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In this episode, we have our guest Harry Mosner from Reshoring Initiative, who discusses how to compute the total cost of ownership of reshoring initiatives. He also shares several stories of manufacturers where they could reduce the costs and increase sales through reshoring initiatives. Finally, he sheds light on manufacturing verticals and components that benefit most from the reshoring initiatives.

Chapter Markers

• [0:19] Intro
• [2:30] Personal journey and current focus
• [4:02] Perspective on growth
• [5:36] How reshoring can help
• [7:42] Offshoring vs reshoring
• [13:11] TCO computation for ERP initiatives
• [14:03] Profitability because of reshoring vs offshoring
• [16:31] The process for sourcing from China
• [19:31] Mexico vs China sourcing
• [29:16] Resourcing resources for manufacturers
• [30:43] Closing thoughts
• [31:34] Outro

Key Takeaways

• 66% of companies look only at the FOB price. They don’t even look at the landed cost. And so by looking only at the FOB price, they are ignoring duty freight packaging, carrying cost of inventory, no travel costs, intellectual property risk, the benefit of having engineering and manufacturing close to each other, in the same time zone speaking the same language able to improve the product and the process together, the risks may be to stock out.
• 80% of consumers say those US consumers say they’ll spend 10% or more extra forum made in USA product as opposed to say a Chinese product.
• The reason why businesses might not be computing the landed cost at this point in time is that the model could be too complex. But at the same time, when you look at maintaining the ERP system or maintaining the IT system to be able to compute that, then you are going to require more manpower, you are probably going to require system, and so there is going to be some cost associated with that tool.
• The US is 97% dependent on imports of apparel and footwear. And that seems seen as a trend back partially driven by automation, that’s making it a little more competitive to produce those things in the US. The average consumer appears to be favoring domestic consumption because of the benefits of the environment and sustainability, and things like that.

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About Harry

Harry is the founder of the Reshoring Initiative after being president of GF Machining Solutions for 22 years. His Awards include Industry Week’s Manufacturing Hall of Fame and his active participation in President Obama’s 1/11/12 Insourcing Forum. He is also a member of the Department of Commerce Investment Advisory Council. Harry is frequently quoted in the Wall Street Journal, Forbes, NYT, New Yorker, and USA Today and seen on Fox Business, MarketWatch, and other programs. Harry holds a BS and MS in Engineering from MIT and an MBA from the University of Chicago.

Resources

• Connect with Harry
  • LinkedIn | Twitter
• Connect with Reshoring Initiative
  • Website | Blog | Twitter | LinkedIn Group | Facebook

Full Transcript

Harry Moser 0:00

So the companies go from looking at just the FOB price or price to add 25-30 other costs and risk factors. And when they do that, they see that in many cases, they’ll be more profitable, producing the product in the marketplace.

Intro 0:19

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:55

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

It’s very rare to relate reshoring initiatives with cost savings and sales growth. It’s typically the opposite. However, if you account for all the costs and risks involved with offshoring or nearshoring, including geopolitical risks, reshoring initiatives can outgrow a company.

In today’s episode, we have a guest Harry Moser from the Reshoring Initiative, who discusses how to compute the total cost of ownership of reshoring initiatives. He also shares several stories of manufacturers where they could reduce the cost and increase sales through reshoring initiatives. Finally, he sheds light on manufacturing verticals and components that benefit most from the reshoring initiatives. Let me introduce Harry to you.

He is the founder of the Reshoring Initiative after being president of GF Machining Solutions for 22 years. His awards include Industry Weeks Manufacturing Hall of Fame and his active participation in President Obama’s January 11, 2012 insourcing forum. He is also a member of the Department of Commerce investment advisory council. Harry is frequently quoted in the Wall Street Journal, Forbes, New York Times, New Yorker, and USA Today and seen on Fox Business Market Watch and other programs. Harry holds a BS and Ms in engineering from MIT and an MBA from the University of Chicago. With that, let’s get to the conversation. Hey, Harry, welcome to the show.

Harry Moser 2:28

Great to be here, Sam

Sam Gupta 2:30

Just to kick things off, do you wanna start with your personal story and your current focus?

Harry Moser 2:36

Sure. So I grew up in Elizabeth, New Jersey, right across the river from the New York ancestral area. My ancestors were the original founders of New Jersey. And the biggest thing in town was the Singer Sewing Machine Company, which my grandfather worked at. My father ran a big part of the factory. The factory was the biggest factory anywhere in the world, in any industry at the time. And I went past five years ago, 10-20 years ago, actually, and the whole thing’s gone.

There’s no singer sewing machine made there anymore. Everything was important. So that personal background was the motivation for my eventually founding the reshoring initiative to bring manufacturing jobs back to the US. Growing up in Elizabeth, went to MIT, got two degrees in engineering, eventually went to the University of Chicago, got an MBA, worked in industry, starting at GE, eventually ran a large Machine Tool Company.

So a company providing CNC machine tools company’s name was Schar. It now is called GF machining solutions. So we sold EDM machines and high-speed milling machines, sold them all over North America, the US, Canada, Mexico. We had a great job, love the job. I was president for 25 years. And we had a wonderful, wonderful record. So it was an I’ve been blessed, have a great family and sons are professor, no great wife, no grandchildren. Everything has been very good.

Sam Gupta 4:02

Okay, amazing. So I definitely want to dig into your story a bit more. But before that, we have one standard question that we asked everyone. And that is going to be your perspective on business growth. What does growth mean to you, Harry?

Harry Moser 4:21

I’ve always been in, especially in sales and marketing. So for me, growth is more orders, bigger order book, but more, more business. And when I joined that company, we were sitting may be seventh in the industry in North America. And within about six years, we were number one, and our sales had tripled or quadrupled. So do growth. That’s my definition of growth. And this is an established solid industry. Not it wasn’t a startup, electronic kind of industry, or software industry.

So then the question is, how did we do that? When I got there, the company was a mess, heart treated the customers horribly. And I got to know the customers, got to know the Salesforce, listened to them all about what their issues were, what were the problems, what do we need to do better. I supported our team to achieve those things. And they understood, and it worked. And like I say, our sales tripled or more in six, seven years. So it was, it was a blessing to have that growth opportunity.

Sam Gupta 5:36

Okay, amazing. So your mandate is to make sure that companies are doing reshoring. Can you tell me how reshoring can help with the business, though?

Harry Moser 5:49

Our mandate is not to do reshoring. Okay, our mandate is to bring manufacturing back. For any given company we are in, our mandate would be to help them make a smarter business decision, which some of the time is reshoring. And some of the time it might be to offshore might be to go some to put the work somewhere else. So we’re not adamant about it.

But we’re objective and logical and measured about it. So for a US company or Canadian company thinking about reshoring, they would choose to reshore because they would be more profitable if they reassured that what we do is help them understand all of the costs and risks associated with offshoring, or reshoring, as the case may be, but there’s a lot more cost and risk associated with offshoring.

So the company’s go from looking at just the FOB price, 25-30 other costs, and risk factors. And when they do that, they see that in, in many cases, they’ll be more profitable producing the product in the marketplace in the US or in Canada, as the case may be. And when they do that, their sales grow.

If they bring the work back in-house, their production grows, their employment grows, their profitability grows, and they’re a better citizen. They’re a better, more responsible part of the community.

Yeah, you’ve probably heard of ESG and corporate responsibility for the environment for the society for improved governance. And a lot of the big companies completely ignore that when it comes to deciding to keep the work in China, say to somewhere far away, which does not support the environment or the community.

Sam Gupta 7:42

Okay, so you mentioned some of the comments. The offshoring could have a lot of costs and risks associated with that and reshoring, maybe more profitable, so touch on the differences between reshoring versus offshoring. If, let’s say we have a manufacturing or a distribution CFO, who is comparing the differences between offshoring and reshoring, what would be some of those differences?

Harry Moser 8:09

Okay, so we would suggest that they do the calculation, calculating TCO (total cost of ownership), which is a fairly well-established methodology or definition. And specifically, the TCO estimator is free software online at our website that they can use, they sign up, they sign in, they answer questions about the US source, or they say the North American source and the foreign source and, and the software does quantify all these other costs and risks based on their input.

But some of the costs and risks that about 66% of companies look only at the FOB price. They don’t even look at the landed cost. And so by looking only at the FOB price, their adoring duty freight packaging, carrying cost of inventory, no travel costs intellectual property risk, the benefit of having engineering and manufacturing close to each other in the same time zone speaking the same language able to improve the product and the process together, the risks may be to stock out. In total, we’ve got the value of a made in the USA or made in Canada label that 80% of consumers say those US consumers say they’ll spend 10% or more extra forum made in USA product as opposed to say a Chinese product.

Harry Moser 9:34

So you put all these together, and it turns out that there are 15-20-25 points like percentage points of these costs and risks that can be quantified. Now the difficulty is that it’s easy to look at the FOB price now in the US is ten and drop from training it’s eight that did really easy that whereas the total cost of ownership requires some assumptions.

It requires some judgment requires to gather, bring data from various places in the company or in the ERP system and bring them together to put them into our TCO estimator or into their own if they’ve developed one of their own. So it’s somewhat more work, but it produces a better decision and is good for society. It’s good for the community in which the company is based.

Sam Gupta 10:22

Great. So if you look at it from the CFOs perspective or from the business perspective, we have to make a conscious decision in terms of business profitability, right. So if we compare the FOB price versus the landed cost, and you did mention that he or he can probably hope in determining the landed cost.

And the reason why businesses might not be computing the landed cost at this point in time is that the model could be too complex. But at the same time, when you look at maintaining the ERP system or maintaining the IT system to be able to compute that, then you are going to require more manpower, you are probably going to require system, and so there is going to be some cost associated with that tool. So do you account for that when you are calculating your TCO?

Harry Moser 11:18

I understand that I think the cost you’re talking about is minimal to do the typical TCO calculation using our system. Our online system might take an hour the first time and maybe half an hour the second time. Yeah. So if we’re talking about a product that’s $100,000 worth of purchase price per year or a million dollars worth, and that’s insignificant, I’d say not worth calculating.

But it would suggest that and in the same sense, if you’re only buying $200 worth of some custom made product from China, then you’re crazy to have done that in the first place, the sooner you can find a local source that could have made it for you. So I think that’s a de minimis factor. But we’re thinking about what some companies have done. There’s one that we helped in Vermont called Hubbardton. They took our TCO estimator that has 29 cost factors in it.

Harry Moser 12:15

And they were only buying one category apart. The aluminum dies castings from China or from the US. And so they took our 29-factor model and said, of those 24 of them are always constant, the value of manufacturing and engineering being close to each other, the risk of stocking out, all these things, all of a sudden, is okay.

That’s all that is worth 7%. And then they said, here are the other factors that are important variables, the weight of the product, obviously, the price, the quantity, a few other things like that, and four or five things, and therefore they simplified the model. So that on that whole range of products, all of which had the 25 cost factors cost and risk factors are essentially identical. They made it, so they only had to calculate the four or five. So to further reduce the cost of the calculation, they simplified the model.

Sam Gupta 13:11

So you talk a lot about the TCO computation for ERP initiatives as well, and any of the ERP initiatives are going to be similar. Whether you are talking about planning for the parts or doing the ERP initiative, it’s the procurement initiative that you have for the company. So tell us what is involved in doing the TCO computation for the ERP initiative?

Harry Moser 13:36

Again, the TCO calculation is only for manufactured products. So it’s these are ours as we’ve designed it is only for comparing two different sources of a component or product a physical thing, and the data that goes into the TCO estimator comes either from bunches of people’s pieces of paper and spreadsheets or where possible it comes out of the ERP system.

Sam Gupta 14:03

Okay, so tell us some more stories about where you have had the cases of profitability because of either reshoring or offshoring initiatives. So do you have any other stories that you might be able to share?

Harry Moser 14:18

So I’ve got a friend who runs a die casting shop in a contract manufacturer in Illinois. Yeah, in his one of his good customers had been buying housing from China, and the customer had a problem with the quality of the housing and the customers’ customer force, yet either customer to find a US source to overcome the quality problem.

And when they did that, they audited the results. And they found that they had cut their inventory of the component. So the because they, when they were getting it from China, they would get, let’s say, a container full of the product once every quarter baby or because the Chinese foundry insisted on container shipments, and so they get huge quantities coming in.

Harry Moser 15:20

And they would never know when the container was going to arrive or for sure what the quality was or what demand would be over the months in between. And so when they went to having local sourcing shipped just in time as they needed it, inventory was down by 94%.

That’s something any CFO can relate to another company that happens to be in Illinois is an EMS company. They make printed circuit boards and assemblies from those circuit boards. And they came to me that they wanted to use TCO as a sales tool instead of a sourcing decision tool.

So they had a US customer that was about to leave them and buy from a Chinese competitor, the Chinese company offered a lower price. And so the VP of Sales, with my help, did the TCO calculation and showed his customer that even though his price was higher, his total cost was lower. And he credits that with being the key to winning a $60 million order by helping the customer understand all the factors that would hinge on sourcing domestically or offshore.

Sam Gupta 16:31

Interesting story. So tell us a little bit more about, let’s say, if somebody is working with vendors in China versus working in the US, what is involved in the process? What are some of the cost factors that they need to be aware of? So let’s say if I have the manufacturing CFO or the CEO, and they are trying for the new procurement that they have not done before, they are trying to offshore some of the things for the first time. So what is going to be involved in sourcing from China?

Harry Moser 17:08

That’s generally not the direction I go. I go the Richard way. I haven’t studied the offshoring process as much as the reshoring process, where someone’s going to offshore to China, for example, they want to think about one thing they should certainly think about is, is their contract with that company.

So lots of cases where someone is having a product made in China, and there’s an injection mold or a die casting involved in the process. And then, the company eventually decides for whatever reason to reshore or bring the work back to the US or to some other country.

And they’ve been unable to obtain the tool because their contract with the Chinese manufacturer did not specify that they had the right eventually to recover, recover the tool, even though they had paid for it. So there’s the legal system that works differently, the ability to be flexible that way is different in China than it is here.

Harry Moser 18:06

So the companies have to be very much aware of those considerations. Yeah, there are obvious advantages to China. I mentioned China because about 40% of the reshoring has come from China. Then you know, there are stories about the Chinese, working all night long and seven days a week and how they went to Foxconn, which makes most of the products for Apple, they finally got the final design the final component or whatever they were waiting for.

They go to the dormitory, and they wake up 100,000 people hand him a bowl of rice and a cup of tea, and then they work for 12 hours on the assembly line at midnight. And in America or Canada, that’s not going to happen if you told people to get up at midnight on Saturday and come in and start working, they quit. They go to work for somebody else. So there are two, the Chinese are very hardworking, you’re very disciplined.

So there are reasons for companies to go to trial. And China has the best supply chain of components, especially for electronic products and some textiles and a bunch of things where you can get in China, and you’re almost cannot get it anywhere else. And if you’re going to assemble a product from all those things, China makes a lot of sense. But that all of those benefits should be reflected in the FOB price. And then what we do is help the companies calculate everything other than the FOB price.

Sam Gupta 19:31

Okay, so let’s talk about comparing China versus Canada or Mexico. Would you consider Mexico as reshoring as well? Or, in your opinion, reshoring is going to be either the US or Canada or only the US. So talk about some of the differences between sourcing from China versus Canada versus Mexico or locally in the US.

Harry Moser 19:53

Yeah, so the definition of reshoring is to produce the product once again or again. Now in the country in which the product will primarily be sold, so if it’s you have is a US company reshoring is only producing it again in the US. If it’s a Canadian company, then in Canada. If it’s a Mexican company, reshoring means to produce it again in Mexico. And if it’s a US company, or Canadian company, that have offshored the product, they’re buying castings, machine parts, wire harnesses, something from China, India somewhere else, and they choose to bring that and have it produced in Mexico, then we would call that nearshoring. So it’s being produced at nearshore rather than at the home shore, the reshore, so to speak, and there’s certainly been a good trend of work to Mexico.

Harry Moser 20:46

Why is it that the Mexican wage rate today is lower than the Chinese wage rate? And the Mexicans are hardworking people. And they have pretty good technology, but they also have the advantage of US and Canadian technology not too far away. The brand for the US company that is sourcing the product. Mexico, Monterrey, for example, is if you have a company in Massachusetts, Monterrey is probably just about as close as California.

So the distances, the time zones, etc. The language is quite good. The risk is the violence, some of these problems that are still, unfortunately, too common. In Mexico, if it weren’t for that, I think there’d be more work in Mexico. But our view is that companies should try to bring work home to their home country, wherever their companies are located when they can if the economics favors.

And in North America, if it does not favor that, if you cannot automate enough to get the work into Canada or the US, then Mexico is a great choice. And specifically, for example, from the US perspective. If a product is coming out of Mexico has about 40% of our content, one coming out of Canada has about 15% of our content, and one coming from China has 5% of our content, so if you can get it to Canada or Mexico is far better off than leaving it in China from a national perspective.

Sam Gupta 22:18

Okay, interesting. So let’s talk about some of the manufacturing verticals do you recommend? Or do you find reshoring to be valuable across every manufacturing vertical? Or are there specific manufacturing verticals where reshoring is going to be slightly more beneficial?

