or there are confirmations going that, okay, just making sure that you have everything you need. There's all that sort of stuff, but it's very isolated. And so the expectation is of course that the entire relationship just works. And then there are, I would say, how often are they fully aware it's on a case by case basis?

Danny He (00:15:00):
Yeah. So isn't that just extra work for the both of you?

Mark Taylor (00:15:06):
Yes. I mean, it is. I mean, as a 3PL service provider, I mean, our service is that we're going to handle your logistics and I think it can be broken down as simply as we receive people's items, we take good care of them, and then we are given a specification for which to build that item to ship it out. And so I look at what we do as a manufacturing process where our raw materials are the customer's products.

(00:15:41):
So I mean, I don't think that that aspect of it and just doing what we said we're going to do, I mean, that's why people hired us in the first place. That's why people work with us and that to me is not extra work. That is the work. The extra stuff, of course, the out of spec, the out of this one needs a red bow, this one needs a handwritten note, that sort of stuff. Of course, that's extra work for everybody because they're having to put extra thought into maybe this box is going to an influencer and maybe this one and so on and so forth. And so that is extra, but I mean, that's also, I think someone, BJ Patterson says it all the time, it's like the one who wins is the one who solves the most problems. And so I think while the extra work is just that extra work, it's also something you should hope for in a way because it means you're solving more problems.

Danny He (00:16:36):
Yeah, that's a really great ... I really like that quote. It's the one that wins, this is the one that solves the most problems. And when you look at software in this space, it's oftentimes I think a lot of the one that solves the most problems is masked by this idea that you can customize everything.

Mark Taylor (00:17:00):
Right.

Danny He (00:17:00):
Right.

Mark Taylor (00:17:00):
I would agree with that.

Danny He (00:17:01):
Yeah.

Mark Taylor (00:17:03):
Yeah. Every sales ... I mean, so if I look at WMS, the trend I see is that WMS is often started as somebody hired somebody in their own warehouse and created something that was built to their process. And it was because they couldn't find another product out there that attacked and dealt with the data the way that said operator dealt with the data.

Danny He (00:17:31):
It's like tribal knowledge digitized,

Mark Taylor (00:17:34):
Basically. Exactly. Yes, yes. And then what ends up happening is, okay, well, this is our way of doing things. And then after you get it really perfected for you, you believe that the way we're doing it, I mean, we're doing it pretty well. So I mean, clearly everybody else wants to do it this well, and then you start offering it out to everyone else and other operators have different ways of doing things or they may call things slightly different by slightly different terminology. And so it doesn't water down, but that product now that becomes sellable to other operators is you have to then as a software provider or the SaaS provider, then you have to kind of start doing that "extra work" to make sure that your features now conform to the masses.

Danny He (00:18:26):
Yeah. So that's a really interesting thought there. And we debated about this for a little bit before we came to kind of like a interesting conclusion. And the conclusion we came up with is that's certainly true for a traditional WMS and for a traditional fulfillment solution for brand shipper. So your brand, you want to customize your fulfillment to the end degree to satisfy how you feel like your customer experience should be. But as a 3PL, it's kind of like the opposite, right? You want to standardize your operations from a technology perspective, not so much the service.

Mark Taylor (00:19:09):
I want every customer to ship in the same size box- Bingo. ... the same SKU is as quickly as possible.

Danny He (00:19:16):
Exactly. And so then you look at the WMS out there, no WMS is kind of set up for that. All the WMS is still built around the fact that each customer is special and you can customize each one of these customers. And yes, you can create templates against one after the other, but there's this element of prescriptiveness of how operations should work in your warehouse. And that's my point in saying that when the customers have the products in your warehouse, how you move their products, that's on you. How you operate should be on you and standardizing that should be on you. Your customers should never tell you how to fulfill, like how to be able to build your racks to be able to put their products in. And it's like, these are the racks that we have available. It's a go or a no go.

Mark Taylor (00:20:10):
And I believe that's handled on the front end too, where someone says, "Can you do this? "

Danny He (00:20:16):
And

Mark Taylor (00:20:16):
You say yes or no. And at that point, but I mean, once the goods are in the warehouse, then yes, it's on each individual operator to do what they need to do. And as long as they're hitting SLAs and agreed upon things, then fine. But I say that, and then I also know of several business situations where customers make their suppliers better and vice versa, where I interviewed Courtney Folk back about six months ago, seven months ago, and their big break came from this customer that was, I mean, very, very large. And that large customer, Courtney's Business Renewal Logistics made this ... I mean, they completed the impossible task with a little bit of time to spare, and everybody was very, very impressed. And so this customer said, "Okay, you guys are our people. " And they started asking them to do things that was out of their depth and that customer ended up coming in and helping them with the resources and introducing them to the processes via certain things.

(00:21:30):
So I do agree with you, but that generally, if it's a run of the mill customer, you're used to doing it, then they shouldn't be able to come in and dictate. But there are plenty of opportunities where customers have made vendors so much better and everybody's happier for it.

Danny He (00:21:47):
Absolutely. I think it's always a growing experience. And I think what's interesting about that 3PL business is you might have one customer that does that, but you still have your other 49 customers of your 50 that need to be standardized and make things easier. And it kind of goes along with why we've architected our technology and our solution the way we did is there is a need to standardize a lot of the operating aspects of this, not because that there aren't exceptions to be managed, but your default should not be, how do we manage your exception? Your devault should be, "This is our standard and every exception should be handled as an exception." Where I think a lot of technology in space, they go the opposite direction, right? We can be infinitely customizable to all of your customers all the time. And that doesn't make a lot of sense because when you onboard within a new technology, typically you'll onboard a single time with that tech team, with that software, and then that's it.

(00:22:54):
And let's say you have 20 customers today and you get help onboarding your 20 customers, but tomorrow you might have 25 customers. And how are you going to onboard the next five? How about the next five? What about offboarding? So that's the difference I think between a true 3PLWMS and a legacy WMS is because there is this element of continuous onboarding and continuous integration that quite frankly, you don't have to deal with as a brand shipper, as a direct shipper. And so when we're able to standardize that onboarding process, the data that we need, the integrations. And in fact, for us, we actually handle all of the onboarding, technical onboarding for our customers, for our customers, meaning the warehouses and for their customers, we take care of all the integrations. When we do something like that, we take what, in our research and what we've talked to, one of the largest friction points in growth, which is that onboarding piece, the technical onboarding piece, we take that entire friction point away.

(00:24:01):
And so to that end, this past holiday season, 2023, where I think a lot of our peers in software, they kind of slow down on business development and in onboarding, we were onboarding all the way up until December 31st because we take care of the onboarding for our warehouse partners and because they have enterprise customers that want to start January 1st. And quite frankly, if you're an operator, you don't have the bandwidth to go and figure out technical onboarding for your customers and also fulfill 30,000 orders. Right. You just don't have the bandwidth for that. Even if you have the resources, I know some boutique 3PLs, they have an IT team and it's great. And guess what the IT team does when it's peak season? They're on the floor picking and packing because you need them and you got to get the orders out. You're getting 5,000 orders a day.

(00:24:56):
That's what you have to do all hands, right? That's what they call it.