So some of these examples of the manufacturing verticals are going to be, let’s say if you talk about the contract manufacturing, or the electrical or electronics manufacturing what it says the industrial automation, so, or food and beverage? Do you recommend really showing for any of those verticals? Or there are verticals where we should it would not make sense?

Harry Moser 22:57

I’ll tell you where the most reshoring has happened yet. And that is in transportation equipment, as has been a huge percentage, maybe 30% of the total. So automotive, truck, airplane, things like that. Yeah. So transportation equipment, both at the OEM level and at the supplier level.

Second is electronics and electronic assemblies of some kind, I think, third is appliances, and then machinery. And not too far down the list is textile and apparel. The US is 97% dependent on imports of apparel and footwear. And that seems seen as a trend back partially driven by automation, that’s making it a little more competitive to produce those things in the US. The average consumer appears to be favoring domestic consumption because of the benefits of the environment and sustainability, and things like that.

Sam Gupta 24:03

Okay, and let’s touch on the same question from the parts perspective or the component that we are sourcing either locally or from offshore. So let’s say if you were to decide between different parts that you are sourcing, would you recommend any specific parts to be resold versus the other parts that the manufacturing company may be using?

Harry Moser 24:22

Most of what’s actually come back has been outsourcing, so purchase from other companies from either contract manufacturers like machine shops or foundries or from sub-assembly producers like motors and pumps and things like that, perhaps brand new product. And so we see a lot of both the contract manufacturer and the product, we see strength, especially in where the product can be automated.

So if the production lends itself to automation, preferably at a higher level than what’s been achieved in China or India, then it’s possible to overcome a portion of the wage differential. So if you can get the labor cost, total labor costs direct, indirect sigma labor, get that whole thing and get that whole thing down to in the US two to 20% or 30%, or something like that, then the wage differential is isn’t going to make it impossible to bring the product back paralyzed, I’m surprised, but it’s done pretty well. We see quite a bit of machine parts, some foundry, some wire harness, a fair amount of furniture, woodworking, things like that coming back.

Sam Gupta 25:33

okay, and what is your perspective on some of these geopolitical risks, especially in the last four years? As you know, things have been pretty shaky, right? Anytime there’s going to be a change from the geopolitical perspective, that is going to change the duty. And because of that, your cost is either going to go up, or it’s going to come down.

So that actually makes everything very uncertain in computing. So what will be your recommendation to hedge some of these geopolitical risks? And obviously, if you have the nearshoring, or the reshoring, in that case, your risk is going to be reduced, but the geopolitical risk may have an implication on your domestic parts as well because they are going up and down because of these geopolitical issues. So what is your perspective on that?

Harry Moser 26:24

Certainly, during the Trump years, things were going up and down. They were chaotic, not as well planned, as I would have liked. We perceived him as having the right objective; he wanted to balance a trade deficit, bring back millions of manufacturing jobs.

So we agreed with his objectives, but not his methods. So we disagreed with tariffs on steel and aluminum, with allies. But we were overall supportive of most of what he did with China. But now we’ve got President Biden, and I’ve just written an article that did a report on like a report card on President Trump’s performance.

And he did some things well, and some things poorly. Overall, he did not achieve the objective. He did not reduce the trade deficit. And that was, that’s what he should have been his main objective. I critique President Biden’s plans. In some cases, he has the right ideas; he wants to bring back 5 million manufacturing jobs just like we do exactly the same number.

Harry Moser 27:24

He recognizes that no skilled workforce can be an important part of it. He’s pushing for apprenticeship programs and things like that. But he does not understand the underlying problem because the underlying problem is that he does not appear to at least. The underlying problem is that the US manufacturing cost is about 20%, higher than Europe and about 40% higher than China.

The best way to overcome that is to get the dollar US dollar down by about 20%. And so far, treasury secretary Yellen has said that they’re for a strong dollar, and they’re not going to do anything to make us competitive that way. And that’s the single best way to do it, the fastest way to do it. The other ways to do it are immensely better-skilled workforce to have an apprentice program like Germany’s which goes against the US tradition of everybody going on to university and studying, liberal arts things, whether there’s a job for them or not when they get done, so we recommend a lower dollar huge shift of resources from liberal arts university to engineering and technical apprentice programs, probably having a value-added tax, as most countries do.

And we have a series of other programs like that, that we’d recommend getting the US medical costs we spend down we spend about 17% of GDP on Germany spends 10, or 12. If we could give just as good results, that we get it down to the German level benefit cost in us to the manufacturer would come down. And US manufacturing costs would drop by 5% just because of that, which would bring about 400,000 manufacturing jobs back to the US.

Sam Gupta 29:05

Okay, so let’s talk about some of the resources that manufacturing executives can utilize if they are exploring resourcing initiatives. Do you have any resources that you would like to recommend them?

Harry Moser 29:16

Sure. Well, of course, the first one I’ve mentioned a couple of times is the TCO estimator to help them make a more objective decision. When they’re sourcing or citing a plant, then it’s free online at www.reshorenow.org. TCO estimator is

It’s free to use. It’s also, as I mentioned, usable for the sales team to take advantage of the customer to make a smarter, more objective decision. That’s the first free tool. Then we have paid services, the most obvious of which is the import substitution program. So a company, US or Canada, can identify a product they’re really good at making a certain kind of shaft Or casting or a wire harness or chemical or something that they’re one of the best in North America and making.

And we can tell them who the biggest importers are of those products, what tonnage they’re bringing in, whom they’re buying them from offshore, and roughly what they’re paying for that product. And then we train the company to use the TC estimator to go to those importers and convince some 10-20%, maybe convince some of them to source from our client company, instead of continuing to source from offshore plus the import substitution program, again, identified under resources on our website.

Sam Gupta 30:43

Okay, amazing. So that’s it for today. Harry, do you have any last-minute closing thoughts, by any chance?

Harry Moser 30:47

We work in the US directly with companies, and we work through MEPs manufacturing Ascension partnerships, which is one in every state connected to the state and to the US Commerce Department. We work through economic developers, all those things in the US and Canada. We’ve done some consulting work with invest Quebec, and we have had discussions with Ontario and some of the other provinces. So then, we’re delighted to hear from our companies or Canadian or Mexican companies and do our best to help all of them bring as much as possible back to North America.

Sam Gupta 31:27

Right. Amazing. Thank you so much for your thoughts. Really appreciate your time. This has been an insightful discussion. Thank you, Sam.

Sam Gupta 31:34

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about me or reshoring initiatives, head over to reshorenow.org. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check out the related episodes, including the interview with Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues. Also, the interview with Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 32:37

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guests Sarah Scudder from Real Sourcing Network and Roger Buck from Corporate Development Associates. They discuss some exciting trends in the print industry to create a compelling customer experience. They also discuss how print innovation could help manufacturers increase their sales. Finally, we discussed some interesting use cases of print and how they have helped manufacturers increase profits.

Chapter Markers

• [0:36] Intro
• [3:43] Personal journey and current focus
• [12:29] Perspective on growth
• [14:56] How manufacturers can increase their sales using print innovation
• [26:52] How print innovation and packaging strategies can help increase profit
• [29:19] Customer experience use cases through print innovation
• [31:01] Closing thoughts
• [32:37] Outro

Key Takeaways

• The packaging is essential to brand building and brand awareness. And so it’s really important for manufacturers to spend time and resources designing packaging that is not only functional but it’s going to protect the product, so the customer doesn’t get something damaged.
• Gone are the days now where companies are spending significant amounts of money just sending out bulk generic direct mail, maybe still if you’re a pizza company and sending out large amounts of coupons. But in general, especially for higher ticket items, customization, which has been able to be really accelerated because digital printing is really important in helping manufacturers close more deals and obtain new customers.
• The post office has a really cool little process called EDDM, which stands for Every Door Direct Mail and allows companies who have a very small geo area to do very inexpensive mailings to a pocket of people just in their immediate zip code areas. And that can save the company a lot of money at the end of the day because you’re mailing to people who are never going to drive to that location.
• Every business is different. Every channel is different. Every customer is different. You have to understand your customer base. You have to understand what version of content, text images is going to impact that recipient. But if you do your homework on that and get with the right print vendor or print supplier, it works.

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About Roger and Sarah

Roger Buck is a 50-year veteran of the print industry and Managing Director at Corporate Development Associates, a merger and acquisition advisory firm specializing in the print space. He is a past recipient of the PSDA Manufacturer of the Year, PSDA Member of the Year award, and serves as the chairman for the Print Education and Research Foundation (PERF), a non-profit foundation supporting education in print industry. His background includes print production processes, sales management, marketing, and new product development. Roger resides in St. Louis, Missouri with his wife Deborah who is a 35-year veteran in the print industry. 

Sarah Scudder is President of RSN. Sarah is honored to win awards, but she is not defined by them. She loves helping procurement professionals transform the way they buy print and marketing services. She speaks at industry events, serves on panels, hosts webinars, and writes articles for Sourcing Industry Group (SIG) and Procurement Foundry. Sarah created ProcuRising, a magazine that uncovers the unique stories of doers in our sourcing community. Sarah created ProcuremenTalks, a monthly series that features procurement leaders.

Resources

• Connect with Roger
  • LinkedIn | Website
• Connect with Sarah
  • LinkedIn | Website

Full Transcript

Sarah Scudder 0:00  

There’s this misconception that print is dead. Nobody prints anymore. It’s not worth spending any time or resources on print. That is not the case. And when you look at the data and the hard facts, the print was actually a growing industry in 2018. The spend was about $820.4 billion in the global printing market in 2019. So just a year later, it increased to $826.5 billion.

Intro 0:36  

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:12  

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. 

When you think of print marketing, what comes to your mind, perhaps flyers or coupons with print marketing, but it is much more than that. There have been some exciting trends lately with print marketing, where the printed packaging includes QR codes that can take you to a web page to improve customer experience. The print industry is way cooler than you would think. 

In today’s episode, we have our guests, Sarah Scudder from real sourcing network, and Roger Buck from Corporate Development Associates. They discuss some exciting trends in the print industry to create a compelling customer experience. They also discuss how print innovation could help manufacturers increase their sales. Finally, we discuss some interesting use cases of print and how they have helped manufacturers increase profits. Let me introduce Roger and Sarah to you.

Sam Gupta 2:13  

Roger Buck is a 50 year veteran of the print industry and managing director at Corporate Development Associates, a merger and acquisition advisory firm specializing in the bridge space. He is a past recipient of the PSDA manufacturer of the year, PSDA member of the Year award, and serves as the chairman for the print Education and Research Foundation, a nonprofit foundation supporting education in the print industry. His background includes pre-production processes, sales, management, marketing, and new product development. Roger resides in St. Louis, Missouri, with his wife Deborah, who is a 35 year veteran in the print industry. 

Sarah Scudder is the president of RSN. Sarah is honored to win awards, but she’s not defined by them. She loves helping procurement professionals transform the way they buy print and marketing services. She speaks at industry events, serves on panels, hosts webinars, and writes articles for sourcing industry growth and procurement foundry. Sarah created ProcuRising, a magazine that uncovers the unique stories of doers in our sourcing community. Sarah created procurement talks, a monthly series that features procurement leaders. With that, let’s get to the conversation. Hey, welcome to the show, Sarah and Roger.

Sarah Scudder 3:38  

Hi, Sam. Hi, Roger. It’s a pleasure to be here. 

Sam Gupta 3:43  

So this is the first time I am adding two people to my show. And on audio, it’s going to be slightly different. So what we are going to do is we are going to take one turn each time. So I’m actually gonna start with you, Sarah. And can you start with your personal story and your current focus these days?

Sarah Scudder 4:03  

Absolutely. So I was planning to pursue a career in fashion. I love clothing. And I used to do runway modeling. So I went to school and Sonoma County, so Bay Area, and I was planning to go work at an agency that produces fashion shows, and I wanted to actually eventually have my own company producing fashion shows. 

And my senior year, I had finished my presidency at my sorority, and I decided that I was going to do my last hurrah, my big effort, and my sorority and I co-chaired our major fundraising event called LipJam, where we raised a significant amount of money for diabetes research. And I had a full course load was super involved in just about everything you could be on campus. And in order to produce the event, we needed to procure lots of printed materials.

Sarah Scudder 4:58  

So all of the paperwork printed, all of the promo, all of the apparel, and I had no idea how to source or buy things yet. So I was introduced through a friend on campus to a local company that was a managed print company, meaning they would go out and source print items. 

So I contacted them, really hit it off, and hired them to source and procure and manage all the printed products that we needed for our event. Well, after the event was over, they offered me a job. And I’m thinking in my head, why in the world would I want to go into print? 

I don’t even know what the print is. Let alone I have absolutely no idea what procurement or what sourcing is. And I had, I said that sounds so uncool, I want to go into fashion. But I also know that it’s important to take every opportunity as a learning experience.

Sarah Scudder 5:56  

So I went in, and I met with the team. And I actually realized that it would be an incredible opportunity for me to come into a very, very male-dominated industry, an industry that I felt was really behind the times and technology. And that didn’t really have any young people. So I decided, you know what, I’m going to go for it. And so I took the job. So three days after I graduated, I started at this local company, and I was on the marketing team. 

So I helped kind of position the company and built the brand. And we were acquired a few years later by a much larger organization. And through the transition, I actually shifted and shifted into doing marketing procurement, which is where I would help global companies set up and execute very strategic print sourcing programs. So in both of my roles, like sales and marketing, and then doing marketing, procurement, I thought this is really, really manual. 

There is a lot of email and spreadsheets and back and forth. And there’s got to be a better way to manage this. So two and a half years ago, I decided to take the entrepreneur leap and run a tech startup in the print space. And we have a very, very niche and innovative software that helps companies better by all things print.

Sam Gupta 7:26  

Okay, so now we are going to start with Roger, and I want you to touch obviously on your personal story and current focus. But moreover, I want you to touch on whether you feel print is cool or not because there are definitely things that print a score. 

And the other thing that I wanted to touch on is about the male dominating aspect. Do you agree with her? Do you not agree with her? So can you start with your personal story and current focus? And on those two questions?

Roger Buck 7:54  

Certainly can start, thank you. And I can agree with everything she said. But my personal story, which was really easy that back in the late 60s I got into printing, my dad worked in a print shop. So I started working in the print shop, but I really wanted to be a rock guitarist. So the print shop was a way to make money to buy all my hardware and guitars and amplifiers. 

After a few years, I found out I was a lousy rock guitarist, but I became a pretty good printer. And that kind of started my career. In fact, I’ve got a picture of myself when I was five years old standing in front of the crate that held a Heidelberg windmill letterpress, and ten years later, I was running the press that came in that box, so that that’s how my career got started. 

Roger Buck 8:42  

I’ve been in manufacturing. I’ve been in sales and marketing management for printing companies for over 50 years now. So when she references there are no young people in the industry. She’s talking about me. Yeah. So I gotta tell you, but no, she’s absolutely right. It’s always been male-dominated, mainly because it was heavily manufacturing-oriented. 

But it is changing. There are more females and young ladies getting into it. There are more people coming up through the marketing area. And the procurement area like Serra’s operation is in print is cool. It’s never lost that I joke with printers all the time because the only time I ever hear the word print is dead is coming from a printer trying to debate the subject. 

I’m not sure whoever made a comment, to begin with. It’s not dead. It’s very cool. It’s got a lot of growth potential and a lot of different areas. And I’m 67 years old. I’m not quitting. I’m still having a lot of fun with it.

Sam Gupta 9:36  

Okay, so I want to touch on one of the things that you mentioned, which is going to be you being young, right? But what do you feel when you see other young people coming to your industry? Do you feel excited? Do you not feel excited? Do you feel that you and Sarah are of the same age right now? What’s your perspective? I mean, young people, when they are coming to your industry, you are probably going to have some feelings, Roger, so tell me, What do you feel about that?

Roger Buck 10:01  

Oh no, I’m excited whenever we see young people come in. As a matter of fact, I sit on the advisory board of a graphic and technology department at a college back in Kansas. I get excited when I see young new talent coming into this part of the industry. They’re excited. They’ve got new ideas. They challenge old, old guys like us. It’s fun. I just don’t want to compete with them. They wear me out.

Sam Gupta 10:23  

Okay, so Sarah Rodgers is changing his story. Initially, he said that he was super young. But now he’s saying he’s old. So what do you feel? Is he young? Or is he old?

Sarah Scudder 10:32  

Oh, Roger is one of my favorite people in the printing industry. I met him very early on in my career. And he’s just been a tremendous resource and mentor to me. So I’m a millennial. I’m old enough to be his daughter. And 

I think it’s actually a really cool meshing of age difference and experience differences because I’m really focused on the technology procurement sourcing side, and Roger and people of his generation have so much industry knowledge about manufacturing and production and how things work. So I think there’s an incredible blend to take the new millennial tech-focused up and comers in the industry and pair them with people who have decades of experience.

###Sam Gupta 11:22  

Okay, amazing. So let’s talk about growth. Right? This is the question that we ask every single guest, and we are going to be talking about this question in turn. So I’m actually gonna start with you, Roger. So what is your perspective on growth?

Roger Buck 11:37  

Okay, business growth is tons of opportunity. It depends, of course, on the manufacturer or the company and how they approach their business growth because you can do it through marketing. And you can say certainly there’s, there are tons of opportunities for using print innovation and marketing for print and kernel to just improve operational flow and improve the profitability of the company. 

So there are lots of opportunities to infuse print innovation into operations to improve your company and prove that growth. The challenge is getting the right marketing processes and the right internal processes, the right communication processes because that’s what you’re talking about is print as a communication tool. 

It’s a matter of getting those processes in place and alive. So there they’re ongoing, and they’re self-surviving year after year. Too many companies fail in that area because it’s a one-shot wonder it fails, and they never do it again. 

Sam Gupta 12:29  

Okay, so Sarah, now, I’m going to turn back to you. Do you agree with Roger, his definition of growth? What is your perspective on growth? And how do you define business growth?

Sarah Scudder 12:39  

Yeah, so I’m gonna take a little different perspective and talk about growth in general in the print industry, and then I’m going to relate it specifically back to the manufacturing space. So as Roger mentioned earlier, there’s this misconception that print is dead. Nobody prints anymore. It’s not worth spending any time or resources on print. 

And that is actually not the case. And when you look at the data and the hard facts, print is actually a growing industry. In 2018, the global printing market spend was about $820.4 billion in 2019. So just a year later, it increased to $826.5 billion. In the US, the print market is growing as well. In 2018, it was about 199 point 4 billion in 2019. It was about 199 point 6 billion. 

So organizations are spending more and more on print, within that the biggest print industry growth categories this year are packaging, labels, and direct mail. And the reason for that is companies consumers have shifted a lot of their purchasing habits to buy things online.

Sarah Scudder 14:00  

So I know for me, I love fashion, I don’t now go to brick and mortars. I’ve been on lockdown in California for a few months when I need something and then order it online, whether that’s food, whether that’s ordering from a clothing manufacturer, so with the rise of online ordering, companies need to get their products to the end customer or to the distributor or to the end-user that is causing a significant increase in packaging and labels. 

And the third that I mentioned is direct mail. And the reason for that is so many people are now working from home. They’re not going into offices at all, or they’re going into offices a lot less than I think we’re going to continue to see a hybrid mix of people working from home and not so in order for a manufacturer to get in front of an end customer. They’re now sending things to their homes where they didn’t use to do that as much.

Sam Gupta 14:56  

Okay, so I have learned about the print industry so much, Sarah, since I came in contact with you,. And the print industry is fascinating, obviously. And one of the things that I learned because of your introduction with Mark, and he does packaging, right, so one of the fascinating conversations that I had with Mark is just because of the changing in packaging. 

You can launch a new product, a completely new brand new product. I’m sure manufacturers can do this as well, especially the manufacturers in the CPG community. So let’s say if they were trying to increase their sales primarily using print, oh, can they do it? Can you tell me about it?

Sarah Scudder 15:41  

Yeah, so I’ll touch on the packaging first. And then there are some other really cool things that kind of tie into packaging as well. So the packaging is essential to brand building and brand awareness. And so it’s really important for manufacturers to spend time and resources designing packaging that is not only functional but’s going to protect the product, so the customer doesn’t get something damaged. 

And then the manufacturer has to re-send out a product, which of course is eating away all their profit but also having that experience. So when the customer receives it, they’re going to remember that company based on that packaging and the experience of opening the product. So I’ll use an example that’s, that’s close to me. So there’s a shoe manufacturer called Freebird. And they make really stylish but comfortable shoes. And those two things don’t always go hand in hand. Yeah, and this is a higher price point. Their shoes range from two to $500, on average.

Sarah Scudder 16:48  

And when you order a product from them, you’re going to get a really amazing experience when you open their package because they do such a good job with packaging with branding their packaging. So when you get the box, every part of the box is branded, it has its logo, it has the website, it has a cool message, then when you take the shoes out of the box, the shoe box is also branded. 

So it’s all part of that experience of this luxury higher-end item. Then when you open the box, there are additional print items as well. So I think it’s really important for companies. Ted Baker is another example. I recently got something from Ted Baker, and the packaging is bright orange, and it looks like an envelope. But it’s a box. So it’s really unique and stands out. 

So I think manufacturers can really increase sales by focusing on the design and coolness factor and messaging that they use to communicate on the packaging. The second thing, and I’ll let Roger chime in about QR codes. So another really important innovation that manufacturers can use is something called a QR code. And it looks like a square with a bunch of boxes. 

Sarah Scudder 18:00  

And when you put your phone over it, you put your camera on top of it. What it does is take the customer to a website or to another site. And I recently ordered something from a company called a manufacturer called the YZR., And they are making these spacesuits for COVID protection, they go from the waist up, and they allow you to wear the suit outside and traveling and protect yourself from COVID. 

So when I got my product from them, there were several QR codes. Some of them were on the packaging, but some of them were also on the tags. And when you screen the QR code on your phone, it takes you to a video that shows me, as the customer, how to actually put the product on and how to use the item. 

So QR codes are another great way that manufacturers can use print innovation as a part of the packaging and other printed items to provide additional information and provide value to the customers.

Sam Gupta 19:22  

Okay, so Roger, we are going to start with you now. Number one thing that we need to assess here is whether you agree or disagree with anything that Sarah said. And number two, obviously, you have been around the block for a very long time. So what is your perspective on the strategies that manufacturers can use in increasing their sales using print innovation?

Roger Buck 19:42  

She’s spot on when you’re talking about engagement. Whether you’re using packaging or direct mail starts with visual someone receives a printed something, so you got visual that generally leads them to a digital experience either go online, look up something, check their order, and then you get a personal experience beyond that they’re either touching the product or getting it, or they’re calling in to order something, and they’re visiting with a salesperson of some sort. 

So there are different levels of engagement that print drives. But a good example of like the packaging she was talking about, I always like to go back to the iPhone, if you get a new iPhone, when you pull the box open, Apple spent a lot of money developing that box because they wanted a certain amount of pull. And when you open that box, you get this little wind sound like little, and it adds to that experience. And they spent a lot of money designing because that’s what they wanted.

Roger Buck 20:36  

And that creates that cusp of that first customer experience even before they started using the phone. And that’s what we’re talking about with print and how you can increase sales, is; you have to think what that engagement what that first customer experience is going to be like, and how you can manage that. 

Now she mentioned QR codes. I tell everybody it was a toe in the water. Because what QR codes taught people is they could take their phone, and they could scan something. And now you’re seeing augmented reality come around, which is QR codes on steroids. Instead of using a Data Matrix code, a barcode that you can, and you get driven to a website. 

Now you put your phone over an augmented reality image, and there’s a marker in that image, and you get a video engagement while you’re looking at the page on your phone. So it’s that engagement can be lifted, but you’re going from a printed engagement now to a virtual digital engagement. And that starts when you start reaching those levels. That’s when you start grabbing customers, you get their attention, and they start buying more.

Sarah Scudder 21:39  

And Roger, to piggyback on that, you mentioned augmented reality, or some people know it as AR. And I think there are two industries in the manufacturing space that have really started using this one is wine and beverage. 

And the second is clothing and apparel. So there are when you go to a grocery store, and you look at wine bottles, some of them now allow you to scan the label. So you’re going to put your phone on the label, and it’s going through to a QR code, it’s going to take you to a video, and that video can have a message that really helps close the customer or talk about the brand. 

So for instance, if I was running a food manufacturing company, and it was a family business, it’s been around for 100 years, I might want a message from our CEO, communicating and talking about our company story, and some of the unique things about our food products. If I’m a wine company, and I’ve got a cool wine collection, I might have different characters on the wine bottles, and I’ll have the characters speaking in their voice and in and communicating a story or message. 

So I think augmented reality is really, really key and combining print with digital to increase sales. And Roger, one of the other things that I know that you and I have talked about before is lenticular printing. And that is where you combined several images into a single print. So when you look at a product, it has an image, but when you change your angle or move the product, the image changes with it. And that’s a really cool way to engage customers and really stand out amongst all your competitors. 

Sam Gupta 23:28  

Do you wanna piggyback anything? Roger?

Roger Buck 23:31  

Yeah, yeah. ticular is cool. It’s been around, actually, since the 40s. But they’ve improved the technology so much now that it’s gotten much more cost-effective and usable. In fact, you used to see it on cereal boxes. And the reason it was so effective is when people would walk down the aisle past a cereal box. When they went from the left side of the box to the right side of the box, the image on the box changed. 

So you see something subliminally out of the corner of your eye, or your peripheral vision picks up, hey, something moved. And when you walk backward, it goes back to the other way. Because it’s a flip effect, it goes from one image to another. If you’re old enough and neither a wonder, you probably are. 

But when you used to get prizes and a crackerjack box, that lots of times that were a lenticular image it was a little helicopter or something that the image would flip back and forth. So yeah, that’s it’s another very cool technology, and it drives engagement, and it drives people to you want to.

Roger Buck 24:29  

I want to pick that up, and I want to take that home. I want to buy that. You can also, besides good manufacturing you let’s talk to your auto manufacturers or get your manufacturer to make hard equipment. They can use QR codes or AR tags on equipment. A user you know someone at a plant with this piece of equipment can scan that and show how to repair something, you rather than having to go search out a repair manual and figure out what part you’re looking at. 

They can move their iPhone over a part that part can actually be the AR-tag, and it can run a video to show them how to repair that part. They’re doing that with vehicles right now. Yeah.

Sarah Scudder 25:06  

And let Roger. To piggyback on that, I think let’s talk a little bit about targeted direct mail because I think that is so important for manufacturers. So I’m looking at actually some direct mail that my boyfriend received this week. And it’s important because of two things. It’s customized specifically for him. So it’s from Toyota, they know that he has a Toyota Camry. 

So the entire piece is targeted at Paul because they have insights and information about him and what he likes. And they know what he’s purchased in the past. So instead of sending a generic postcard in the mail, they’re sending him something very targeted and specific with his name with a photo of a vehicle that he may want to purchase based on his purchase history. 

The other thing is, this direct mail piece actually has a QR code, so I can actually hold my iPhone, then it takes me to a website to offer me a promotion, and also gives a unique coupon code promotion, which is printed on the piece, and it specifically has his first and last name. So I think Gone are the days now where companies are spending significant amounts of money just sending out bulk generic direct mail, maybe still if you’re a pizza company and sending out large amounts of coupons. But in general, especially for higher ticket items, customization, which has been able to be really accelerated because digital printing is really important in helping manufacturers close more deals and obtain new customers.

Sam Gupta 26:52  

Okay, so my audience here is going to be CFOs. And CEOs get very excited to hear about the sales aspect, but what they really care for is the bottom line. So the next segment that we are going to have is going to be related to profit. So, Sarah, I’m going to start with you. So obviously, I am very excited to hear what print innovation can do to increase sales. But what can it do to increase the profit?

Sarah Scudder 27:16  

Yeah, and Sam, I think it’s. A lot of times, companies think print is just kind of a wasted expense. And it’s only something that’s used for marketing, but especially in the manufacturing space, print is an incredible resource and can actually be used to significantly increase profits. 

So a couple of examples that I have to share about this. The first one is about inventory control and reducing inventory obsolescence. So if you are producing large amounts of product and storing it in a warehouse or fulfillment center, one of the challenges that you have is having to destroy and pay for a product that you actually never used. 

And that can be a high cost to organizations through the use of bar-coded labels and labels incorporating something called RFID tags. You can actually bet much better manage your inventory and reduce obsolescence. The other thing that you can do is barcodes can be used in production to manage and improve workflow. Improved workflow can have a very, very positive impact on the bottom line.

Sarah Scudder 28:32  

And then in regards to manufacturers that are producing products that may be expired, or that can go bad. I know, for instance, I like hummus. Well, the hummus in my fridge has a shelf life. And at some point, that product is going to expire. But it also needs to be kept at a certain temperature before I buy the product to make sure that when it gets to my fridge, that it’s not going to be bad, it’s not going to be moldy. So you can actually use printed labels to help track the temperature on products or other factors as well other than temperature to realize what the product may have been exposed to. 

Sam Gupta 29:19  

Okay, so, Roger, we are going to start with the same question with you as well. Obviously, you are going to have very different perspectives just because you have been around the block for a very long time. 

So tell us Do you agree with Sarah, do you not agree with Sarah? And what are other use cases that you have seen in increasing the profit for manufacturers using print innovation?

Roger Buck 29:37  

I really like the way you keep reminding me I’ve been around a very long time. No, I’m in total agreement, but there’s a couple of other areas, and you mentioned that you know some of the listeners are going to be chief financial officers, and you really want to look to save your money. 

And I’m going to go back real quick to an analogy that Sarah referenced for pizza companies when you’re a pizza company. You probably are marketing to people within specific geospace. Because once you get five miles from your pizza location, there’s going to be another pizza location. 

So your target area is very secluded. It’s very geo-based within an area. And a lot of companies spend a lot of money doing big mass mailers and everything, and they mail to people who are never going to come because your mailing too far away.

Roger Buck 30:24  

And the post office has a really cool little process called EDDM, which stands for Every Door Direct Mail and allows companies who have a very small geo area to do very inexpensive mailings to a pocket of people just in their immediate zip code areas. And that can save the company a lot of money at the end of the day because you’re mailing to people who are never going to drive to that location. 

On the flip side of that, if you’re a company and you’re selling Maserati, there are very few people that are probably going to go buy a Maserati, it’s not going to be geo-based, but you’re going to have to get the attention of someone who can afford a Maserati. And you can send video postcards or video brochures where when the recipient gets it. 

They open it up, there’s a screen there the size of an iPad, it’s a high D screen, it automatically plays a video talking about the aspects of a Maserati or a Lamborghini, or whatever the vehicle might be, well, that’s highly, highly engaging, but you’re targeting that very, might only send out 50 or 100 of these on a regular basis, because you’re targeting very, very specific people who will appreciate the vehicle and more importantly, can afford the vehicle.

Roger Buck 31:31  

And that saves you money because you’re not mailing to a whole ton of people that will never be able to go forward one. And we see that all the time in the direct mail world, people are mailing product offerings to the completely wrong recipient, so that’s one way to do it, and another aspect that we probably ought to touch on is if you’re a manufacturer of almost any sort of product, you’re probably being impacted by counterfeiting.

Product counterfeiting in the United States is absolutely huge. I think it costs $300 billion now, and a lot of people don’t realize how that can impact it. But I’ll give you a quick story example of this. I worked on a project a number of years ago with a security company and the client who was a manufacturer of recliner chairs, and they were getting fake recliners back into the repair department because they were being sold on the open market as one of their chairs. 

And the hinge system in the chair would break. And that chair would come back into their repair department, and they had a hard time telling if it was one of their chairs or not because the counterfeit was so good. And they had no way to authenticate it. So they actually ended up using a series of security tags and labels inside this. So when it comes back into the repair department, they can scan it and really authenticate it and find out whether it was not one of their hinge devices or not. So loss from counterfeiting is another thing manufacturers need to take a hard look at.

Sarah Scudder 32:54  

Yeah. And a couple of other things. Roger, what are your thoughts on one of the other things that I’ve seen manufacturers starting to do is use printed GPS tabs. Can you talk a little bit about what you’ve seen in regards to manufacturers using those types of tags?

Roger Buck 33:12  

It’s getting more and more frequent, both GPS and NFC tags. And NFC is near field communication tags. Your NFC tags require a shorter distance between the tag and the scanner GPS can be read at longer distances. I’ve seen more GPS tags now on the skids. And I’m seeing it on rail cars. As a matter of fact, if you walk through a local Costco or Sam’s wholesale, and if you look at the skids on the bottom of all the underneath all the shelving, everything looks on the side of the skid, the skids probably going to be a plastic material. 

And on the side of that, you’ll see one of these GPS pegs. And what they’re doing now is giving them better inventory control because they can track the skids as they’re literally in transport, whether they’re in transport on a truck going down the highway or train or sitting in the Costco warehouse. So yeah, that’s tracking in real-time delivery. What they call last-mile deliveries is this is going to be driving an awful lot of that.

Sarah Scudder 34:09  

Yeah. One of the other things Sam that I have seen manufacturers starting to do to improve profit is focused on safety. Okay, so we have some clients that are in the manufacturing space that do major production and have pretty large facilities. And there have been some pretty major safety issues, people coming into work and getting really injured. And that’s a big problem. And that can be a huge, huge impact on a company’s profit, not only from dealing with people out on disability, having to bring in temp labor, but also potential lawsuits and things that can come from it. 

So one of the things that companies can do is huge, wide-format printing to provide Wayfinding directions inside their facilities. So What it does is it makes sure that there’s signage on the walls, signage on the floors, making sure that all of the employees that are working in the production facility or the warehouse and fulfillment center are really focused on safety, and making sure they’re warned of any dangers that may take place. Amazing. Roger, do

Sam Gupta 35:21  

Do you want to piggyback anything? Are they, by any chance? Do you have any other comments? 

Roger Buck 35:25  

I will. Because when you when you’re talking about profit, there are two ways to view profit, you can either increase profit, or you can reduce costs. And there are various types of costs. And there is some subliminal cost. They’re a little bit difficult to track that has to do with your employees and your staff and how well they like their work environment and how they work within that work environment. Do they enjoy it? Or are they stuck into a little cubicle, and they have a hard time focusing because it’s not fun, if you will. 