Mark Taylor (00:25:01):
So tell me a little bit, I've got a decent amount of experience with 3PLs. I mean, so not 3PLs, WMS. I mean, we went with three before settling where we're at now. And tell me about a customer comes on and they start utilizing your soapbox. What's going to be the first difference? What is the experience like as a customer?

Danny He (00:25:31):
Yeah. So there's actually two sides to this when we onboard. We're always onboarding the warehouse, and that's a one-time onboard. We'll set up the map of the warehouse, the locations of the locations and bins and how you want to pick and pack and how you configure your pick and pack flows and such. You're receiving hours docs or all of the operational settings. But the true onboarding for us happens at a customer level. We onboard each customer separately. We take care of that because that's actually, we think about it from a data fidelity and an integration and a success perspective, that's really where you're successful is if you're able to get your customer's data seamlessly into your system and then send back relevant data to them, that's successful. So we actually handle that primarily because most 3PLs don't have the technical resources to do that or the technical proficiency to figure that out or just the time to figure it out, even if they're smart enough and they have the resources.

(00:26:36):
So we handle all of that on the warehouse side. On the customer side, what's unique about our platform is that we do act as an order management for them. So we're able to go and telegraph their orders across their 3PL, not just a 3PL, but their 3PL network. So we're able to create a really light footprint against a warehouse, a 3PL warehouse, provide full visibility and transparency into a shipper's inventory, shipment and orders within that warehouse, within that space, send that back out to the shipper, but provide an unlimited view of however many disparate and independent 3PLs there are. So you can almost think of it as each, rather than looking at each 3PL separately, we're actually connecting their network of 3PLs with a unified view while still providing them real data fidelity, like warehouse level, not like secondary, we're going to integrate into this, that and the other, like real, this is what the warehouse is doing in real time, not emails, not, "Hey, what's my inventory today?" Because you get that email out, let's say within two hours, that's still a two hour difference, two hour gap between anything.

(00:28:03):
And that's if you have the time to be able to respond in two hours, right? So for us, that set of having that shipper log in as an order management on our platform where on the other end of it, it's the warehouse using it as a WMS. I think that experience really just allows both the shipper and the 3PL to be able to focus on the operational needs capacities. And in many cases, the 3PLs, the growth initiatives that they can provide, to your point, the additional opportunities.

Mark Taylor (00:28:34):
Right. So when we first met, I'm going to characterize the way I think of Soapbox, so don't

(00:28:42):
Want to mess it up, but I'm going to throw that out there and then you kind of correct me or tell me where it's off. I interpret what you're doing is you're kind of acting as if ShipStation were to also track inventory and be a WMS. And so you're really helping on the side of people who utilize Soapbox or utilizing your shipping, like your shipping negotiated contracts, which it takes the burden off the 3PL to go and establish their own low shipping rates. And then you're also really offering, I mean, this is one of the biggest value adds in my opinion, is you're building these integrations between all the major marketplaces. And so if a warehouse or a customer or whoever wants to get on, so it's like from a customer perspective who's like, let's say, started something in their garage and now it's growing and they've gotten to the point where they need to split inventory, you're going to help them effectively by getting them really, really competitive shipping rates, but you can also say, "Hey, guess what?

(00:29:57):
We have these X number of warehous Houses in our network and it's about that time where you need to split inventory. And so we've got a warehouse here and then you can also send it to a warehouse in Illinois and West Coast, East Coast, West Coast, Midwest, whatever. And that's how you really help the customer, the actual brand owner. And then as far as the warehouse, the warehouse itself is from the perspective of that. So it's like you're not only the WMS, but you're also the negotiated rates and you offer this kind of simplicity in the integrations.

Danny He (00:30:32):
Yeah. I think that's accurate. I think the biggest value add for a 3PL, especially a boutique 3PL is that as a customer scales and grows beyond I think just their own footprint, what our software does, and especially what our network does for shippers is you don't lose that customer. If they outgrow you, that's because they're not outgrowing you for the region, they're outgrowing you for the nation from a coverage perspective. So what our platform does by unifying the data for a shipper, regardless of whether or not they use an independent 3PLs, is we're able to tie in one independent 3PL from the West Coast, another independent 3PL from the East Coast. Neither of them lose that customer to the other. The customer doesn't have to find this large national 3PL to be able to connect the dots here. And we do have customers that have gone through the exact life cycle that you've said.

(00:31:32):
We're self-fulfilling using our tool. And when you're a self-service customer, it's just an inventory management and shipping tool. That's very simple. As you graduate into using a 3PL, a single location, now it's just purely order management because you're no longer managing your inventory of the warehouses. You're no longer shipping the warehouses. And then as you graduate into that, into a 3PL, now it's just a single 3PL location to a 3PL network, you're still maintaining the same data regardless of the life cycle. So we have Fortune 25 companies within our customer base using us for their 3PL network and they've got dozens of warehouses and they're all disparate. Well, then if you kind of look at it from that lens, that's almost, in many ways, that's even harder to integrate with that because you're now one of three dozen warehouses. Are they really going to spend the time and resources to go and integrate with whatever system that you're going to have?

(00:32:30):
I mean, ultimately, it's an unfortunate truth, but the truth is, is that a lot of shippers, especially at an enterprise level, they view 3PL as a commodity, right? It is. And it's-

Mark Taylor (00:32:43):
I try to avoid those customers.

Danny He (00:32:44):
No, right. But certainly you find people who value commodity different, right? Certainly. But ultimately, it's still a commodity. And so how much resources are these companies really going to spend in illuminating the visibility and transparency in these 3PLs? 3PLs by nature have an obfuscation of data. It's a third party logistics. That means that whatever you see, however you're connected to them, it's still going to be a rear view of it. Even if you connected an ERP into a WMS, everything is happening after the fact, right? Everything has already happened in WMS and then it pulls into your ERP enterprise level. The

Mark Taylor (00:33:28):
Tracking number has already been generated.

Danny He (00:33:30):
Everything's already done.

Mark Taylor (00:33:31):
Yeah.

Danny He (00:33:32):
So that's the difference within our platform is they're logging into our platform. They're seeing in real time what's happening at the warehouse, across all of their warehouse network. And at a pretty nominal rate too, I might add, it's something that makes a lot of sense for large companies.

Mark Taylor (00:33:52):
So I guess if I'm following that point correctly, whereas let's say our system pushes information every 15 minutes, every 30 minutes, every hour, yours is happening constant, real time. Every time there's an impulse in the system, it's automatically reflected back to the customer's dashboard.

Danny He (00:34:11):
Yeah. I mean, it's their data, right?

Mark Taylor (00:34:14):
Correct.

Danny He (00:34:15):
Yeah.

Mark Taylor (00:34:16):
And so, okay, I see that. So our customers all have logins to the portal so they can look at what's going on. And if they care to look at it, then of course they could track it somewhat real time. But to your point, you have to go into another system. It's not maybe the home dashboard that's tracking all 30 warehouses. Well, it would be if we were just looking at North Carolina and our Southern California warehouse, they can track it, but the more complex it gets, the more challenging it is to keep tabs on that. But I mean, we are pushing, and I think most WMSs that are pushing that data back fairly frequently, like in 15 minute increments, hour increments, whatever it may be. Okay. I see what you're saying.