A good example is I’ve got a friend of mine that owns a company, and he’s got a wide-open front office space. And it’s really nice, big open, it’s typical cubicles and everything, but it was flat, boring. And his work staff is relatively fairly young. So he wanted to give them that industrial look that she also many millennials like to work in.

Roger Buck 36:13  

So what they did was they painted their walls with a special material that would accept magnets. And then they went to a wide format printer, and they had wall graphics printed to look like brick, and it looks like old brick. And then they came in, and they just literally slapped these up. The magnetic material of the substrate adheres to the walls. And within a couple of hours, this entire office was converted, converted to what looks like an old brick warehouse. And all the people in there, they enjoy it, they like coming in it gives a better I just more creative ideas because the environment change. 

And if they ever want to change the environment, again, all they have to do is go back print some more magnetic wide-format graphics slab up on the wall again. So you know there’s you can get some lips some liberal dollars, and increase your profit by making your workers just in a better space like that. 

This is kind of a cool little tactic that has more to do with improving employee morale and trying to reduce some of that cost that might be due to lost efficiencies, as opposed to just trying to raise your percentage points on your margin a little bit.

Sarah Scudder 37:18  

Yeah, Roger, great example. And I have a similar example. So my sister just started at a new company two weeks ago, she lives here in the Bay Area, as well. And one of the things because of COVID, most of the tech companies are completely shut down. And so you’re having challenges with team members being remote. And this is even in the manufacturing space, where you may now have remote sales teams, remote channel partners, people who are not necessarily coming into the office every day. 

And so what they did is they used print innovation to create this really cool welcome kit for my sister. So at her house, it was delivered. And I haven’t seen it yet, but it was a really cool box with a QR code. And then there were all these really cool, unique branded items in the box, things that she could actually use for her day-to-day work. 

So I just thought that was a really unique idea. I mean, it was, it was so cool that she actually texted us about it and said, I got this really cool thing delivered to my office, and they want to make me feel welcomed. And they’re using print innovation as a way to do that. So I think employee engagement, you can do a lot using print to really make people feel engaged and stay connected.

Sam Gupta 38:42  

I agree. And that is so exciting. But we are about time here, guys. So, Roger, I’m gonna start with you. Do you have any last-minute closing thoughts, by any chance?

Roger Buck 38:51  

you preserved for the people that are listening to this, they may need to take a hard look at their different uses, both internally and externally save money internally there can certainly generate sales externally. Every business is different. Every channel is different. Every customer is different. You have to understand your customer base. You have to understand what version of content, text images is going to impact that recipient. But if you do your homework on that and get with the right print vendor or print supplier, it works. 

It’s been proven for years and years. And the one thing I always remind people is there’s no delete button on your mailbox right now. Do right now digitally. You know, emails and text messaging had just gotten overboard, and people are just not responding to it. And that’s why direct mail and print marketing are becoming more and more viable every day is. It just has to be seen when it gets in your mailbox or in your hands. You have to physically dispense of it. You don’t just hit a button on the keyboard.

Sam Gupta 39:50  

Okay, Sarah. So I’m actually going to start with you now. Do you have any last-minute building thoughts, by any chance?

Sarah Scudder 39:55  

Yeah. So being that I’m on the procurement side in the print industry, I would encourage manufacturers to think about using print-specific technology to source and procure all the print that you use to significantly reduce costs and increase efficiencies. 

So the old way of sending an email or sending spreadsheets, there are many more innovative solutions in the market that can help you better source and procure buying the printed materials that you need.

Sam Gupta 40:30  

Okay, my personal takeaway from this conversation is going to be print is really cool. On that note, thank you so much for your time.

Roger Buck 40:38  

Really appreciate Roger and Sarah enjoyed it as well. Appreciate it, Sam. Thanks, Sarah.

Sam Gupta 40:42  

And I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Roger, head over to printmergers.com. If you want to learn more about Sarah, head over to rsnetwork.com. Links and more information will also be available in the show notes. 

If anything in this podcast resonated with you and your business, you might want to check out the related episodes, including the interview with Aman Ailani from the Sah.ol cold brew, who discusses the unique challenges and important metrics for a consumer brand and a food and beverage company. Also, the interview with Kevin Lawton from the New Warehouse podcast, who discusses why standardization plays a key role in inventory planning. 

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to get you on the next episode of The WBS podcast.

Outro 41:56  

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Nelson Aberu from 3050 Imports, who discusses the wine importer and distribution business’s nuances and supply chain challenges. We also had a chance to touch on the different contracting and system interaction requirements of the wine importer industry. Finally, we touched on the nuances associated with Wine importer and distribution businesses in Ontario and Canada.

Chapter Markers

• [0:17] Intro
• [2:26] Personal journey and current focus
• [4:18] Perspective on growth
• [5:09] Vendor relationships in the wine distribution industry
• [8:25] Sales and purchase order structure of a wine distributor
• [9:57] Inventory and warehouse processes of a wine distributor
• [15:13] How to work with international wine exporters?
• [22:56] Quality and testing processes
• [28:57] Wine distribution in other provinces
• [31:01] Closing thoughts
• [32:37] Outro

Key Takeaways

• The LCBO, as some of us might know, it is a monopoly. It controls all liquor flow and sales through the entire province. Okay, so any single purchase at any retail point, whether it’s a government store, whether it’s a brewery, whether it’s a winery, whether it’s online, it’s all LCBO sales, every single bottle.
• The LCBO has issued forms for all of these processes. And basically, we enter all the product information into their system and into their ordering system. Basically, that system generates codes for everything, purchase order numbers, item numbers, so on and so forth.
• We can’t establish specific payment terms with each of our suppliers, that would be a unique and appropriate situation agreement for that particular relationship, you’re dealing with one system, one set of rules, some producers in some regions, they don’t find doing business in Ontario attractive, because it’s such a rigid system. It’s a take it or leave it kind of market to be for that reason, because of the rules.
• A lot of people do want to be here because you’re dealing with one purchasing power that buys for the entire population. So really, some producers find it really attractive to be here for that reason. Some of them find it to be quite frustrating to do business in Ontario.
• The system in Quebec is very different from the one in Ontario, and the one in Manitoba is very different from the one in Ontario as well. So every province has a different way of seeing things and running their business to make it even more complicated.

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About Nelson

Nelson Abreu has invested 17 of his professional career years in the wine importer business and is founder of 30.50 Imports Inc., an Ontario wine agency dedicated to the marketing and sales of imported wines; and co-founder of WineWire.ca, the first web portal in Ontario to offer consumers direct access to imported wines usually only available at restaurants.

Nelson is a WSET Diploma graduate and an elected member of the Wine Judges of Canada. In 2012 Nelson achieved 1st place and became Grand Champion of The Wine Tasting Challenge.

Resources

• Connect with Nelson
  • LinkedIn
• Connect with 30.50 Imports
  • Website | LinkedIn

Full Transcript

Nelson Abreu 0:00

The way wine is traded in Canada is deeply rooted in prohibition days. And they’re getting looked at differently right now. If you think of what happened this summer with restaurants for the first time, we’re able to sell alcohol off-premise in Ontario for the first time.

Intro 0:17

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:53

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at digital transformation consulting firm ElevatIQ, who doesn’t enjoy drinking wine. But did you know that the wine importer and distribution business is very complicated, similar to cannabis or tobacco businesses? And if you’re selling in Canada, especially in Ontario, there is a different complexity level as everything is so monopolized and government-controlled.

In today’s episode, we have a guest, Nelson Abreu from 3050 Imports, who discusses the wine importer and distribution business’s nuances and its supply chain challenges. We also had a chance to touch on the different contracting and system interaction requirements of the wine industry. Finally, we touched on the nuances associated with wine distribution businesses in Ontario and Canada. Let me introduce Nelson to you.

Nelson Abreu has invested 17 of his professional career years in the wine importer business and is founder of 3050 imports, Inc, an Ontario wine agency dedicated to the marketing and sales of imported wines, and co-founder of winewire.ca, the first web portal in Ontario to offer consumers direct access to important wines, usually only available at restaurants.

He is the best diploma graduate and an elected member of the wine judges of Canada in 2012. He has achieved first place and became the grand champion of the wine tasting challenge. With that, let’s get to the conversation. Hey, Nelson, welcome to the show. Thanks, Sam.

Nelson Abreu 2:25

Good to be here.

Sam Gupta 2:26

Just to kick things off, do you want to start with your personal story and your current focus these days?

Nelson Abreu 2:32

Yeah, absolutely. So I’ve been in the wine importer business for about 17 years now.

Nelson Abreu 2:38

Yeah, well, you find your groove, and you go with it, right?

Nelson Abreu 2:43

So 17 years in the wine importer business. I started importing as an entrepreneur and have built my business since we focused on bringing in wines from all over the world really, and we distribute them within the province of Ontario. So we’re a licensed agency. Our specialty is to bring in wines and sell mainly our legacy businesses is to restaurants or business to business, we also sell a lot to retail we’re selling mostly to retail these days in this in this environment in the COVID environment.

And we have a new and strong customer base, which we call corporate. We are doing a lot of wine tastings with corporate clients where we actually entertain their clients virtually online with winemakers from overseas, giving them an opportunity to spend some casual time with their clients. So it gives them the opportunity to meet their clients’ friends and generate referrals during these online chats and stay top of mind with their clients, which is really difficult to do these days.

Because we can’t socialize like normal and or we can’t golf with our clients and we can’t eat with them. So really, we’ve taken our product and the lifestyle that goes with it. We’ve brought it online to this type of platform that we’re on right now. We’ve made a business case for it. And we are finding ways to carve new paths and during COVID right now, by continuing to sell wine and, you know, the lifestyle that comes with it.

Sam Gupta 4:18

It’s amazing. So obviously, I want to dig deeper into a lot of those things. And in my experience, the wine importer industry is very complex overall, from the contract perspective and the processes perspective. So it’s going to be a fascinating conversation. But one of the questions that we always ask our guests and is going to be your perspective on growth. What does business growth mean to you, Nelson?

Nelson Abreu 4:41

Well, business growth means taking on. As I said, we’re forging ahead in a difficult time because our legacy customers have been shut down essentially. The entire hospitality industry has been closed. So really expanding and retail getting aggressive with the having an online presence growing through different means, as I mentioned through corporate channels, increasing our retail presence in the retail system being the LCBO stores a lot of growth ahead.

Sam Gupta 5:09

Okay, so let’s talk about the supply chain a bit in terms of the supply chain. The wine importer industry is completely different. And as we were talking ERPs, so the way you guys make the contracts is completely different, the way you’re going to relationships are going to be completely different, the way you will products, our inventory is going to be completely different.

The kinds of roles you have in your supply chain, the role that LCBO is going to play is going to be completely different. So from the wine importer and distributor perspective, can you walk me through how the vendor relationships are going to work? What relationship is LCBO going to play? And what relationship you as a distributor is going to play?

Nelson Abreu 5:45

Yeah, so, the LCBO, as some of us might know, it is a monopoly. It controls all liquor flow and sales through the entire province. Okay, so any single purchase at any retail point, whether it’s a government store, whether it’s a brewery, whether it’s a winery, whether it’s online, it’s all LCBO sales, every single bottle. And what the LCBO does is it controls three functions in the process, okay, very much like the way it controls cigarettes, tobacco, the way it controls cannabis, the way it controls gasoline, alcohol is very heavily taxed.

And that’s why it’s an expensive product, it’s only food, and it’s not as expensive as it should be in the parts of the world. But the reason is that the government controls and generates a lot of revenue by controlling the importation and distribution of alcohol. Essentially, what happens is they do fulfill all of the administration with suppliers around the world that are exporting their products to Ontario.

Okay, that means cutting purchase orders and cutting payments back to the suppliers for the goods that they ship here. So all of the paperwork is arranged through the LCBO to the suppliers. Secondly, they control all of the transportation. So whatever way, shape, or form that product arrives from the seller, the supplier seller to the warehouse in Ontario, that shipping was arranged by the monopoly by the government, okay.

Nelson Abreu 7:00

And thirdly, it is a warehouse by the government. So once it gets here, it isn’t a government. It is stored in a government warehouse until it leaves for the retail destination where the consumer can buy it or to the hands of the distributor who takes it to a consumer or restaurant, hotel, etc.

We don’t work like other food products, let’s compare us to food, the food industry, because that’s in my eyes, wine is just food, and it’s consumed with food. It’s a consumable product in the same way. So if I import cheese, I can find my supplier, I can find my transporter, I can arrange my payment terms, I can negotiate my prices, I can find the best shipping rates, I can buy my own currency, to pay my supplier, I have control the entire process. And when it lands at my facility, I’ve got control over the storage of the goods. Well, in this scenario, everything I just said is out of my control. The only thing I do there is to negotiate the price of the product. That’s it.

Sam Gupta 8:25

Okay, so let’s talk about your sales order and purchase order right. So obviously, you are acting as a sort of the agent or the broker, right? And you are representing your vendors, and you are trying to negotiate with the LCBO. But from the legal perspective, from the contract perspective, and also from the sales and purchase order perspective, how is your documentation look like?

So let’s say if I review your sales order, purchase order, what kind of line items it is going to have, and what kind of line items it is going to have when you are interacting with? And what kind of line items you are going to have when you are interacting with your supplier. Can you touch on that?

Nelson Abreu 8:58

Sure. Yeah. So basically, the LCBO has issued forms for all of these processes. And basically, we enter all the product information into their system and into their ordering system. Basically, that system generates codes for everything, purchase order numbers, item numbers, so on and so forth.

And we basically take the information that our suppliers gave us, we process it through the LCBO system that so that attaches codes to all of the items, and we use their forms to generate purchase orders. So we input all the information into the LCBO system.

But the forms that the actual supplier or producer receives are on the LCBO letterhead, not our letterhead. So essentially, we’re populating all the information, and they are creating all the forms we don’t get involved in the customs process. Okay, because they control all of that.

Sam Gupta 9:57

Right. So your role here, it seems like that If you are not maintaining any of your inventory, so you don’t have any warehouses. So your role, I mean, you almost become a service agency. Because you are not even touching the inventory, the only thing really you are doing is you are looking at a transaction, and you are processing it. And I don’t know, even if you have a sales order on your paper, right, so let’s say if you were to implement an ERP system, you are not going to have any sort of order or the purchase order because you are putting this on the LCBO system.

So the only thing you need is the file that you need to upload on the LCBO. And everything is really taken care of by the LCBO. The only thing you really need to do is you need to maintain the customer information that customers are buying from you. But at the end of the day, they are going to place the order in the LCBO system.

Nelson Abreu 10:47

There’s some little tweaking to you know, to make your comment, but that’s pretty much it, Sam, then you have to realize that this is a government-controlled industry, it is very, very rigidly structured, okay, so we the only time that we actually get the product in our hands is when we’re delivering it to our customer.

Okay, so we have to buy it from the warehouse, and we do invoice the customer for the product. And that’s the only transportation we do our transportation is all local and regional. Okay, it doesn’t move across borders. It’s strictly from warehouse to end-user or restaurant, which is a reseller business client.

Sam Gupta 11:28

So basically, once it lands in the LCBO’s warehouse, then you are buying, so you are getting a purchase order may be to LCBO, and then they are sending over that wine to you, then you are sending it to your customers, right? Because you are sending the invoice to your customers, and you’re getting paid by them.

Nelson Abreu 11:47

Exactly, yeah, but I wouldn’t say that we’re cutting a purchase order to the LCBO, that stock is assigned to us in their warehouse, so nobody else has access to it, you can say that it is our property, but we don’t own it until someone buys it.

Sam Gupta 12:05

and what is buying? And that’s where I’m not sure if I followed everything.

Nelson Abreu 12:09

Yeah, so we don’t have to send in a purchase order. We just have to create a customer order in the LCBO system, basically. So the purchase order, the term that we use for the purchase order is something that is issued to the vendor that is producing the product, okay, what we’re doing is we’re creating order in their system for our customer, so that they know where that product is destined to.

Because obviously, there are huge tax implementations here. A large part of our business is business to business, it’s to restaurants and hotels, okay, and they are reselling the product. So when we receive it, it’s been we’re paying sales taxes on it when we sell it to our customers, okay, they’re paying sales tax on it.

And then when they sell it to their final customer who’s sitting in their restaurant dining, there, again, they’re selling it at an increased cost, and they’re generating sales taxes for the government. So the reason that the government wants to know who we’re selling it to is so that they can track all these businesses’ purchases and make sure that they are collecting all of the taxes. So if they know how much alcohol they purchased, then there’s no way that business will be able to circumvent sales taxes.

Sam Gupta 13:22

Yeah, it makes complete sense why they are tracking that. I’m definitely following that. So let’s talk about you know. Let’s say if you get an order from your customer, and your customers are placing an order with you, right?

You need to have a sense of the inventory that you have stored with the LCBO. So, at any given point in time, how do you verify what kind of inventory do you have in with LCBO? Is that going to be in the LCBO system as well? Or do you maintain that in your system?

Nelson Abreu 13:50

Yeah, so that information is available to you through the LCBO system, okay, and they generate reports for us. We can go in and man, you know, manually go through the system and assess our inventory situation. But they also do issue reports to us daily that show us our inventory levels, how far things are, where things are rapidly ordered from overseas, and what the ETA is so that we can track the movement of the product as well.

So it’s really up to each individual business owner, whether they want to create a system that sort of mirrors the LCBO system and tracks information and is able to, you know, coordinate all of their company’s activities, or whether they just want to use a simple call it like a QuickBooks.

Most people that start out new in the business as single owner-operators usually start out with QuickBooks and just look after their own invoicing. And then at some point, they grow up, and they expand their business, and they expand their Salesforce and then to get into more complex systems that will track that will do their own kind of forecasting on to how much lead time do we need? What are our sell-throughs on certain items, and would we be able to track all that information?

Sam Gupta 15:13

When you work with these international suppliers, do you have any specific requirements in those countries as well? Or is it fairly straightforward? LCBO is going to take care of all of that when they are working with the supplies and when you’re putting the purchase order now, this would be called a purchase order.

Nelson Abreu 15:33

Yeah, exactly. Yeah. No. 100% Yeah, it’s kind of a disjointed system when you compare it to a normal system where goods flow freely, and businesses really, really dialed down and have a lot more control over the entire process. Yeah, like our discussions with our suppliers are about allocations that we need from them on an annual basis to service the market and the growth that we’re expecting in the market.

That’s as far as it gets. But all of the system’s interaction is through the LCBO. We essentially feed their system with our requirements, and we just wait for that product to come in. And we can monitor it through their system. Interesting. But I mean, from the international perspective, since Canada is obviously super regulated when it comes to wine and some of the products that you mentioned, right? Some other countries are going to be similar in that regard.

So my assumption would be, they would like to track who is importing or exporting. So there are going to be some restrictions there. Well, when you are dealing with these international suppliers, do you experience any of that? Whether you buy from Italy versus France, it’s all the same? Yeah,

Nelson Abreu 16:44

I mean, it varies from producer to producer, really, in terms of the laws, there isn’t a region in the world that doesn’t export to Ontario or to Canada. Now, a lot of suppliers, individual producers, because of the rigidity of our system, it is very rigid, okay, you deal on their governments pay payment terms, you deal with their system, and the way it is built to work here in Ontario.

So we can’t establish specific payment terms with each of our suppliers, that would be a unique and appropriate situation agreement for that particular relationship, you’re dealing with one system, one set of rules, some producers in some regions, they don’t find doing business in Ontario attractive, because it’s such a rigid system, it’s a take it or leave it kind of market to be for that reason, because of the rules.

And the fees associated with being in our system. Because in a government system, they offload most of their fees back on to vendors, much like large retailers will do to suppliers. So and the other side of the coin, a lot of people do want to be here because you’re dealing with one purchasing power that buys for the entire population. So really, some producers find it really attractive to be here for that reason. Some of them find it to be quite frustrating to do business in Ontario. They’ve tried it. And they don’t like the terms. They don’t like the way costs are pushed on them.

Sam Gupta 18:27

So then, let’s say if you are sourcing a supplier for LCBO, and now they are doing business with the supplier. So what is going to be your protection, because obviously, you invested your money in sourcing the supplier, creating a relationship with them, can LCBO go ahead and do business with the supplier for their own retail store? Is that possible? Or is that supplier always elevated to you?

Nelson Abreu 18:57

Every single supplier is represented by a unique agency. So relationships are exclusive in the market, and they pay you free from a relationship. I mean, anything’s possible. Does it happen? Probably but it doesn’t happen very often that I know of.

So it’s as likely for the LCBO to be able to pry business away from an agent who has developed the demand for a specific brand in the marketplace. It’s as likely as it is for one of my competitors to try to do that as well. So it’s possible in any business in any business environment. But that comes down to your strength in your relationship with your supplier.

Sam Gupta 19:45

Okay, interesting. And how is the LCBO process work? How difficult is it to get the license? Let’s say if somebody is starting new in selling to LCBO, Is it a very difficult process? Does it require a lot of fees? How is the process for acquiring a license to sell with LCBO

Nelson Abreu 20:02

Yeah, so the license fee is $30. You, you apply for it through the alcohol and Gaming Commission, very inexpensive, it’s very easy to do. That’s not the difficult part. As long as you have a clean record in terms of criminal record, you should be able to get the same, with applying for a restaurant license would be the same thing.

The difference is, is that depending on what channel you want to be in if you want to sell products to the stores, you’re going to have to attract brands with pre-big volumes to supply that retail system, you know, there’s over 600 LCBO stores in Ontario. So you’re gonna have to find suppliers that are willing to trust you to represent their brand, you’re going to have to be able to get them into the system and then be you’re going to behave to prove to them that you can keep them in their system.

Nelson Abreu 20:5

Because if you don’t hit your numbers, you’ll be out as fast as you got in. So to get a license is quite easy to actually get operating in into the system, it’s extremely difficult, it takes a lot of investment time, it will take years of investment time, there really is no quick way to succeed unless you buy another business that’s existing because they start your quantities very, very small.

And but they train companies upward. Or they say like, Okay, you’ve proven that you can move certain volumes will increase your capacities to do business. So it’s not uncommon for people who start in this business to have two careers and do the best part times and then grow them. And then when their wine importer business or their alcohol importing business grows to the point that they can make the leap. They do that

Sam Gupta 21:38

Interesting. So tell me, why are these businesses and you are supplying to the restaurants and businesses? Why are they not buying directly from LCBO? Why are they buying from you?

Nelson Abreu 21:49

So there are two types of products. One guy per product is the product that is destined for the retail store, the retail system, and that has to be those opportunities have to be won by tenders, you have to submit your products to their buying team, just like you would approach a big-box retailer and you have to present it you have to make a business case marketing plan, and then they decided to buy it.

You ensure that you can sustain it the other way is to import privately. And it’s kind of where my company is founded and grown on you start your business, you identify the brands that you think work in the market based on your experience, and you grow those brands. And in this way, I’m not dealing with the buyer for the retail system. I’m dealing with independent or individual business owners or business groups that are purchasing.

So I can start with a brand that was never here before. And in years, I can build that into a very recognizable brand because I take it from customer to customer, and I increase the distribution of it. And I do that through the private distribution channel of the LCBO.

Sam Gupta 22:56

Okay, and how does the quality testing process work? So let’s say if the suppliers already doing the business with the LCBO directly, and they are the ones who are actually testing the product, and if there are going to be any issues? So is LCBO directly communicating with the vendor? And what if the vendor does not respond? We have to get into that process from the coordination perspective.

Are you always going to be looped in the communication? Do you have an account manager from the LCBO perspective? Who is going to call you if there are going to be any issues with your vendor? Tell me a little bit more about that process.

Nelson Abreu 23:29

Yeah, all of the above? Yes. Basically, the quality assurance lab tests everything as it comes into the province for the first time. After a year, they’ll retest the product. It’s all based on CFIA standards, Canadian Food Inspection Agency standards. And they are the only lab in the province that does this type of testing because there’s only really one importer, a physical importer that they work for.

So it’s their division. They don’t release any product, Sam, until it’s actually tested. You know, so recalls are very few because everything gets tested. And you know, they don’t release it until it passes on all levels, not just chemical analysis, but actual label analysis and everything right.

So it’s an internal quality assurance control. And because they also control the warehousing and distribution of it, they don’t let the product into the market until they give it the green light. So it’s a food product. So the standards they’re using are far they are National Food Standards that they comply with.

Sam Gupta 24:32

So some of these international suppliers that are actually trying to sell in Canada obviously are not going to be aware of the processes that are prevalent in Canada.

So is LCBO going to coach them in terms of what is required here, what they are supposed to be testing what they are supposed to be supplying? As part of the product, do they supply any certifications when they try to sell their wine here?

Nelson Abreu 24:54

So you know every product produced around the world has its own testing. I’m producing wine in France. I have local authority. If I’m going to put the local designation onto the wine, then they are going to have to get it tested before they’ll authorize that their name goes on to the bottle as an approved product, right?

So there are all kinds of local but the LCBO, even though products are tested globally, or locally, everywhere around the world, based on their own standards, the LCBO still has Canadian standards that these products have to clear. So there’s a lot of discrepancies.

Yes, we are responsible for making sure that our suppliers understand the compliance process and what they have to go through, and what it costs. And what the costs are. If the products don’t comply. Because there are fees associated with repackaging, there are fees associated with returning the product if it doesn’t get fly on a chemical level or disappear to have been destroyed if they don’t comply.

Nelson Abreu 25:5

So really, they give them the booklet, they give them the book, it says okay, well, you’re signing a contract that you want to do business with us. So here’s what you need to know. And they can look at it, and it’ll just be like, what, and then we’ll have to physically, we’ll have to physically take them through all of those guidelines and digested for them and say.

This is what you have to be prepared for. So yeah, that we do get involved that there is interacting directly with the supplier, it’s black and white to the LCBO. But we’re the ones who really make all of that technical jargon realistic as to what passes what doesn’t, how do they interpret it compared to their own standards, so on and so forth? And that’s where our expertise comes in, as well.

Sam Gupta 26:39

Yeah. So you play a much bigger role, I would say, in the process, because what LCBO is really doing is they are simply creating the educational material for you, and you are keeping up with that educational material. I’m pretty sure there are going to be updates with respect to quality as they come across these scenarios and issues in the real world that is going to be issues, and I’m pretty sure they have some sort of briefing sessions for us so that you can be educated about these changes and the regulatory changes as well.

So that you can brief your suppliers. 100%. Yeah. Okay. And from the binary perspective, let’s say, you know, if somebody’s trying to export wine from Canada to other countries, is LCBO trying to control that as well. Is the process going to be similar there? Or is it going to be different?

Nelson Abreu 27:28

Yes, his term as far as the export is concerned, the products are produced here. Anything that is sold here is considered an LCBO. Sale, whether it’s made in this country or imported into the country, anything that is traded in Ontario is considered an LCBO. Sale.

So there are guidelines for people that produce alcohol here and export it, there are very strict guidelines to which they have to like the product, whether you’re buying it here, or whether it’s being exported, there are taxes that are applied to the product, because it is an alcoholic product that producers cannot escape.

And it’s a cost of doing business for them. So when they quote, the cost of the product overseas, they still have to accommodate for the local taxes that they have to pay to the government for producing it here.

Sam Gupta 28:17

Okay, but the warehousing and inventory processes are going to be similar in the case of exporting, or the only thing they really need to worry about is going to be the taxes.

Nelson Abreu 28:31

That is a better question for an actual wine producer. I’m not up to speed on the intricacies the details of the flow of product and how much of it they have control over whether they get to assign, you know, figure out their own shipping freight lines and everything like that, and their shipping terms, or whether that’s also controlled through the government. I wouldn’t be the guy that asked for that because of the side of the business that I see this importation and distribution, not export.

Sam Gupta 28:57

Interesting, though, from the perspective of LCBO. I think you mentioned that Ontario is determined. I don’t know if LCBO is really a national organization or a provincial organization. So do they control these things at the province level? Or are there any regulations at the national level as well?

Nelson Abreu 29:18

Yeah, so you probably never realized, but Canada is full of borders, provincial borders. Yep. Every province you cross has a different liquor board. So they are all provincial like India, in Quebec, it’s the SAQ, and legally, you’re not supposed to take alcohol across the border, or even though there’s no physical border, you’re not supposed to fly it in one province and take it to another province.

That’s another one of these archaic kinds of outdated prohibition laws, and producers are not supposed to take orders from people that are out of province. Ship them out of the province. Now that might happen, I’m guessing. But that is the way the systems are built up. Every single province has its own liquor jurisdiction with particular requirements and functions.

The system in Quebec is very different from the one in Ontario, and the one in Manitoba is very different from the one in Ontario as well. So every province has a different way of seeing things and running their business to make it even more complicated.

Sam Gupta 30:30

So the supplier that you are working with, let’s say, we are supplying in Ontario, as well as in Quebec, so they will be working with another agent like you in Quebec to be able to supply these wines there. And they have to go through that provincial process again to be able to sell their right.

Nelson Abreu 30:46

Yeah, they have to know it’s like selling to different countries for the—different forms, different forms, different languages, different rules, etc.

Sam Gupta 31:01

Yeah. All right. That’s it. I think this is it for today. Do you have any last-minute closing thoughts, by any chance?

Nelson Abreu 31:06

I would love for you to share with me your opinion on what I’ve just described to you as a government-regulated industry as it applies to enterprise requirement planning systems and how you see it compared to the non-monopolized the non-controlled free-market world? What does it look like to me? Because I know I’m on one side of the fence, and I can’t see over the wall.

Sam Gupta 31:34

Right now, my head is spinning, to be honest, just because of the complexity and also because of the nature of the industry. So I don’t think the plain vanilla ERP system is going to work for your industry. Just because you are literally doing more of the contracting, you are not a traditional either food business or the e-commerce business, right?

Your contracting is going to be very different. The way you interact with LCBO is going to be very different. I don’t know how the larger distributors are managing their business. Obviously, they have to do their financials. They have to manage their processes. So they must have customized the ERP for your industry. There are customized ERPs available for the wineries and also for the spirit industry that has been built over the standard ERP systems that are available in the market. But for the most part, the whole business is going to be extremely difficult, of course. So thank you so much for your time, Nelson.

Nelson Abreu 32:35

Hey, Sam, thanks for having me on. I really appreciate it.

Sam Gupta 32:37

I can’t thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Nelson or 3050 imports, head over to 3050 imports.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Aman Ailani from the Sah.ol cold brew, who discusses the unique challenges and important metrics for a consumer brand and a food and beverage company. Also, the interview with Chris Grainger, who discusses how his company EECO, a large electrical distributor, needed to change the way they sold to their customers.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get out. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 33:40

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Mark Oser from Anteris Consulting Group, who discusses How to launch new products through innovative packaging. He also shares his insights into how to take new product packaging ideas from concept to design. Finally, he sheds light on design challenges that COOs and CFOs must be aware of, before launching a new product line.

Chapter Markers

• [0:21] Intro
• [2:15] Personal journey and current focus
• [3:00] Perspective on growth
• [7:02] How to take innovative packaging ideas from concept to design?
• [9:01] How to test the feasibility of a innovative packaging idea?
• [13:52] The implications of poorly planned packaging
• [18:51] Recent innovative packaging trends
• [22:07] Industry-specific packaging trends
• [26:09] How to work with packaging vendors?
• [28:35] Building internal packaging capabilities vs outsourcing it
• [33:06] packaging KPIs
• [35:47] Closing thoughts
• [36:57] Outro

Key Takeaways

• Companies are switching to plastic pouches right because the plastic pouches can be printed more effectively. They’re resealable. They have a lot of technical properties that are better than paper. And also, you can print them a lot nicer, so you get a better-looking product.
• Anybody who’s been involved in consumer manufactured goods or consumer packaged goods company knows that there are several constituents that get their hands in packaging, you may have marketing. You may have R&D. You may have Ops. Eventually, you’ll deal with procurement. You may have sales. So if you don’t include the right people early on in the process, you’ll get something that sub optimizes the output from one of these constituents.
• Typically, marketing and R&D come up with a need. They say, hey, I want to make it out of this material. Okay, they turn it over to procurement and go out to get this material, and then by the time it gets ready for launch, there may be a problem with operations, it may not fill correctly. There may be something with how it ships.
• The advancements in digital printing have actually allowed digitally printed corrugated cases in longer runs to be price competitive with their flexographic counterparts.

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About Mark

Mark Oser has been involved in corporate procurement for the past 27 years, with the last 12 years focused on innovative packaging. Throughout his career, he’s worked with more than 100 companies on procurement-related issues, and led 30 packaging sourcing and technical design efforts covering nearly $200MM in spend and delivering over $30MM in one-time and recurring benefits.

Resources

• Connect with Mark
  • LinkedIn
• Connect with Anteris Consulting Group
  • LinkedIn | Facebook | Twitter

Full Transcript

Mark Oser 0:00

And then all of a sudden, they started shipping it, and due to the shape of it, it wouldn’t stand up, so the packaging wouldn’t work because the things were frozen, they were tilting, they were falling. And then nowadays, as you know, in retail, most retailers want display-ready cases. So by the time they tried to put this into a display-ready case, the great beautiful innovative packaging design wouldn’t work.

Intro 0:21

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:58

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.

Product packaging is as important as the product itself. Poor packaging could cause issues with delivery failures and increase returns. These issues typically lead to a bad customer experience. In today’s episode, we have a guest, Mark Oser from Antares consulting group, who discusses how to launch new products by simply changing the packaging. He also shares his insights into how to take new product packaging ideas from concept to design. Finally, he sheds light on design challenges that CEOs and CFOs must be aware of before launching a new product line.
Let me introduce Mark to you.

Mark Oser has been involved in corporate procurement for the past 27 years, with the last 12 years focused on innovative packaging. Throughout his career, he has worked with more than 100 companies on procurement-related issues and led 30 packaging, sourcing, and technical design efforts covering nearly $200 million spent and delivering over 30 million in one-time and recurring benefits.

With that, let’s get to the conversation.

Hey, Mark, welcome to the show.

Mark Oser 2:12

Thanks, Sam. Good to be here. Appreciate it.