Danny He (00:35:13):
Yeah. I think there's certain things that do get updated like tracking, right? But what about freight shipments, like TMS elements, things that go in and out of your warehouse that you need to be coordinated with the transportation team on the shipper side?

Mark Taylor (00:35:29):
Yeah. So that's an interesting one, especially for us because most of our LTL shipments are going Amazon partnered carriers.

(00:35:36):
And so that relies on a ... We've loaded the stuff, we've gotten assigned BOL and somebody's ... It's within their ... That warehouse guy is going to close out the order. And then a part of closing out the order is scanning in the BOL or taking a picture and then uploading it to the attachments in the order. So a bit more manual, certainly, but I know there are systems out there and tools out there that are effectively, you take the picture real time and it automatically updates and you can close the order. So it's getting faster, but I mean, I can certainly appreciate the level of visibility you're talking about, like OMS, TMS, all that sort of stuff.

Danny He (00:36:23):
Yeah. And I think where within a warehouse, when the confines of warehouse, what is important to you and the data and metrics and analytics, that's pretty well defined. You know what you're looking for, you know what is successful and the data, all of that is ... That doesn't change customer to customer, but it does for your customer. And the success metrics for each customer, especially as they get larger are just totally different and they might be multifaceted. It's not just a single thing, right? It's just not like order accuracy. Also inventory accuracy, time to shipment accuracy. There's just like a lot of things that they need to be able to see. So as we look at, and as we work with upmarket customers, what we found is that those data points just aren't supported in the current WMSs to be able to accurately reflect that level of volume.

(00:37:25):
So I'll give you an example.

(00:37:29):
For the first three years of our business, we're building our software, but we were a 4PL. Effectively, we were drinking our own juice as we were building the technology. And earlier in 2023, we transitioned over to a full subscription, like a SaaS based model and we transitioned over our customers to the warehouse partners, and then we just purely focused on software. The first customer that we got, first enterprise customer that we got is a very large beverage company, one of the largest in the world. And they were actually a customer of a warehouse of ours that was on our wait list that was waiting to be a subscription customer. And what this warehouse told us was this beverage company has a substantial volume through them and everything was pen and paper. And so when you hear everything is pen and paper, you think analog, but you don't think like pen and paper.

(00:38:24):
Oh, this guy was like, he was literally pen and paper, as in they were doing 10 million units through this location a month and they were printing out the emails of everything going in and out and marking that piece of paper of what was going in and out and how much it matched. They would get a bill of lading, of course, and then mark the lot numbers and all that such. But then how did they get the data back to the customer? Well, at the end of every night, they would upload all of that data into a spreadsheet, but because they were warehouse operators, they didn't know how to work a spreadsheet very well. So each day was one sell. All of the data from a day's worth of work was in a cell. So they would have a spreadsheet with 30 cells filled in and that would be the 30 days.

(00:39:16):
And so when we met with the customer, we asked them like, "This is a little bit difficult. How do you deal with this? " It's like, "Well, this is what we have to do. We have 200 warehouses and we get reports from them every Friday for all of them, and this is how we reconcile our inventory and

Mark Taylor (00:39:39):
Shipments." So every one of those 200 warehouses was on pen and

Danny He (00:39:43):
Paper? Not all of them were on pen and paper, but they were all just manually getting the data feed through spreadsheets from all of them. Wow. And this is one of the top beverage companies in the world. Well,

Mark Taylor (00:40:00):
I have to believe that if it ain't broke, don't fix it from the perspective of the ... It must have been working. It might have taken an army to do it. And I'm saying that because in order to maintain a customer like that, price is right or services right or some combination thereof.

Danny He (00:40:19):
Well, I mean, the price was right. The service was serviceable, but the problem is that there gets to be a point where the data has to match. Certainly. And that's the biggest issue. Well, you can't ... So imagine if they got a data dump from 200 warehouses on a Friday for that week, for the past week, past seven days. Think about how long it would take to just normalize that data and throw it into the ERP. Once you threw it in the ERP, think about how long it would take to then figure out how to make use of that. So let's call it best case scenario, like two weeks, two and a half weeks. That means that their inventory view and their shipment view is two weeks behind, actuals versus projected. Now they have to then reconcile what happens within that two weeks every single day.

(00:41:12):
When you're running a multi-billion dollar company, I mean, that is broken, right? Certainly.That's broken.That was actually why we were brought in was, "Hey, we heard that this is a tool that can give us real time." Well, so here's the story with that warehouse is we went in, we met that customer with that warehouse on a Monday. We turned that warehouse onto our WMS by Wednesday, and by Friday, we were able to get a real time view for the customer within that warehouse.

Mark Taylor (00:41:39):
That's

Danny He (00:41:39):
Great. Within one business week.

Mark Taylor (00:41:43):
That's awesome.

Danny He (00:41:44):
Yeah.

Mark Taylor (00:41:45):
And how was the adoption of technology in the warehouse? Was there any pushback? Was there ...

Danny He (00:41:54):
Yeah. So no, there wasn't a lot of pushback because they were drowning. They didn't have locations. They have anything. It was just everything was being pen and paper written. They didn't have any system in there. So we helped within that timeframe. We were there, we physically went, we helped scope that out, build all of that, made it really simple process. Everything was just pallets and they didn't have a lot of SKUs coming in through it. So it was really easy for us to be able to mark everything off for it. We gave them a very rudimentary floor plan to be able to, at the very least, have general locations because they were getting 30 trucks a day. It was impossible volumes to be able to manually track effectively. And that's what we needed. We were able to help them figure out scanning as they were receiving, document the lot numbers as they were scanning, as they were receiving, figure out which location, general location those items were, and matchbound those pallets to outbound shipments as we needed it, which was also happening daily.

(00:43:00):
It was a 24 hour shift in this warehouse. We were able to get them trained probably within a couple of weeks. We got everything implemented, obviously within that week, but trained within a couple of weeks. And that was that.

Mark Taylor (00:43:17):
And this is all mobile app on Zebra or

Danny He (00:43:21):
Whatever? Yeah. They had scanners they weren't using because they didn't have a system. Basically, they inherited these scanners with the lease of the warehouse and they didn't want to pay the subscription for the WMS, which was ... I don't remember what it was, but it was very expensive. It was like $12,000 a month for this WMS. And so they didn't want to pay for that. So they had these old scanners, which were probably no less than seven, eight years old, and we were still able to load our software into them. It's an Android device, so we were able to load that in and still use that.

Mark Taylor (00:44:00):
That is a great success story. Nice feather in the cab moving forward as well.

Danny He (00:44:06):
Yeah. So that was our first enterprise customer. Within three weeks of that success story, they introduced us to their second warehouse and said, Hey, can we do this for another warehouse and another new one? And so that's how we've been able to prove out this network of ours because ultimately we're taking away a task that quite frankly, neither side wants to deal with, which is data reconciliation.

Mark Taylor (00:44:32):
So I want to dig into, you said you started as a 4PL. What was the thought process behind it and what was the thought process? Because I'm assuming you're not anymore.

Danny He (00:44:41):
Correct.

Mark Taylor (00:44:42):
And so what was the thought process about getting out of it?

Danny He (00:44:45):
Yeah, I think the reason we wanted to get into the 4PL1 was because I think the opportunities were just like there. I mean, I think at the peak of the pandemic, the matchmaking services between brands and 3PL, there just wasn't enough of it, enough that was able to kind of tie in technology. I think people were able to provide sourcing for capacity, but I think what it was missing was that technology layer. And so we did both. We already had the technology. It needed to be built out and fleshed out a little bit more, but the primary reason we launched it was opportunity, but more importantly, we needed to be able to know how this business ran. And for us, being a 4PL gave us some really, really interesting asymmetrical knowledge. We were able to become the shipper for the 3PL, where we were also the 3PL for the shipper.

(00:45:42):
And so by having this ace of ventricle knowledge, we were able to build technology that fit the requirements, the needs, and just become a value driver for both. No, it wasn't an assumptive thing. We were assuming what the customers wanted and we just built the technology. We were the customers on both sides. And so because of that, I mean, our goal was always to not have put our stamp on the 4PL space. It was always a learning experience to be able to get to our software to a point where it's commercializable, which is where we landed earlier last year. But yeah, I think just the opportunities that were available within that space was great. One of the reasons that we got out, outside of the fact that we felt that software was ready to be commercialized for warehouses and for shippers alike, beyond that, I think it was just 4PL as a business, it's very challenging.

(00:46:41):
There are a lot of operational pieces on both sides that you have to deal with while having no control over either one. And while I appreciate, I think 4PL's ability to help fill capacity for 3PLs, I think the business model is a little bit funky. Taking a percentage or a markup on everything, number one, just creates additional costs for the shipper, but two, more importantly, just as a 3PL, your margins are ... It's tough.

Mark Taylor (00:47:13):
The shipper in this case being my customer.

Danny He (00:47:15):
Your customers. Yeah.

Mark Taylor (00:47:16):
The person who owns the goods.

Danny He (00:47:18):
Correct. Correct. Okay. Yeah. I mean, your margins are already ... You're the service operator, right? You're the services operator. You're the people who are doing this. The lease is in your company's name. And it just, to be completely honest, it just never felt right for us to be able to say, "Hey, let's take a percentage of a storage just because we sourced the customer or let's take a percentage of this. " Understanding the value behind it, but it didn't feel equitable for the value we brought.

Mark Taylor (00:47:55):
Having worked with some 4PLs, there are some that just want to kind of serve up a lead and there are some that have extensive legal, they've got their own legal team that helps negotiate the contract. And I mean, there's no question I see the aspects of value. And of course, if you've been very successful at, let's say, raising money and you've got that social proof out there and you say that you vetted somebody and you did site visits and we're doing the legwork. I mean, I understand it and it's a very, very expensive way to give a referral.

Danny He (00:48:34):
Exactly.

Mark Taylor (00:48:35):
And it's kind of hard because you, I think from the 4PL's perspective, it's like, I don't think they're very specific about who their customer is because on the one hand, you have to have the 3PL and then because they have the space, they have the operations, they've got the insurance, et cetera. And on the other hand, you also have to serve a customer and make that customer feel like they're getting a good deal. And it really, they need operators to be very good and very attentive and receptive, responsive, not receptive, I mean receptive as well, but more responsive and offer a high level of service. But at the same time, you go back to the other side and you say, "Well, if the market's doing this, this is the deal that we're getting you. " But then you've got an above market 3PL taking a below market rate.

(00:49:37):
So it's a challenge. But I mean, I think I've had good experiences, I've had neutral experiences, not very many negative experiences, but it's certainly a ... If you can build your business, if you can build your business without them, obviously you're going to do that.

Danny He (00:50:00):
Yeah. Yeah. And I think the perfect example of this is like, look at Deliver 4PL through and through, but the value add that they provided wasn't in everything that you mentioned. It wasn't the fact that they were growth at all costs, right? They were subsidizing so much. There

Mark Taylor (00:50:22):
Are a lot of companies that do that.

Danny He (00:50:24):
I mean,

Mark Taylor (00:50:24):
And I've got an upcoming guest who part of the reason, I mean, I know him, he's a friend, but he also, part of his thing is that he said worst thing to happen to logistics is venture, is venture funding.

Danny He (00:50:38):
Yeah.

Mark Taylor (00:50:39):
And it has allowed ... I say that logistics and supply chain is an industry that's very bound by gravity and

Danny He (00:50:50):
Physics.

Mark Taylor (00:50:51):
I mean, physical space, and obviously we're all bound by ... We're all subject to the laws of gravity. But if I want to enhance capacity in a tech company, I can put another rack in the server rack, or another server in the rack

Danny He (00:51:04):
Excuse me.

Mark Taylor (00:51:04):
And you can double, triple your space in a matter of days, assuming you have the hardware.

Danny He (00:51:11):
Yeah.

Mark Taylor (00:51:13):
It's not the same with the warehouse. I mean, you've got lead times on pallet racking, you've got negotiations with landlords, et cetera, et cetera. And so it's a multi-month process typically to get more space on board. And then once you outfit a warehouse, you really slot yourself for the type of products that you're going to bring in. Are you a cross-stock operation or are you a pick and pack operation? Are you some combination thereof? So you have to be very, very thoughtful and intentional.

Danny He (00:51:43):
Yeah. And I think that's the part, that's the gap between, to your point, the gap between a 4PL and a 3PL is as a 4PL, you don't have that intentionality, you don't have that thoughtfulness. Your goal is to fill space. However it is, whoever's willing to take it, you just want that space to be filled. And I think it's an interesting business and I think it definitely works for those shippers that just, they just want to be able to have pre-qualified and just make it as easy as possible. It's an easy way to be able to vet certain things, which is fine. But I think where what I've seen and from our experience and from talking to our 4PL network when we had our 4PL, our 3PL network, was there's very few scenarios where it doesn't put a little bit more strain on the 3PL.

Mark Taylor (00:52:47):
Yes, absolutely.

Danny He (00:52:48):
And I think the one thing that we have, me personally, I've sympathized about having run a warehouse is it's already hard enough as it is to run a warehouse. When we talk to 3PL operators, it's not the same as talking to a brand. It's not the same as talking to a software company. These are, regardless of how sophisticated they are, it's blue collard work. And there's just something in my DNA that has a really hard time with putting this unnecessary burden on people who are actually, to your point, bounded by gravity. They're the ones that are walking on the moon and we're saying, "Hey, we're here to collect your

Mark Taylor (00:53:37):
Taxes." Yeah. So I do want to dig into your point though. So your point about deliver being a pure 4PL play and I mean, they did to give them credit though. I mean, they saw that Walmart's this behemoth that can be so much better in e-com and then they made and they didn't have a good third party system like an FBA type thing. And so they moved in to try to help with that as much as they possibly could. And as far as the founders of DeliverGo, well played.

Danny He (00:54:18):
Yeah, right?

Mark Taylor (00:54:20):
Shopify, on the other hand, did not make good decisions with that one.

Danny He (00:54:24):
Well, I think I don't know if this is a place to share conspiracy theories about all of that.

Mark Taylor (00:54:33):
Let's go.

Danny He (00:54:34):
Yeah. You want to go there? All right. Here's my thought on this. I think that Shopify never cared about Deliver. I think Shopify cared about Flexport. So you think about what happened in the last 18 months, Shopify bought Deliver for $2 billion, and then they turned around and sold Deliver to Flexport for 20% of the company.