Sam Gupta 2:15

Of course. Just to kick things off, do you want to start with your personal story and your current focus?

Mark Oser 2:21

Sounds great, Sam, by way of background, Mark Oser here. I’ve been involved in the world of corporate procurement now for, geez, I guess, 27 years. That’s a long time. For the last 12 years, I’ve been focused singularly on innovative packaging. So throughout my whole career, yeah, I’ve worked with probably more than 100 companies on procurement-related issues. In the last 12 years of lead, probably 30 packaging sourcing or technical design efforts. And I imagine that covers probably $200 million worth of spend. Of that, the team has delivered about 30 million a year in recurring benefits.

Sam Gupta 3:00

Amazing. So one of the standard questions that we have for all of our guests before we dig deeper into your background and some of the interesting stories that you have. What is your perspective on business growth?

Mark Oser 3:12

Well, business growth is challenging, particularly in this market. Not only is business growth challenging, but within the growth. Generally, you’ve got the packaging space, which is frankly in a very chaotic state right now. So what we do is we view packaging as both an opportunity to cut costs to improve operations but also a way to deliver growth through new innovations and to package through better appearance through better user experience. So we look at it as a two-pronged approach. One is the possibility of cutting costs and putting money to the bottom line during a troubling time. And the second is to really drive new growth.

Sam Gupta 3:49

Amazing. And I find the packaging to be fascinating. Because just by changing packaging, you can launch new products. So and you have been doing this as part of your focus. So tell us how manufacturers can explore the path for new products by simply changing the packaging.

Mark Oser 4:06

That’s a really good question, Sam. And I’d like to approach it kind of in two pieces. So you mentioned the term changing packaging. Well, that’s certainly one of them. One of the options, another would be totally launching innovative packaging. So let’s take the first part, which is how do you change packaging? Well, this gets a little challenging. So, for example, let’s say you’re marketing pet food, and you’re producing it, and your operations are set up to run pet food in 25-pound multiwall paper bags, which has a traditional way of selling pet food. Well. Right now, many manufacturers and many consumer pet food companies or pet food companies are switching to plastic pouches right because the plastic pouches can be printed more effectively.

Mark Oser 4:52

They’re resealable. They have a lot of technical properties that are better than paper. And also, you can print them a lot nicer, so you get a better-looking product. So simply, it sounds kind of easy, right? Well, you just say, Okay, I was buying paper, and now I buy plastic. So what?

Well, the challenge is they fill differently. It’s different from filling a paper bag versus a plastic bag. You’ve got testing that has to occur, right? You just can’t just say I’m gonna switch it to plastic and make sure it works. You’ve got to go through testing. The testing can be a bit complicated. Then you’ve got to source the plastic bags and figure out am I paying the right amount of money? What’s it costing me for the proper finishes to make the product really catchy? So there are so many different elements of it just to switch innovative packaging? That’s number one.

Mark Oser 5:33

Sam, I think the second part was, okay, what if we launch an innovative packaging? Yeah, yeah, that’s where it gets really complicated. Because anybody who’s been involved in consumer manufactured goods or consumer packaged goods company knows that there are several constituents that get their hands in packaging, you may have marketing. You may have R&D. You may have Ops. Eventually, you’ll deal with procurement. You may have sales.

So if you don’t include the right people early on in the process, you’ll get something that sub optimizes the output from one of these constituents. So, for example, we had a product that we were working with a company in California, they make bagged salad and fresh-cut vegetables. For years, they were buying their corrugated boxes from the same supplier we came in. We were looking at creating a lighter-weight design that used less raw material and also improved the look and feels corresponding to a relaunch of the brand and updated branding.

And what we realized is the print quality of what they were getting was just subpar. So by bringing new suppliers in who had state of the art equipment, including digital print, all of a sudden, the client realized that they weren’t even getting the correct colors that they were specifying because they didn’t know. So again, bringing procurement bringing somebody with that kind of expertise in the process earlier would have identified this opportunity sooner and created a smoother transition to get the finished product the way they wanted it interesting.

Sam Gupta 7:02

So let’s say if somebody does not have as much experience with respect to packaging innovations, and they are trying to explore ideas where they might want to increase their sales just by changing the packaging. So what is involved in taking new product packaging ideas, from concept to design?

Mark Oser 7:21

Yes, well, now you have a very complicated process. And to be honest, I don’t think a lot of companies have a great process for this. Typically, marketing and R&D come up with a need. They come up with a new product, right? They say, hey, I want to make it out of this material. Okay, they turn it over to procurement goes out, get this material, and then by the time it gets ready for launch, there may be a problem with operations. It may not fill correctly. There may be something with how it ships.

I’ll give you a really interesting example. Obviously, I can’t use client names because we’re under confidentiality with our clients. But we had a company that was getting into the guacamole business. And guacamole is a very interesting product. It’s largely produced with avocados grown in Mexico. Avocados are frozen and, or excuse me, mixed into guacamole. And then that product is frozen.

Mark Oser 8:07

Well, R&D came up with a novel way to dispense guacamole. But testing it in the actual shipping environment wasn’t brought in. And the procurement people weren’t bought until later in the process. We always encourage that you bring up, so you bring procurement in early. So they designed a new, a new dispenser. They thought it would be great, and then all of a sudden they started shipping it, and due to the shape of it, it wouldn’t stand up.

So the packaging wouldn’t work because the things were frozen, they were tilting, they were falling. And then nowadays, as you know, in retail, most retailers want display-ready cases. So by the time they tried to put this into a display-ready case, the great beautiful innovative packaging design wouldn’t work. So then you have a code red problem where you have to bring us in and figure out why is it failing? And what can we do in the short term to figure out how to get it right. So there’s a great example of the process, how it should work, how it really works sometimes. And then here’s a real-world example of what happens if you don’t do it that way.

Sam Gupta 9:01

So let’s say if I am the manufacturing executive. And obviously, I can see the challenge in terms of designing this and testing the feasibility. So there has to be some sort of testing done before I invest in creating the actual process or production line.

So what will be involved in doing the feasibility testing, and the only way to do the feasibility testing is going to be number one, involve all of the parties and then do the appropriate testing whether this is going to work in the real world, and then finally decide whether this is the right innovation that I really want to operationalize it. Right. So what will be involved in testing the feasibility? Can you touch a little bit deeper into that?

Mark Oser 9:42

Sure. Okay. So let me ask you a question. I’m gonna ask you to answer your question with a question. Let’s say you’ve got a great idea coming from marketing and R&D. Let’s say you’re a smaller company, you know, $500 million – $800 million. You don’t have packaging engineers on your team. Who do you call to get this information? How do you get this information on how this product to be packaged?

Traditionally, you call packaging suppliers. Well, packaging suppliers are in the business of selling you more packaging and selling your packaging that’s easy to produce. So again, what’s missing in most cases is the internal capability to design the packaging effectively. Early on in the process, working as a partner with marketing working as a partner with research and development, too often, it happens that marketing and R&D come up with the product, you figure out with a packaging supplier how it should work. And by the time it’s operationalized, something’s amiss.

Mark Oser 10:33

So the way you solve that is you have, First of all, if you’re lucky enough to have this kind of packaging resource in your company, you bring them to the table early, you bring them to the table working with R&D, working with marketing, and at the same time you test different samples, different prototypes, you do ship testing.

We have all kinds of protocols that we’ve helped customers and clients derive or design, I should say, and you follow the protocol, what happens a lot of times is they’re driven by what the client or the what the ultimate retailer wants, and they say, hey, this will work. And they don’t do enough sufficient testing or enough high-quality testing. And then there’s some kind of an issue down the road.

Sam Gupta 11:12

Amazing. So let’s say if I were the CFO of a manufacturing organization. Obviously, one thing that I don’t want to see is if I invest in something, then I’m looking for some sort of ROI. And if these initiatives are going to fail, then obviously, I’m probably not going to get any of the ROI. So what are some of the issues or the investment planning that I should be aware of as a CEO or CFO, well?

Mark Oser 11:36

CFO and CEO would attention potentially have slightly different motivations and different interests in this? Let’s take, for example, a CFO, right? a CFO is looking for a return on investment. They’re looking to use the company’s dollars in a manner that produces the greatest possible return or for other strategic purposes. So before any project that I’m aware of, typically, people internally, usually R&D or some business person, come up with a business case for investing in this.

Yeah, right. Say, Oh, I want to launch this new product. Well, is the market there? Yes. Okay. Can we produce it? Yes. Okay, what else do we need? Well, we need to design a new line. Okay. So typically, there has to be a business case, where I’ve seen a lot of business cases fall down, is they don’t understand the packaging process, or they don’t understand the real cost of the innovative packaging, and they underestimate it. Okay, that’s one.

So to satisfy a CFO, all these points should be figured out early on in the process. So you can come up with a far better, far more ironclad business case.

Mark Oser 12:36

That’s number one with respect to CEOs. Now you’re talking about, okay, R&D has come up with this great new product, it fits with a marketing need, we can brand it, we can market it, we know there’s an audience in a customer base interest in it, how do we produce it? Right? I’ll give you a great example.

We’ve seen clients come to the table with a brand new product, the right product, the right, branding, everything, right, but they don’t have the capability to produce it efficiently. So now you’ve got it invested in as a CEO would see you got to put capital expenditures potentially on the table in order to produce the product correctly.

Okay, well, that’s where a CEO should be brought in early. And that’s where somebody with exceptional packaging knowledge to say, hey, is there another way to produce this innovative packaging? Could we use an alternative design of the innovative packaging that doesn’t require such an investment in infrastructure or CapEx, such that it can be produced correctly in the plant?

So there are all kinds of different permutations that arise from this. But the bottom line is, and the biggest issue that we see is that these constituents are never working together. And the last piece of the constituency procurement is not brought in early enough. And then, if they are brought in early, they may not have the requisite packaging expertise to make something like this work. That’s when you end up with a failed product for a failed project.

Sam Gupta 13:52

Okay, amazing. So we are going to be touching on three stories from the packaging perspective. And from your experience, obviously, you have done a lot in the packaging and procurement space, right. Let’s say if you were to pick on three stories that were, like, super terrible innovative packaging ideas that they shouldn’t have been even considered.

So tell us those three stories where the idea was just terrible, they shouldn’t have considered it, and they ended up losing money. So those three terrible and three awesome ideas as well, where they probably got bottom-line growth or the top-line growth.

Mark Oser 14:27

Well, I see a lot of terrible stories. I don’t necessarily call them terrible. Instead, I call them the situation, Sam. I mean, with all due respect, right. So people do put a lot of effort into this.

Mark Oser 14:42

Yeah, I would say this guacamole story had a very interesting situation. Well, not only was I think I referenced earlier the novel way of dispensing the guacamole and how that led to failures in the shipment, but ultimately at the third retailer told us a shelf that was correctable with corrugated inserts and etc.

But I’ll tell you another one that was like that that went wrong also happens to be in guacamole. Not that we cornered the market on the packaging of guacamole. But we happen to have people who produce guacamole that need innovative packaging help; we had another situation where now, as I mentioned, guacamole is produced, and it’s frozen, right? And then typically, it’s either thought out in route from the manufacturer to the customers, disease or the customer shells.

Mark Oser 15:33

Well, when you thought out guacamole, what occurs? Well, you’ve got condensation, okay? Anybody who knows corrugated boxes knows that condensation or water is like the kryptonite to corrugated boxes. So now you’ve got condensation, you’ve got boxes that are crushing, you’ve got boxes that are failing, you’ve got deformation of the boxes, and quite frankly, they just look ugly.

And so when a retailer receives a box that has water damage, they’re very, very likely in many cases to reject it. Well. So now you’ve got a reverse logistics problem, you’ve got a sales problem. Okay. So once again, this is a situation where they didn’t have packaging engineers looking at and packaging experts looking at what would happen throughout the lifecycle of this box from the time it’s thawed to the time it’s delivered.

So there were two things, for example, that we came in to do. Number one is we changed the way the boxes and the guacamole were racked in the manufacturing such that the condensation would be worn off or be experienced early on before it’s put into its final boxes. Alright, that was another way to solve it. So it was a process change, if you will, yeah.

Mark Oser 16:43

And then where that was not feasible, we looked at another change, which was to use something called solid board, while there are certain types of the board in packaging that have either poly coating or some sort of a wax coating or other types of impregnation into the paper where you can reduce the damage or the permeability of the water.

So again, that was just not thought of early on in the process, created problem created two problems. And then they had to bring us in to solve the problem. So there’s, there are two really good examples off the top of my mind where something like that fails. I’ll give you another great example of something that worked. We do a lot of work with direct-to-consumer companies. And we have one client that makes organic direct to consumer, custom-blended lawncare. And so the current design of the packaging was such that they were concerned about, you know, shipping liquid inside of a pouch, that the pouch would somehow be exposed to forces in the shipment, and then the innovative packaging would fail, it would leak, and that would be a problem.

Mark Oser 17:51

Okay, so to their credit, they did a lot of thinking about this. Well, we actually looked at it, and we brought our top designer who happens to live in the Netherlands to look at the problem. And we were able to figure out a new design for the corrugated box to ship it, to shift it rather from a horizontal axis to a vertically packed design. The vertical pack design also achieved lower dim weight.

So we were able to get the new design into more favorable dim weights, which reduced the cost of the shipping dramatically. By changing the orientation of the innovative packaging and creating inserts, we were also able to reduce the frequency of damage. And it is well cut out an entire processing step where they used to kind of sub package each liquid-filled pouch our packaging obviated the need entirely for that step.

So that’s a double win, or actually, a triple win, save money on the corrugated, save money on the innovative packaging, reduce the failures and save money on the ship. So there are three examples of wins off of one project.

Sam Gupta 18:51

so obviously, you spend a lot of time in the packaging industry, right. So what are some of the things that you’re most excited about, from the trend perspective, from the macro perspective, that you think that manufacturing companies or DTC companies should actually take advantage of?

Mark Oser 19:06

Okay, that’s great, a great question. Number one is Advent and the advancement of digital printing. Okay, so if you look at a corrugated box, traditionally, they’re printed what we call flexure. Graphically, so they have printing plates, they run them over these machines, they print them, etc.

It’s the way that printing has been done for many, many years. Well, digital printing has been available on corrugated on film and whatnot, but it’s been typically restricted to smaller size runs. If you’re going to make a new product offering, you may want to do it digitally, so you don’t have to invest in printing plates, etc. Well, the advancements in digital printing have actually allowed digitally printed corrugated cases in longer runs to be price competitive with their flexographic counterparts. So that’s a huge, huge advancement.

Mark Oser 19:52

What that gives you gives you the ability not to have to pay for print plate B, being able to change overruns at the same time. Almost instantly, from one SKU to another, you can literally print two or three SKUs on the same sheet digitally at the same time. So operationally, from branding from an appearance standpoint, from an aesthetic standpoint, from an operational standpoint, digital printing is now offering a lot more advantages, and we see that trend poised to continue.

In other words, we feel that further advancements are coming, and digital is going to be even more of an option for companies where it wasn’t in the past. That’s a very large trend. Another really interesting trend right now is obviously towards sustainability. Everybody throws out the word sustainability. Well, there’s only so much you can do, right?

Mark Oser 20:41

If you want to have a say, a plastic pouch that has certain properties and certain barrier properties. To store your food or your product effectively, you might need something called a laminated design. Well, laminated materials are generally not recyclable. So there’s a concern about sustainability, biodegradable films, and there are advancements in that area that are coming. Where we see the move towards sustainability in the shorter term that can be achieved by most companies is the number of materials being used to produce a package.

For example, if you have a corrugated box that requires 15 square feet of material to make one box, and using our engineering capabilities, let’s say we’re able to reduce the weight of the paper, reduce the amount of the paper, now you’ve got a new package that says uses 15-18%, less paper it well, that’s environmentally friendly, that’s something you can tell your customers that, hey, our new design cut out 15 or 17, or 18%.

Not only that, you, as the buyer of that packaging, save money because, for example, in a corrugated box, 70-75% of the cost is paper. If you take out 16% of the paper, you’re now saving 12% on the box with no sourcing activities required. So that’s the other big trend that’s going on right now. A lot of what we’re seeing right now is how we can design innovative packaging that performs better with less material?

Sam Gupta 22:07

Interesting stuff? And do you see these trends across the manufacturing sub-industries as well? Do you see, let’s say you provided a lot of examples from the food and beverage perspective, right. But when we look at the CPG space, there are many different products, and they all are going to have different innovative packaging needs. So are you seeing similar trends here? Do you see any different trends in any specific industry where one particular packaging material is not going to work or may not be as effective?

Mark Oser 22:35

Generally, Sam, we see the trends across all things that are packaged. Okay, so we see that as universal trends. But let me tell you a very interesting story that we’ve been recently brought into that we’re studying right now, we have a potential client that is in manufacturing of components, that I can’t even tell you what they’re in because it’s very confidential, but you’re using an industrial setting, let’s just say, yeah, and these components are heavy, and they’re dense.

And right now, the company is packaging them in crates. So for each shipment, they’re going to put one, two, or three components into a custom-built crate. Okay, yeah. Well, what’s going on with the price of lumber? Well, the price of lumber is skyrocketing. What’s going on with the price of labor, the people who create the crates? It’s skyrocketing. So all of a sudden, these crates are enormously expensive. Plus, what happens when a customer receives a crate? Well, that’s very difficult to open.