Mark Taylor (00:55:00):
Yeah. Okay. The

Danny He (00:55:01):
Numbers

Mark Taylor (00:55:01):
Are close. Yeah.

Danny He (00:55:02):
Yeah. So whatever the numbers, exact numbers are. But then you look at who did the deal at Flexport, and it wasn't the founder. It was this new CEO that came in, guess what, from Amazon and that had partnered with Shopify. Okay. Well, now Shopify wanted to go upstream more on supply chain side, right? And Flexport's really, from a tech supply chain perspective, they've got that locked down pretty well. They're one of the larger guys out there for it. How do you buy into a supply chain company without buying into a supply chain company? You give them deliver, which is what Flexport wanted. Flexport wanted more of the life cycle of package handling. They wanted the transit. That's what they care about is the transit of things. They don't care about the warehousing. They care about the transit of things. So my theory has always been that they were over leveraging deliver for something else, and that's something, in my opinion, ended up being Flexport.

(00:56:17):
Again, total conspiracy, but-

Mark Taylor (00:56:21):
Well, I mean, I don't think there's a conspiracy. It's an interesting ... It's a theory. And I think the problem on the Shopify side is those are all still ... Nobody knows ... I don't think they've taken funding, but I mean, Flexport's last funding round that I am aware of, I think was 22 maybe, they were valued somewhere between seven and $8 billion.

Danny He (00:56:47):
Eight billion. Yeah.

Mark Taylor (00:56:47):
Yep. And then now ... I mean, so Shopify effectively got 20% or whatever the actual, the

Danny He (00:57:01):
17,

Mark Taylor (00:57:01):
18, whatever is 20%, around 20% of Flexport had an $8 billion valuation, which is $2 billion, but they're not worth $8 billion anymore. I mean, maybe somebody's willing to write that valuation or subscribe to it.

Danny He (00:57:22):
Yeah. I think that part is, like I said, nobody besides the people who are part of the deal knows actually what went down. Sure. But I think the point to that is Shopify, I think when you look at Deliver, the value that they provided was capacity management. Their business model, quite frankly, wasn't sustainable. They were subsidizing a significant amount of the warehouse fees. And we knew that as a fact, because on their main page, on the front of their page, the front of that page, it was pick and pack and shipping starting at 495, all in 495. That was what their cost was, maybe 395 or something. It was like something 95. And coincidentally, it's the price of commercial CPP, commercial plus pricing for USPS. It's that price, that's that base price, which means that if you're shipping the lowest cost carrier, which is commercial plus commercial pricing for USPS, you have all of the fulfillment fees, the dollar, whatever in storage that's being subsidized-

Mark Taylor (00:58:35):
Poly bag the box.

Danny He (00:58:36):
Yeah. It's being subsidized by somebody

Mark Taylor (00:58:38):
And

Danny He (00:58:39):
It's being subsidized by deliver, right? So how do you build a business off of subsidizing all of your operational costs for your customers?

Mark Taylor (00:58:47):
Well, you convince a lot of people who invest off of eyeballs and things like that, that supply chain is the same.

Danny He (00:58:56):
Yeah.

Mark Taylor (00:58:57):
And- It's

Danny He (00:58:58):
Crazy, right?

Mark Taylor (00:58:59):
Yeah. I mean, and at some point when enough money's evaporated, everybody looks up and says, "I don't think it's quite the same."

Danny He (00:59:06):
Yeah, no, it's not the same. I think it's not the same. We see a lot of these different companies that try to extrapolate, to your exact point of venture going into supply chain, they have the same lens of venture, like hot venture businesses applying it to supply chain. So now the big thing is the gig work of last mile. That's the big thing. There's so many companies looking at the Uber here. We're going to be the Uber for last mile services, but here's the difference between being an Uber of last mile services and actual Uber. If you're an Uber driver, you get to choose when you work. That's it. That's the only difference. If you are a gig worker, That's in fulfillment. You don't get to choose to fulfill that package or not. You got to get that out. There's no such thing as, "Hey, I'm on vacation today.

(01:00:09):
I'm not going to go and fulfill your packages." When everybody's on vacation, that's your peak. It's the opposite. You can't apply gig work to something like this, to supply chain. But that's the point is it's hot in venture. You're going to get a ton of money.

Mark Taylor (01:00:30):
Well, okay. And there are a couple delineations. There are some funds out there. Cambridge Capital comes to mind that are specific to supply chain and get it. I'm not lumping them in with every other fund out there. There are some people who totally get the places where you need to put the investment and they are operators. So I don't want to lump just all venture

Danny He (01:00:58):
Into that. We're venture backed. So we are venture backed. Our investors get it, but

Mark Taylor (01:01:05):
Yeah. Now the other side of it, there are ways in which I think some people being Amazon in this case, there was a segment on the Wall Street Journal that was the shipping wars. It's like a seven or eight minute video. You can find it on YouTube where they've gone from having these two to now. I mean, we've got our five million or four point something million square foot facility in Ontario now, but they're going to much smaller buildings where they're doing everything. And the whole idea was that their average click to dock, click purchase, buy button to dock is like 11 minutes. And they're implementing Uber-like drivers to come in, take some orders and go deliver those orders. And then they truly are gig workers in the sense that they are choosing to go and do a route.

Danny He (01:01:59):
Exactly. That's different.

Mark Taylor (01:02:01):
That's different.

Danny He (01:02:01):
That's different.

Mark Taylor (01:02:02):
And they're also the outside, they're outside of the walls of the warehouse.

Danny He (01:02:06):
Yeah, exactly. When I'm talking about supply chain, I'm talking about inside the walls of a warehouse where companies are looking to take fulfillment and take your home and make it a fulfillment center.

Mark Taylor (01:02:23):
Yeah.

Danny He (01:02:24):
Right?

Mark Taylor (01:02:25):
Yeah.

Danny He (01:02:25):
How crazy is that?

Mark Taylor (01:02:26):
It's wild.

Danny He (01:02:27):
Yeah. It's wild. I mean, without saying the dollar amount, you have a seven figure insurance for your warehouse. Yeah. You know why? Because every 3PL has a seven figure insurance for their warehouse. Yeah. Doesn't matter how small it is, it's seven figures. So the idea of sending my products over to some person's garage for them to fulfill, and this is where I'm going to fulfill it. Like I said, I mean, as an Uber driver, even as a last mile driver, last mile driver, you still get to choose when you work. But let's say I have my inventory in Aunt Susie's house somewhere in LA and Aunt Susie decides to get sick and can't fulfill my orders. Now what? What if Aunt Susie wants to go to Disney World for the holidays? Now what? There's just certain, I think, interesting trends that just quite frankly, you have to stay in your lane for certain things.

Mark Taylor (01:03:33):
So I guess I'm not as aware of people other than small business owners themselves running their own homes as fulfillment. I guess I'm not as aware that people are doing micro fulfillment out of their homes

Danny He (01:03:44):
On behalf

Mark Taylor (01:03:45):
Of other people.

Danny He (01:03:46):
Yeah. There are companies that are building out entire networks that are getting venture funded, like a ton of venture funding for this concept without having the understanding of having to work with any actual large scale 3PL.

Mark Taylor (01:04:01):
Oh, okay.

Danny He (01:04:03):
Interesting, right?

Mark Taylor (01:04:04):
It's very interesting. I wonder what happens when a feeder truck starts showing up, 28 foot truck in the residential.

Danny He (01:04:13):
Yeah, right. Like in somebody's town home.

Mark Taylor (01:04:15):
Yeah.

Danny He (01:04:16):
Yeah. Obviously it doesn't work for the larger companies and larger customers like that. It's the idea of like, can you democratize hyper local fulfillment?

Mark Taylor (01:04:28):
Got it. So you're saying that there are these Airbnb of fulfillment, these like, let's put the power in the neighborhoods of people

Danny He (01:04:35):
Who just want to ... Yeah.

Mark Taylor (01:04:36):
Okay. I see what you're saying.

Danny He (01:04:37):
Yeah. Yeah. Which I think in theory, conceptually, it makes sense, but then in practice, it doesn't. Vacation. Yeah, I

Mark Taylor (01:04:50):
Get

Danny He (01:04:51):
It. I get it. That's just what it comes down to. So it's really interesting that when we talk about venture and how they view supply chain logistics, I think it's two-sided approach because for us, we've raised money, venture money, we're going to continue raising venture money. And on the one hand, you have companies that bank on these, I think, very tech-centric, tech-oriented, really hot topics within investments, apply it into supply chain with no operational experience that just ... They mess it up for everybody, basically. They mess up the valuation because it's like, that's fake. That's not scalable. It's not a real business. That doesn't work. And it just messes up the entire market for supply chain and real supply chain businesses. But then on the flip side, you have these venture guys that are also trying to do the same. They're also trying to bucket supply chain companies into what they know and what they're comfortable with with venture.

(01:05:59):
Like, "Oh, these are the metrics that we see everywhere else. These are the things that are hot in other industries." So you should do things more like them, not understanding that there's this level of groundedness. And to your point, the gravity of, well, yeah, that's great, but where the digital meets the physical and the wheel meets the pavement, that is a lot more expansive within supply chain than an Uber.

Mark Taylor (01:06:29):
Yeah. I think that makes sense. So switching gears a little bit, what are some of the big trends you're seeing? So I mean, Amazon has been so dominant for so long, they're going to remain dominant for a long time, but you also have Walmart starting to nip at the heels, they're starting to get a lot more aggressive. Target's a little, we're not sure about Target yet, how exactly they're going to react. TikTok fulfillment is coming in hot and heavy. I don't know if it's Shane or Shine. S-H-E-I-N?

Danny He (01:07:04):
Shine.

Mark Taylor (01:07:04):
Shine?

Danny He (01:07:05):
Yeah.

Mark Taylor (01:07:05):
Okay. So Shine and then Tamu.

Danny He (01:07:07):
Tamu, yeah.

Mark Taylor (01:07:08):
So what are we ... And then there's live commerce is another big one.

Danny He (01:07:12):
Yeah. That's interesting. Doug McMillan, just this past week was in a TV morning show talking about Walmart fulfillment, like e-commerce and Walmart fulfillment services and the investments that they're going to make in the coming years, how it's like a top priority basically for the company and pushing that through. And I think you're going to see some pretty interesting things coming out of Walmart. Their investments, I think they're starting to do something that they were maybe hesitant to do previously, which is they're starting to invest internally in their solution rather than purchasing something. So they bought Jet and that I don't think that turned out the way that they thought that they partnered with Deliver with 4PL, which was kind of okay, but then it still didn't leverage their strength, which is they have 3,000 plus retail stores. They have dozens of distribution centers. They have a major, major real estate footprint.

(01:08:26):
They just never took advantage. They never looked at it from like the ... Maybe they did. I don't never say never because I'm not a part of obviously Walmart team, but I think they are really seriously looking into their existing infrastructure to leverage all of that.

Mark Taylor (01:08:42):
Certainly.

Danny He (01:08:43):
Yeah. So you'll have that.

Mark Taylor (01:08:46):
Well, they had their trucking. I

Danny He (01:08:48):
Mean,

Mark Taylor (01:08:49):
They've had it for years. They've had, as you say, the DCs. The interesting thing I always thought about Walmart, and I learned this when I'm very first getting into the industry, is that I thought, "Man, it'd just be so easy for them to just start doing what Amazon's doing." But no, because they built every single one of those DCs to be pilot and pallet out operations, no direct to consumer fulfillment out of there. And so you almost have to build an operation right next door that is much more focused on that, if you're going to try to emulate

Danny He (01:09:21):
The

Mark Taylor (01:09:22):
Amazon FC network.

Danny He (01:09:23):
Or carve out an existing footprint within your existing distribution centers to do something, have a dedicated zone for it. Yeah. That part I think is interesting, but I think there's another shift that, and you brought this up to an extent from a marketplace perspective, the Shines and T-Mobile of the world. There's two parts that I want to talk on that. One is the customer base that's associated with that, and the second is the supply chain. So the customer base, and I don't mean the end customer, I mean the merchants. So think about Amazon 10 years ago versus now. 10 years ago, you were typing in a brand and you would recognize the names of the brand on Amazon, and now you would type in anything, any commodity, and you don't know what anything it is. It's like a bunch of overseas brands and they're like, "I don't understand any of this stuff." They've almost over commoditized everything.

Mark Taylor (01:10:26):
It seems like, and this is my own purchasing behavior, if Amazon to me is going online and it's like your virtual Walmart meets Target, meets Home Depot, and meets Barnes & Noble.

Danny He (01:10:42):
Meets Swap Meet, because you don't know where these goods are coming in from. No,

Mark Taylor (01:10:46):
No,

Danny He (01:10:46):
No.

Mark Taylor (01:10:47):
That's fair. But I mean, if it's a household commodity, or there are certain things, but I mean, if it's something that you would find in one of those type of big box stores, it's just so much easier to go online and search for it. All of the gifts I bought this year were directly marketed to me, whether it was on LinkedIn or something that popped through on Instagram or something along those lines, everything I ended up buying for other people, which I'm not a huge gift person.

Danny He (01:11:18):
Yeah, me neither.

Mark Taylor (01:11:19):
So

Danny He (01:11:20):
I

Mark Taylor (01:11:20):
Mean, I bought like two gifts this year, and then I bought a couple of things for myself, but all those things were bought directly from their website.

Danny He (01:11:30):
Yeah. Directly from the brand's website? Yes. Not from Amazon. Yeah. So I think that's the ... I don't want to say the right way to do it because that's not ... Well- You want to support the brands, basically.

Mark Taylor (01:11:46):
I certainly want to support the brands, but I'm just ... How they're making it through the noise, how they're cutting through the noise though, to my point is like, you don't get on Amazon and they serve you just a random thing. I mean, they kind of do, but they're not serving you, "Oh, I look at this thing and oh, next thing I look at is this unique thing."

Danny He (01:12:10):
A

Mark Taylor (01:12:12):
Lot of these companies are investing in their own media, not just pay-per-click, not some little infomercial thing that you can get on Amazon enhanced content or anything like that, but literally look at this problem. I mean, they're doing it in Instagram reels,

Danny He (01:12:28):
They're

Mark Taylor (01:12:28):
Doing in that real format.

Danny He (01:12:30):
Or TikTok. Yeah.