And then what do you do with the lumber, right? So all of a sudden, you’ve got disposal issues, you’ve got customer issues, etc. We are actually looking at creating corrugated alternatives, very, very heavy paper corrugated alternatives to take the place of actual wooden crates. So you talked about, you know, what are some of the trends that people are looking at? You asked if there are different materials. Here’s a great example of things that have typically be done been done with wood.

But now, with the Advent of the advancement in heavy paper manufacturing, there are now opportunities to change that to corrugated. And that’s something that we’re looking at a lot right now, in this market.

Sam Gupta 24:10

Okay, and let’s talk about a little bit of enterprise health and safety. And you did mention a little bit about sustainability as well. If we purely look at it from the injury perspective of the employees, and you made some of the comments that you know, some of these lumber things can be very difficult to open.

Some of the packaging trends that you might be seeing at this point in time could not be as friendly for humans to be able to work on those innovative packaging designs. So do you have any stories where the human experience wasn’t as good when you had a specific type of packaging?

Mark Oser 24:44

Well, let me see if I could narrow that down. I have a very interesting I thought to share on this one, Sam. Yeah. So what we see in a lot of cases is packaging has been designed to fit whatever the product is, well, and typically CEOs and CFOs calculate the cost of that innovative packaging. Well, the second half of that equation, Sam, is how do you pack out? Or how do you fill the packaging?

And in a lot of cases, packaging, whether it be a crate, or whether it be a corrugated box or some unusual corrugated or paper-based container. In many cases, what’s not optimized is the person who needs to pack out that container. So it’s very complicated. And so it might take somebody 30 or 45 seconds to either erect the case and then another 45 seconds to pack out the case.

Well, that costs money, especially if you’re in a DTC environment where you’re paying 3PL partners to do the packing out. So a lot of what we’re also looking at is designing innovative packaging that fills easier that he wrecks faster that a user can be more comfortable with less repetitive motion, easier to open, and easier to pack out.

So there you create a benefit where the person who’s picking out the product is happier because I got an easier box to work with the customer or the client that’s supplying it gets an advantage because now it can be packed out quicker. And that results in another below-the-line cost reduction for ops people and CFO people.

Sam Gupta 26:09

Okay, so let’s talk about some of the manufacturing startups. They might not have as much capital to be able to afford, let’s say the packaging engineers or packaging line in the house. In our experience, if they are not, let’s say D2C, and they might be packaging slightly bigger products, they typically hire 3PL, as you mentioned.

So that’s going to be an outsourced packaging scenario. And in this particular case, let’s say they are hiring a vendor to be able to do their entire packaging to they’re going to ship out the product, they this vendor is actually going to do the packaging. So let’s say if you are the CFO or the CEO, and you are vetting a vendor who might be able to do packaging for you, what are some of the questions or some of the things that you would look for in assessing this vendor?

Mark Oser 26:54

Okay, number one is I would want to see the relationship with the vendor, and let’s assume we’re talking about a 3PL right now. Okay, yeah. So if you’re talking about 3PL, I would want to know what their capabilities are in terms of innovative packaging, design. Maybe they have somebody on staff that can help you figure it out. But my fear is, and what we see typically, is that 3PLs or outsourced distribution partners are not in the business.

In most cases of designing innovative packaging, they’re in the business of packing it out and calculating how much time and labor it costs to do what you’re looking for. So there’s typically not a direct incentive for them to redesign the packaging. So we feel that should come from the person who’s manufacturing the product.

Secondly, if we’re vetting somebody out, we like to understand what kind of room they have for machinery. So, for example, if we wanted to install an automatic case erector, which is something that is great because you can just feed sheets in erects the boxes that a person no longer has to do.

Mark Oser 27:54

Okay? Well, there’s an advantage to that it’s less expensive, it requires less labor. So we want to make sure that the person that we’re evaluating the company that we’re evaluating as a potential 3PL or distribution partner has access capacity capability to bring in packaging machinery, so case erecting, etc., printing other stuff that they can be done in house.

So a lot of it has to do with what you’re producing and then trying to match up what the best 3PL or distribution partners would have that complements what you need. Some of them might not have it, some of them might, but these are the questions that you’d want to ask early on in the process, not just assume or wait till the end to figure out they don’t have what you do.

Sam Gupta 28:35

Okay, amazing. And some of the trends that I have personally seen, especially on the packaging line, some of these packaging suppliers, they are renting out their machines, they are also providing the training to the internal employees. So traditionally, if you were to basically acquire a machine, obviously, that’s going to be a CAPEX for you as a CFO, but now it has become more of the operational expenditure in terms of almost renting out this machine.

So let’s say if you had a choice between renting out a machine from the packaging supplier, and they are going to be providing the training, would you rather do that? Would you rather get a machine and build your internal capabilities? What would be your perspective on that?

Mark Oser 29:16

That’s a really, really timely and prescient discussion to be having, Sam. Okay, we see this all the time. And we see, for example, in the box business, there’s box designer, so for oblong shaped or unusually shaped items like furniture, cabinets, window coverings where you’re never producing the same size. There’s a lot of companies that have moved to us machines that take in a corrugated sheet, and then it’s custom cut to fit the size.

Well, that’s great. Okay, we understand that there’s a great, a great argument to be made there. There’s a business case to be made there. Here’s where it gets complicated. So in our business, we are big fans of disintermediating and understanding all the costs in a process, and so what happens is when you give somebody a machine, you’re not really giving it to them. You’re basically giving it to them so long as they buy whatever the input is from you.

Mark Oser 30:11

And the input, in this case, is corrugated. So there is a very simple business case that can be constructed. That tells us, okay, the machine cost $10,000, or $20,000 to $50,000. And you are paying, let’s say, we calculate $90 per 1000 square feet for your corrugated sheets. Okay, well, we know that the market cost for those corrugated sheets could be $70 per 1000 square feet. So we can then calculate very quickly that you’re overpaying potentially by, say, $20 per 1000 square feet, well, that’s great, depending on how many square feet you actually produce.

So what we like to do is we like to disintermediate the costs and make a real business case, and at least help people understand is the business case is more attractive to buy the piece of machinery and then control the inputs, or get the supplier of the machinery to subsidize the machinery at the expense of then buying the raw materials from them, it’s a very common business case to look at. It is typically, in our experience, very strongly in favor of the Machine Company as opposed to the customer.

Sam Gupta 31:19

Okay, amazing. And let’s talk about a little bit more from the process perspective. So obviously, when you are doing these packaging innovations, that’s going to be a change in the operational process. And that’s probably going to be a change in the RFP processes as well if they are using, let’s say, barcoding as part of the process.

So what would be your thoughts in terms of making the integration smooth with respect to the ERP system? And I don’t know whether you recommend an ERP system as part of the process because that’s actually going to expedite the process of innovative packaging. What is your recommendation overall? Number one, the process interaction with a system that is number one, and number two, if you are going to be requiring any changes to support the new process?

Mark Oser 32:02

Well, full disclosure, my expertise is not an ERP system. However, I have worked extensively with companies that have very effective ERP systems and companies that don’t, yeah, and what our big recommendation is, however, a product is designed. However, it’s going to go through the manufacturing process once it’s approved, once it’s vetted, once it’s tested, is that it be processed, driven, and process-driven.

So you can measure fault. So you can measure failure, you can do root cause analysis. I’ve always found that some sort of an ERP or some sort of a system that tracks. This is ideal. The difference in how robust these systems are has been obvious to us over the years.

I mean, we don’t have one favorite versus the other yet. But you can see when you’re on a manufacturing floor whether a system is in place that can track the metrics and the data that we would suggest, and then the client is able to draw a conclusion from that. So we always suggest if a company has an SRP and contract, these processes can document these processes. That’s the best way to go forward.

Sam Gupta 33:06

Okay, so what are some of your favorite KPIs that you are going to recommend to a CFO or see all that they should definitely be measuring? As far as the success of your packaging innovations goals?

Mark Oser 33:16

Okay, well, obviously, you’re looking for failures. And failures can be defined as a lot of different things. So, for example, if you’re getting returns, yeah, that’s how you find out that there’s a problem. Obviously, you don’t expect to see something blow up on the line or fail on the line.

But if you did, you would, you would identify that, but typically, the best data comes from failure. So you’re getting something returned, why is it being returned? Okay, did the package break during transportation, so tracking all the data will help you get back to a root cause analysis. I will give you a really interesting story.

And again, I can’t share the client’s name because we’re under confidentiality, but a very well-known CPG manufacturer was producing protein-type bars or health bars. And when we did our factory tour, we always liked to look at how things were being produced, how the packaging was being used. Yeah, they had a case wrapper.

Mark Oser 34:09

So essentially, they would be auto-filled with the protein bars, and then the case will be erected, if you will, around the bars. And we saw that this machine was shut down for several hours a day. And we started asking the operators of the machine to say, Hey, what’s going on with this machine? It said it’s just not working. It shuts down.

So this was brought up to the CIO. Yeah. And they had already obtained CAPEX in the next budget to upgrade the case erecting machinery. And so that’s obvious, I guess, answer. So when we started looking at it, we kind of got a good sense as to why it was failing. So we actually traced it back to the corrugated supplier. We went back to their warehouse where they’re storing the raw corrugated before it’s used on the floor and found that the corrugated manufacturer was strapping the bundles too tightly, which was causing the boards too.

Mark Oser 35:00

When you put a warped board in a case reactor, it will literally shut down the case erector. So there the situation was, it didn’t even need a new piece of machinery. They needed a new corrugated supplier that had better quality control. So again, failure is something that you can look at from, hey, it’s shutting down three hours a day, let’s replace the machine.

Or, if you really have particular insight and expertise in packaging, in this case, we were able to trace it back upstream and find the root cause had nothing to do with the machinery. It was really the fact that the supplier was strapping the boards to titan that they should have known not to do that.

So, Sam, these are real things that happen. And that’s why looking at things comprehensively looks at things from how the machines work to the inputs to the machines to the raw materials that go into it. Looking at it comprehensively is always, in our opinion, the best case, right, amazing.

Sam Gupta 35:47

So it has been an insightful conversation. Do you have any last-minute closing thoughts, by any chance?

Mark Oser 35:51

I guess the big thing is to pay attention to the trends, obviously, engineering to use fewer materials that take up less space. That’s the thing of the future. Companies are looking to do that it cuts costs. It is more environmentally friendly. Look at new ways of printing and packaging, new materials, that’s they’re always improving digital printing is on the rise.

There are a couple of trends. And the bottom line is I started this company because there’s a massive gap between how well people who produce packaging and sell packaging understand it as compared to the people who buy packaging. My team all comes out of the packaging industry. So what we’re happy to see is bring packaging experts on if you don’t have them internally upfront, and don’t rely on the packaging suppliers because, at the end of the day, they’re in it for themselves. They’re not in it for you.

Sam Gupta 36:39

Okay, amazing. So my personal takeaway from this conversation is going to be packaging is way more than packaging, though. They need to embrace it. They need to innovate. On that note, Mark, I want to thank you for your time and for your insight as well.

Mark Oser 36:52

Sam, it’s been a pleasure. I look forward to connecting with you again in the future.

Sam Gupta 36:57

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Mark or Anteris Consulting Group, head over to anteriscg.com. Links and more information will also be available in the show.

If anything in this podcast resonated with you and your business. You might want to check out our related episodes, including the interview with Kevin Lawton from The New Warehouse Podcast, who discusses why standardization plays a key role in inventory planning. Also, the interview with Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform. Or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the podcast.

Outro 38:00

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Francois Jaffres from Noviland, who discusses what manufacturers need to know about working with international suppliers. He also shares his insights into why the transactional approach does not work while collaborating with international suppliers. Finally, he shared what other options companies might have to access international supplier markets without having pre-existing relationships in these countries.

Chapter Markers

• [0:18] Intro
• [2:42] Personal journey and current focus
• [3:16] Perspective on growth
• [5:01] How to work with international suppliers?
• [7:22] Building international supplier relationships
• [16:53] How to work with an external 3PL?
• [19:58] The business model of sourcing marketplaces
• [25:46] How to build QC processes of a company serving multiple industries?
• [28:07] The fulfillment processes of a sourcing marketplace
• [31:28] Closing thoughts
• [33:40] Outro

Key Takeaways

• So just general culture and business culture, two of the most important things when handling international business, and being able to once you have those two locked down, you’re able to really start to establish those relationships with much fewer barriers.
• You may struggle with just understanding when someone says, for example, no in China, or they may just have a long maybe, which essentially just means a no, and it has to do with sort of a saving face culture.I would say the number one thing is really to understand the culture, too. It about understandiing how these vendors negotiate.
• You want to get a 5% reduction, and they say yes, we’ll give you the 5% reduction, what they’re not telling you is that 5% is coming from somewhere, it doesn’t magically go away from there, they’re not usually working with large enough margins to even give you that five or 10% discount. So they may be cutting corners, they may be using a cheaper material from a different source, they may be not assigning some of their engineers for quality assurance, throughout manufacturing, there are so many different ways that they can actually cut out this 5%.
• When you approach a factory with every single question answered of theirs, and they can quote that immediately, you leave little to no room for error because you gave them everything upfront.

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About Francois

Francois is the Director of Business Development at Noviland, a supply chain management company disrupting the traditional international supply chain through technology and customer-centric innovations. With a degree in Industrial Engineering from West Virginia University, he’s helped develop streamlined processes for international sourcing & logistics management by listening to what businesses and importers need & implementing them into the core of Noviland services.

Resources

• Connect with Francois
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• Connect with Noviland
  • LinkedIn | YouTube

Full Transcript

Francois Jaffres 0:00

It is so costly to switch vendors after you’ve gone through the vetting after you’ve gone through the relationship building, and that will affect your bottom line, whether that has to do with quality, whether that has to do with price negotiations starting a great relationship and maintaining.

Intro 0:18

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:55

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

Do you care for your vendor relationships? Well, your vendor relationships are as important as your customer relationships. If you’re dealing with international vendors such as China, Mexico, or India. Your relationship with vendors and understanding of their culture could impact your bottom line and growth. In today’s episode, we have our guests Francois Jeffrey from Noviland, who discusses what manufacturers need to know about working with international suppliers. He also shares his insights into why the transactional approach does not work while collaborating with international suppliers. Finally, he shared what other options companies might have to access international supplier markets without having pre-existing relationships in these countries. Let me introduce Francois to you.

Francois is the Director of Business Development at Noviland, a supply chain management company disrupting the traditional international supply chain through technology and customer-centric innovations, with a degree in Industrial Engineering from West Virginia University. He has helped develop streamlined processes for international sourcing and logistics management by listening to what businesses and importers need and implementing them into the core of Noviland. Having worked with 1000s of companies in discussing and streamlining your supply chain, Francois is an entrepreneur at heart and has a passion for speaking with every single Amazon FBA seller that joins the Noviland community. With that, let’s get to the conversation. Hey, Francois, welcome to the show.

Francois Jaffres 2:40

Hey, Sam, thank you for having me.

Sam Gupta 2:42

Of course, just to kick things off, do you want to start with your personal story and your current focus?

Francois Jaffres 2:47

Yeah, just a little bit on my background. So I have an industrial engineering background. So a lot of it has to do with the supply chain. And I sort of just stumbled upon this role here at Noviland as Director of Business Development.

And a lot of it really just has to do with creating processes, right, and making sure that anything that we’re building here is something that is scalable and that we are going to be able to target for growth. So I’m a graduate of West Virginia University. And right now, I reside here in Atlanta at one of our offices.

Sam Gupta 3:16

So one of the standard questions that we have for every single guest. And obviously, we are going to dig deeper into your background. And we are going to be talking about how to explore the supply chain internationally, how to acquire vendors, how to vet the vendors.

That is the topic that we are going to be discussing today. But before we do that, we have a little bit of ritual here. So the question that we have for you is, what is your perspective on growth? What does business growth mean to you?

Francois Jaffres 3:43

Yeah, growth is it’s a very interesting topic, right? And it’s something that has kind of evolved over the years, and everyone’s looking for that unicorn idea, right, whether that’s what SAAS companies are, for the products that just take off with, let’s say, some form of viral marketing.

But I think growth is something that I’ve had to learn very much, starting out with Noviland as being part of the founding five, I guess. And now we have over 30 employees globally. But when it comes to growth, it’s really I think it comes at a leadership level. And the only true way that you can grow any company, whether that is an Amazon business, or it’s to continue growing, let’s say you know, a fortune 500, it really has to come at leadership and making sure that any values that that leadership really has instilled in them, they’re able to relate to the rest of their employees and their team members.

Ultimately, if you have managers that really conflict with any growth strategies from, let’s say, the C-level executives, that’s where you will find your bottleneck. And that’s something that you know. We’ve had to really incorporate from going from just the first five people to 10 people, 20 people, and on our way to 50 people. So it’s really important that I think every step of the way you’re able to instill those values at a management level. And then trickle those down.

Sam Gupta 5:01

Yeah, I completely agree. And this is a very interesting perspective that I have personally not heard before in terms of internal communication and communicating your values. And that is definitely going to be a bottleneck to the growth.