Mark Taylor (01:12:31):
Yeah. Fortunately, I've not succumbed to-

Danny He (01:12:34):
I don't have TikTok either. Hey.

Mark Taylor (01:12:36):
Look at us. Yeah. I haven't succumbed to that, but the people that are making it interesting, they're making it cheeky. I hear about people mentioned on a podcast or this or that. It's like I'll check them out. It's like, oh, that might align with my thing with the way I view myself. And so I go after it that way, but all the, my Ms. Meyers dish soap or my-

Danny He (01:13:04):
USB extension, phone charger, right?

Mark Taylor (01:13:07):
All those things? Yeah. Yeah, Amazon all day.

Danny He (01:13:09):
Yeah. And it's interesting because it's not just Amazon basics anymore, right? That program has almost disappeared in favor of these gray label items that I feel like are Amazon driven and Amazon, I don't want to say controlled, but it's almost as if Amazon said, "Hey, here is some of the top things to a group of manufacturers and they're just importing a bunch of these things in. "

Mark Taylor (01:13:38):
So when we started, so I got into this by being a third party seller on Amazon and it was a couple years later that I figured out we needed to have our own supply chain situation. And at that time I couldn't find 3PLs who were willing to work with such a small person without a minimum spend, that kind of stuff. So that's why I started Warehouse Republic. So fast forward and at the time, I don't know how many of the third party sellers were located in China, but it wasn't nearly as many as there are now.

Danny He (01:14:20):
No. It was what, 10 years ago? 2016.

Mark Taylor (01:14:22):
2016.

Danny He (01:14:23):
Well,

Mark Taylor (01:14:23):
2015

Danny He (01:14:24):
Is

Mark Taylor (01:14:25):
When we started. And at the time, I remember speaking to my old business partner and saying, "The Chinese sellers will never..." We know we're working with trading companies. We're rarely working directly with the factory, but they're never going to figure out how to market to us. I was so fricking wrong and now you would be hard pressed to find this, but I have know a friend in Amazon who said that third party sellers are 80% represented by Chinese now.

Danny He (01:14:56):
Yeah. And I think that they've made the barrier for it so much lower. And I think it's actually been empowered by Amazon to a degree.

Mark Taylor (01:15:05):
It has, I think, I believe that to be true. And I don't think the number of ... If you just look at the cost structure, you have a $15 item, 15% of it comes off the top from Amazon, the referral fee. Let's say if you're lucky, a dollar pay per click comes off and those products might be 250 to land, 250 a unit. You can make, in the grand scheme of things, the third party seller, American person sitting in Iowa, Texas, wherever they want to be, could walk away with four or $5 a product. And that's a pretty low price product. And this was back when we started. Now, you've got these trading companies sitting there and they're like, "Wait a minute, I'm just making $1.75 a unit, but it's being sold for 15

Danny He (01:16:05):
A

Mark Taylor (01:16:07):
Unit." So they have a whole lot more cushion that they can come down and they make a lot more money. So it's this natural progression of continuing to try to serve the customer as quote unquote good as possible, but it's also at the expense of all the entrepreneurs that were created or the small businesses that were created in the United States. Now, I'm not saying that there's still not people employed because there certainly are, but this whole spirit of entrepreneurship for the American third party seller has been outsourced to China now.

Danny He (01:16:40):
Yeah. Certainly for products that can be commoditized, right? Yes. I mean, yeah, that's certainly the case.

Mark Taylor (01:16:47):
Well, I mean, but there are other things. There are other criticisms where it's like if you look at like ... So let's say you come up with the perfect pushup and you trademark it and you get it made ... Let's say you invest in the plastic injection molding and you do it all here in the United States, which is unlikely, but let's say you do. Somebody in China is going to look at that and they're going to start knocking it off and there are ways to prove that you have the trademark and to go after them immediately, but it is such a heavy lift for a small brand to do that, that it's like it's not typically ... I mean, it's much harder than you would think to protect your brand. And Amazon makes it somewhat easy, but not super easy. I mean, because at the end of the day, they don't really care who sells.

(01:17:44):
They just care

Danny He (01:17:45):
That

Mark Taylor (01:17:45):
The product is sold.

Danny He (01:17:47):
Yeah. They almost ... It's kind of interesting. I have this friend that I talked to about this and we talk about how competition breeds innovation, but over competition kills it for this exact reason, right? Because how do you compete with whatever it is? How do you compete with the idea that whatever it is you think is going to be great and unique is going to get knocked off immediately for a company that cares more about the product sales than the brand. And so there are a couple companies obviously that have just broken through in the years like Scrub Daddy comes to mind.

Mark Taylor (01:18:31):
Scrubdaddy is ... Yeah.

Danny He (01:18:32):
Yeah. I mean, Scrub Daddy is just, it's just the simplest thing. It's a sponge with a smiley face. It's the easiest thing to knock off, right? But at the same time, it's Scrub Daddy. I've never even seen a knockoff Scrub Daddy online. That's a good point.

Mark Taylor (01:18:49):
I've never looked. I'm sure they exist, but the knockoff has not broken through the noise.

Danny He (01:18:54):
Right, right. Exactly. So it's almost, to your point, I think branding and marketing, you just mentioned that in your holidays, the only things that you bought were directly marketed towards you, directly marketed towards you. So you cut through ... So there's still a possibility to do that, but it kind of goes into my second point of ... I mentioned the first point is just the fact that you have this oversaturation of these products. Well, then now you have this oversaturation of these vendors that are selling products and putting it into warehouses that are displacing all of the other customers' products. And that's, I think, something that is from a supply chain impact perspective, I think that is much larger in the grand scheme of things than the marketplace aspect because ultimately that just drives up the cost of supply chain for everybody. If 80% of the third party sellers on Amazon are represented by overseas Chinese manufacturers, then I would say it's a pretty good assumption then to say that 80% of FBA is also filled by those customers.

(01:20:08):
And

Mark Taylor (01:20:10):
Having ... I think the numbers of Amazon's revenue that comes from third party sellers are still in the 60s.

Danny He (01:20:17):
Okay.

Mark Taylor (01:20:18):
Yeah. But of the third party sellers, and like I said, you would be very hard pressed to find that 80% number. That's just what somebody who works there mentioned in a conversation. So it's like you kind of have to ...

Danny He (01:20:34):
I think that's probably accurate. If you said a USB charger, you searched USB charger, how far down a listing would you have to go to find a brand that you would recognize? Probably quite a ways. Yeah. I mean- And how many listings would they have?

(01:20:50):
One. Yeah. Right? They would just have one, but then you would have literally hundreds, maybe thousands of listings counterpointing that. So then you kind of, okay, well, so I would then say maybe it's actually even more than that. You might have 80% of the sellers as third party, but you might have 90% of FBA that's three Chinese companies because they actually don't have the capability to have their own fulfillment here. They have to use a third party. So they can either go and choose a 3PL or they could just ship it straight to FBA, right? So they're going to ship it to FBA because that's what they're selling. Why would they go to a third party, get a third party? They wouldn't do that. They would just go into FBA. So one interesting thing about these companies and these manufacturers, one advantage that they have that unfortunately, a lot of US companies just don't have this is they don't care about their inventory.

(01:21:49):
If it gets lost in the ether and it just happens, it's just one of a thousand products that they're selling.

(01:21:57):
It's just one of a thousand. And if I have to abandon my inventory here, that's what I'm going to do. It's no skin off my game because I've sold 20% of my inventory, I've already made the money for 100% of it. Everything else is just whatever. So how does that not jack up the price for everybody else? When you have people who don't care about squatting on the space and they don't care about paying the penalties, and you know what? Abandoned the inventory, fine. I don't care. I don't care about that. Well, if it's your brand and your products, you would care about that. If you have five products that you're selling, yeah, you do care about that. But when you're a manufacturer that has a thousand products and this is just one of them or five of them, why would you care?

(01:22:40):
And so then you kind of think about, okay, how do you then even support an infrastructure? Do you even separate the two to say like, these are import exclusive items and these are US only items to the point of what the trend looks like in the future, what is the future going to look like here? I think we're going to start seeing those things come top of mind in supply chain logistics to say, is there any level of nationalism that we can do to protect the brands in the US that can say, "Hey, this is an actual US company. How are you incentivizing other companies within another country to overtake this so easily?" So I think you're going to find maybe some, maybe not restrictions, but something that's going to help with protecting nationalism and US brands in the US.

Mark Taylor (01:23:36):
So that's a nice little segue to section 321 fulfillment.

Danny He (01:23:39):
Yep. So we just signed our first three, two, one warehouse on our WMS January 1st.

Mark Taylor (01:23:47):
Congrats.

Danny He (01:23:48):
Thank you.

Mark Taylor (01:23:49):
So are you of the mindset because the argument is that Shines and the Tamus are eating the lunch of the Amazon of the world because it's like they're not importing a container, they're sending singles, but there's also regulation around three, two, one, where it's like you're only allowed to send one product per day. So there's this really interesting thing where it's like, are they just signing thousands of sellers or thousands of different accounts and then just importing, or it'd be a lot more than thousands, obviously.

Danny He (01:24:23):
Well, you're only allowed one ... The one buyer is allowed one import a day. The seller can sell as many as you want, but one buyer can ... Yeah. So to this home, I can buy one three, two, one item a day, but the seller can sell as many as they want.

Mark Taylor (01:24:42):
So if you start talking about nationalistic policies,

Danny He (01:24:46):
I

Mark Taylor (01:24:47):
Mean, if you're Amazon, you want that three, two, one close.

Danny He (01:24:51):
So from what I understand, the biggest lobbying against 321 is Amazon, Walmart, and Target.

Mark Taylor (01:24:59):
Of course,

Danny He (01:25:00):
Because it just-

Mark Taylor (01:25:01):
It eats our lunch.

Danny He (01:25:02):
Yeah.

Mark Taylor (01:25:03):
It's 20% discount immediately. I mean, well, not maybe 20%, depends on the good, but it's importation.

Danny He (01:25:10):
Yeah, it's importation, regardless of how you look at it. But at the same time, it's tough to get around because a lot of large brands are also taking advantage of 321 cross border nearshore. So the first 321 warehouse we signed is in Mexico, it's on the border, and they work with substantial brands, very, very, very, very, very big bands, which now become our customers because everything rolls through the system, which rolls through our system. And so we're kind of getting an inside view, inside track of what this means within this ecosystem. On the one hand, kind of going back to the ecosystem of, it's kind of a problem that Amazon and Walmart created on their own because by making their marketplace so accessible to these third party sellers, and Walmart's actually, in many ways, much worse than Amazon in terms of their marketplace, it's kind of a mess.

(01:26:14):
You can't even filter well through quality. There's no recommendation. It's just like, here's a red dress, and then you have all these red dresses, and it's just thousands of red dresses. So it's a mess. But because of that, because they've kind of injected their own supply chain and their own ecosystem with a bunch of these third party sellers, that's made it effectively untenable and just unnecessarily expensive for their US-based companies, they've almost kind of created the necessity of having three, two, one because they didn't guard their domain for the US-based companies, if that makes sense. And so I think it's kind of like they have to look at themselves and say, "Hey, how much more are we going to support these overseas companies filling up all of the lanes for supply chain?" And then also say, "Hey, by the way, if you don't want to use us, you're not allowed to use another service that's competitive." It's competition.

(01:27:21):
That's what it comes down to. And it's not ... I personally think that, yeah, I think Amazon has a big part to do with it. To your point, 80%, man, that's a lot. 80% of third party resellers, well, that's 80% of people that quite frankly don't care about the ecosystem. They care about making money. Totally fine. There's nothing more capitalistic in the US than having Chinese sellers come in and sell their products in.

Mark Taylor (01:27:50):
Especially when, if you try to go sell there-

Danny He (01:27:53):
Impossible. Yeah,

Mark Taylor (01:27:54):
Exactly. Without a JV.

Danny He (01:27:57):
Exactly.

Mark Taylor (01:28:00):
What do you know about TikTok fulfillment at this point?

Danny He (01:28:04):
Yeah. A surprising lot that I can't share.

Mark Taylor (01:28:11):
I guess it means I'm just going to have to have you on again.

Danny He (01:28:13):
Yeah. A surprising lot that I can't share. We've been in a discussion with TikTok since before they launched TikTok e-commerce and they have some very, very sharp folks over there. I think it remains to be seen how it's going to get deployed because it's a 4PL network that they're deploying through this. And they want to apply a lot of the e-commerce, foundational e-commerce logistics and supply chain that worked in China here, remains to be seen how effective it potentially can be. But here's the thing, nobody's just selling on TikTok. If you're selling on TikTok, you're selling in a bunch of other places. So anytime I hear a specific, this storefront is launching their fulfillment, well, that's great, and that's going to be a great value add for your existing customers, but it's almost a guaranteed thing that your existing customers are not just selling within your platform.

(01:29:22):
So I don't think it's going to take away from the boutique 3PLs of the world. And in fact, it's just going to be another plug into the ecosystem. It's another storefront.

Mark Taylor (01:29:34):
Yeah.

Danny He (01:29:35):
Yeah.

Mark Taylor (01:29:36):
Well, I'm certainly going to look forward to, as those things develop and as you can share them, look forward to learning more. And this was a lot of fun.

Danny He (01:29:48):
Yeah. Thanks for having me.

Mark Taylor (01:29:49):
Oh, thanks for making the time, as always.

Danny He (01:29:52):
Yeah.

Mark Taylor (01:29:52):
Anything, website, how to contact, how to follow, throw anything else out there that anybody Everybody might be helpful so people can get in touch with you. And of course, if anybody reaches out to me, I can forward on any kind of contacts.

Danny He (01:30:06):
Yeah, I appreciate that. Yeah. So thank you for the time again for this. If you are a company that's looking to have visibility into your existing 3PL infrastructure, if you're a 3PL that's looking for streamlined WMS, or if you just want to be able to consolidate your operations, please visit us at www.soap, S-O-A-P-B-X.com. We are a all- in-one stop technology platform. And I think we are a great value add, whether you're a small business fulfilling out of your home or a multi-national enterprise. We have customer bases in both and we provide equal value for all of our customers. So thank you.

Mark Taylor (01:31:04):
Absolutely. Well, all right, everybody. Thanks for listening.

Mark Taylor

Host