So for today’s topic, we are going to talk about suppliers. So let’s say if I’m the manufacturing executive, and I have never done business internationally, maybe Mexico or maybe China, and I’m exploring this for the first time, what are three or five things that I should know about working with international suppliers?

Francois Jaffres 5:34

Yeah, and I guess it’s heavily dependent on where you’re doing business. But number one is always understanding the culture. So, for example, we work with our overseas offices in China, and the majority of our customers and users are based in the US, or they may be based in Australia or the UK, and they have significantly different cultures, whether that’s personal or business with China.

So a lot of times, you may struggle with just understanding when someone says, For example, no in China, or they may, you know, just have a long maybe, which essentially just means a no, and it has to do with sort of a saving face culture. Yeah. So that’s, that’s one thing, I would say the number one thing is really to understand the culture, too. It understands how they negotiate.

I guess that sort of ties into the business culture, right, everyone is trying to get the best price, but it’s all about how that’s relayed, right. A lot of times, I tend to hear, I want the best product, best quality at the best price. I think that’s every procurement agent’s or distribution agent’s dream. It’s really just getting the lowest price for the best quality product.

Francois Jaffres 6:38

But you have to know how to relay that over to the manufacturers, let’s say, you know, if you are a US business, relaying that to China, and not just telling them, I need a very good quality product, and I need it for 30 cents, that’s very transactional, it’s really telling them, hey, these are the key quality indicators that I’m looking for. And this is sort of what I would find acceptable.

Are you able to fulfill this around this target price, and that’s where I think he starts to open a conversation, rather than just telling them exactly how to do their job? Almost is how they come across. So I guess just general culture and business culture, two of the most important things when handling international business, and being able to once you have those two locked down, you’re able to really start to establish those relationships with much fewer barriers.

Sam Gupta 7:22

Another very interesting perspective, that culture is something that I have not heard a lot in terms of establishing these relationships. This is great. But let’s say if I’m the manufacturing executive here in North America, right, and I have no context whatsoever in either China or Mexico. So how can I start on my journey exploring the international supplier relationship?

Francois Jaffres 7:46

Well, I guess the easiest answer to that question is to visit it is to go to Mexico, it is to go to China, it is to go to India, wherever it is, you plan to handle these relationships. And it’s to see how they interact. So, for example, prior to working here at Noviland, I did not fully understand the Chinese culture and the way that you actually manage relationships, and you manage them very effectively.

And I’m talking about not just looking towards getting a cheaper price, but making sure that you have someone that’s there in the good times and the bad times. And that’s just as important as having them there in the good times. But it’s actually going over there and taking them out, and maybe having a nice dinner, having a good amount of drinks.

And I’m talking about a good amount of drinks together and bonding. Yeah, and you’ll see how they sort of interact with each other, you’ll see how they interact with you, you’ll open up more opportunities to be able to build together rather than, again, just being transactional, which a lot of times this is started to boil down to, it’s very black or white, I need this, if you don’t have this, I’m going to go somewhere else. Sometimes it takes a little bit of exploring. Just find out what makes them tick. And they’ll find out what makes you tick.

Francois Jaffres 8:53

And once you’re able to sort of drop some of those defenses down and be a little bit more vulnerable. I think that’s where you can launch a very, very lucrative relationship and a long-term relationship, which I think is everyone that’s listening understands. It is so costly to switch vendors after you’ve gone through the vetting after you’ve gone through the relationship building.

And that will affect your bottom line, whether that has to do with quality, whether that has to do with price negotiations, starting a great relationship, and maintaining that it’s far more lucrative to everyone on both sides than it is to have to just find a new supplier and keep that transactional.

Sam Gupta 9:29

Okay, so before we go to the next question, obviously, I need to understand your business a little bit better, who you help, who your customers are, what your business model is, and the value that you are providing so that we can position this conversation in the right direction. So do you want to touch on your business model, who you help, and what kind of value you provide to them?

Francois Jaffres 9:46

Yeah, yeah, definitely. So we started about five years ago, and we started as a very traditional sourcing agency. We aim to work with another medium- to large-sized businesses and help them source any products effectively from overseas. We didn’t have the technology back then that we have today that was released back in 2018. So what will sort of start the launch in 2018?

So when we launched that, we opened up this new opportunity to not just medium to large-sized businesses and enterprises, but also ecommerce sellers, which is one of the largest growing industries. When we got our first few signups, we noticed that they were ecommerce sellers, and they were struggling to find suppliers overseas.

A big reason for it was because they didn’t understand the culture. And in one case, they may be using open marketplaces that are created today, where any supplier can go sign up. And that also means that there are the good apples as well as the bad apples. So we really aim to simplify and mitigate the risks for businesses that want to handle overseas procurement and purchasing and do this all in one centralized tool to make it really easy for any company of any size to do this.

And so this is why I focus so much on relationship building rather than just a transaction. Because a lot of times you approach the marketplaces with a very consumer mindset where it has to be this price, the specifications, not necessarily it has to maintain this quality level pieces, certain quality control measures, and I’d like to keep it around this price to keep good margins, and everyone stays happy.

Francois Jaffres 11:19

So when we first started, we just had one dedicated person to each account. And we realized that that model just simply doesn’t work. It’s something that has been traditionally done across the board. And companies worldwide have agents that do that specifically for them.

The issue is that it’s not scalable. And so when I’m talking about something that’s scalable and is able to fill that role of, let’s say, a sourcing agent, it really has a team, a team that’s dedicated to working with our clients to maintain and create every project as a successful one. So instead of having one agent, we break apart all of the different positions.

Francois Jaffres 11:55

So you have the product specialists, factory specialists, they interact with the clients, and the factories because they understand both cultures, they’re able to negotiate those successfully, you have an order manager that of course overseas logistics, handles, export, and import documentation, customs clearance, all the boring stuff that no one really worries about.

After you’ve already purchased the product, the quality control Inspector, of course, works with our customers to make sure that we meet all the quality requirements. Then an account manager, one of the most important roles actually because they are the ones that make sure that all the projects are streamlined and that all of our customers and users are happy. And so we had to break apart this business model, simply because that single person that’s managing all of those different roles and wearing all of those different hats just doesn’t work.

So we have a great back end and front end of our platform that helps streamline and really helps us, I guess, teamwork together. And that way, everyone can stay on the same page at all times during every project.

Sam Gupta 12:57

Okay, so, in terms of the market positioning, how do you like to position yourself? Are you going to be more of the Ariba or Coupa of the world in terms of the marketplace? So in my mind, what Ariba and Coupa are going to do is number one. They are going to help in finding new suppliers. Let’s say if I need help in a specific part category or the product category, I can go to rebuy, and I can find new suppliers who might be supplying those, or I can interact with the existing suppliers. And my compromise if I need to work with Coupa is going to be I need to pay per transaction. Is that how you guys work as well? Or Is that your position in the market going to be different?

Francois Jaffres 13:34

It’s a bit different. It’s a bit unique. And it’s very much a white-glove service for international purchasing and logistics. And we’ve gone more downstream into warehousing and fulfillment, which actually is something that I think is top of every CFO’s mind that’s handling any type of product since Coronavirus.

Yeah, I think third-party logistics centers are something that we’re gonna see an increase in the next five to 10 years dramatically. But so we work with a lot of our clients one on one, first of all, they know who it is they’re working with, they know that they’re working with an entire team. And we essentially are their supplier for all of the products.

Francois Jaffres 14:14

So in our contracts, it’s even written out that we are the ones that handle any returns or repairs or replacements for any defects or non-conformities, which of course affects the bottom line, anything that you have to do yourself, whether that is assigning a purchasing manager or procurement officer to start working with all the different vendors and noticing that some of them are dropping off in quality and that you have to reach out to them.

And then there’s the barrier of the time difference, right? So rather than having to reach out to them at 8 pm or 9 pm and worrying about when is that next shipment going to arrive. And of course, you’re getting those reports from your warehousing team, and you start to see this trickle-down effect of access toll charges actually starting to be charged, and you start realizing, Hey, all these last-minute charges are really adding up. This is affecting our bottom line. At the end of the day, this is eating into our margins, eating into our profits.

Francois Jaffres 15:05

So we handle everything very proactively as a team. And this is why it’s more of a white-glove service where we can actually monitor the order managers can monitor all the logistics and shipping coordinate between both parties, the warehousing managers that are receiving and the ports and the exports. Let’s say on the China side. You have the product specialists that are making sure that when a supplier is actually telling one of our clients anything, that they’re being honest about it, and they’re upfront about any potential issues that might happen down the road.

So a lot of times, particularly a procurement officer, may report back to the executive level and just say that the factory or the manufacturer mentioned they could make these changes. But one question that I always see left unanswered is.

Francois Jaffres 15:54

And let’s say the negotiations go wrong. Or they go right, I guess, for the face value, and you want to get a 5% reduction, and the factory just they turn around, they say yes, we’ll give you the 5% reduction, what they’re not telling you is that 5% is coming from somewhere, it doesn’t magically go away from there, they’re not usually working with large enough margins to even give you that five or 10% discount.

So they may be cutting corners, they may be using a cheaper material from a different source, they may be not assigning some of their engineers for quality assurance, throughout manufacturing, there are so many different ways that they can actually cut out this 5%. So it’s our job to actually make sure. Hey, is this factory just saying that they could do 5%? Or why are they saying that they could go down by 5%? Those are questions that my team really makes sure are answered ahead of time. And I think it’s top of mind for every C-level exec out there. It’s understanding the nitty-gritty of it, not just taking it at face value.

Sam Gupta 16:53

Okay, interesting. So I’m still not sure if I understand the order of engagement completely. So let’s see if I’m the manufacturing executive. And I have some problems in sourcing the suppliers internationally. So what is going to be the order of operations here? So am I coming to you that I need to source these part number one, part number two, part number three, part number four, part number five? Or am I going to be provided a portal where I can search? If you already have that? Or am I sending you the list? So tell me, does all the engagement works from the customer perspective? And what are the different industries that are going to be the right fit for you?

Francois Jaffres 17:27

Yeah, we could just use this as a quick example. We have a manufacturer here in the US, down in Florida, actually. And they manufacture a lot of products for the Department of Defense. And whenever they’re looking for a new part or piece, of course, the purchasing manager there gathers all the specifications from their team and their engineering team, they put together a package, right, the tech pack that usually has all the specs and the materials that need to be used dimensions and the certifications that are required a bit of project scope. They understand the budget. They know how much around how much they want to purchase that item.

Francois Jaffres 17:59

Of course, they know how many they need for the project and the duration of the project, let’s say 1000 a year for the next five years. And they’ll take all of these requirements. They’ll upload it into the portal, so they just go to Noviland.com, and then they upload as a new RFP or new request for a quote from their product specialist team review it, they make sure that we have all the specifications that factories in our network would need in order to quote it effectively.

So they are experts on that front. But if you leave out a type of material, or potentially, you know, thickness or length, they’ll call that out. And they’ll let you know. Our biggest goal here is to make sure that everyone is prepared, so setting you up for success when you’re sourcing. And when you approach a factory with every single question answered of theirs, and they can quote that immediately, you leave little to no room for error because you gave them everything upfront.

Francois Jaffres 18:46

And so this manufacturer and Florida that got us all these requirements, we get them back a quote, everything is done right in the portal, they can see the quote, they can add the product to a cart very similar to shopping on Amazon, for example. Yeah. And immediately, they’ll see two things, they’ll see the import duties, and they’ll see the shipping costs that are associated with it.

So that’s right there, they can take that back to their team and immediately say, hey, we don’t have to worry about the customs. We don’t have to worry about finding a freight forwarder that can transport these hazardous goods. Let’s just take, for example, because dangerous goods were very popular in 2020, because of hand sanitizer from there. Their team is able to quickly make a decision. They don’t have to sit back and try to figure out all these moving pieces. They immediately know. okay, yes, that’s within our budget.

Francois Jaffres 19:31

That is the target price that we’re looking for. It meets all the specifications has the proper certifications. They can order samples in the portal. They can place the order in the portal. And of course, if it comes down to payment terms, it just varies. And that’s that that all varies on relationships. Most companies started out with 30% upfront 70% prior to shipping, but after they received the quality control report, but again, it just all depends on who you are, what background you have. What’s the reliability behind it.

Sam Gupta 19:58

Yeah, so I usually have a little bit more details here. Because when we talk about, you know, going from, let’s say, aerospace manufacturer to ecommerce shops, and the number of skills that you might need to maintain, and the amount, number of vendors that you may be sourcing from, it could be enormous.

So I don’t know if you have a database of every single vendor out there and the SKUs out there. So I’m still not sure what is your order of operations in terms of whether you source the vendors where and list all of the SKUs? Or are you going to first take the RFP and going to look at them and see if you have supported those skills in the past? And if we need to do any sort of sourcing for additional parts that they might need? So tell me where the relationship starts in your business? Is it from the vendor’s perspective? Or is it from the customer’s perspective?

Francois Jaffres 20:43

Yeah, so it would be the latter in the first instance. So we do have a network of over 4000 factories, we understand their machinery, their background, the products that they’ve created in the past customers that they have certifications that they hold. So we understand the full background of all these different factors or networking.

It really spans all the way from, and I kid you not automated fully automated garage systems, we’re actually helping provide one in the state of Georgia, one of the first ones in the state of Georgia, fully automated parking garage system, all the way to building materials for construction companies to parts and pieces that need to be ordered at, you know, at scale, or at larger volumes by manufacturers in the US, e-commerce sellers that are looking for consumer packaged goods with minor customizations, they may require some molding or tooling.

Francois Jaffres 21:29

So it’s not necessarily a certain niche that we take on. And we say we can’t serve as anyone else. Now, we don’t do things as we discovered very early on that we weren’t able to supply drones, because actually, the Department of Defense here in the US has a very tight regulation on drone imports from China, that’s something that we just don’t touch, we don’t touch anything with it can’t source Nike brand products from China and just order them overseas, we don’t touch any counterfeits or anything of that nature, anything that’s custom or needs an OEM factory and needs to be purchased at scale.

It’s something that we’re able to service. And so whether that means those are parts and pieces for car manufacturing, or if those are pots and pans that you need to order for your Amazon business, you just submit the RFQ into the portal.

And within just a few days, we’re able to tell you yes, we have factories in our network that are able to service you know, we don’t have factories that are networked currently, but we’re in the process of vetting a few, or we could go vet a few or third, it’s just Hey, this is not something that’s within our wheelhouse, but we can try to refer you to somewhere else, it has to be very limited in scope, but also open enough to where we could take on any of the RFPs. We can’t necessarily service all of them. We have to be honest about that.

Sam Gupta 22:44

Okay, so in terms of your marketplace, you are obviously networking with these 4000 factories. There’s no question about that. But you did mention that they don’t have to worry about the freight duties. They don’t have to worry about quality control.

So are you networking with these vendors as well, where you are doing the rate shopping? Are you working with a third party? How are you finding these rates? Is this your internal capability? external capability?

Francois Jaffres 23:07

And so, this is actually very much part of our operational business development team. Though, when it comes to shipping and logistics, we have multiple partners, I’m talking about over a dozen partners that our operations team overseas has developed these great relationships with, and our tech team has been able to create algorithms that can assign based on the lane that they’re being transported into whether it’s going to the east coast to the west coast, what type of warehouse, is it an Amazon warehouse doesn’t have to have Amazon labels?

Or is it going to a residential address? Our system automatically detects, based on where it’s going, which shipping carrier in our network will be best suited for it and the quotes that are updated. I believe they’re updated weekly or bi-weekly. I would have to double-check with my team. But that’s all done in the system that has a very big tech hand behind it, where the algorithms help determine which partners we’re going to be using for shipping and logistics when it comes to QC.

Francois Jaffres 24:00

It’s something that we do handle in-house. So we do have a quality control inspection team. I believe it’s called the ANSI ASQZ point one level two sampling plan. I want to say it’s a long name, but it’s a fairly international standard. It’s something that we require that each of the orders that are going at or that have been manufactured are able to go through that process and are accepted, I guess in QC terms.

And we have to do this for every order mainly because one where the supplier, so anything that happens down the road is going to fall on us too. It’s something that we want to make sure that every business is set up for success no matter what the product is. So again, if that’s a partner piece or manufacturer if that’s a consumer packaged good that you’re selling, and you’re relying on good reviews on, for example, you rely on that they’re going to sell out quickly so you can increase that sales velocity that all impacts the bottom line for any company, again, parts or pieces or you’re selling the goods for retail to making sure that they’re great at the source mainly because the way that pricing model works is that working completely free to use on the platform.

Francois Jaffres 25:01

Anytime that you’re checking out that product, FOB pricing already includes a small, no VLAN service fee in it. And so of course, if we quoted, you order it in the order at one time, it’s a, we make some money on that order. But one of our goals is really to help you scale that up. So if you’re starting off with, let’s say, 1000 pieces, how can we help you scale up to 2000 or 5000 pieces?

If that means we have to work with our manufacturers to get you better long-term pricing strategies and models, then that’s something that we’ll have to do if that means we have to figure out how we can optimize the container to fit more items in there. So you save money, that’s something we have to do. At the end of the day, it’s making sure that the businesses that we work with are continuously growing and that we can be that helping hand or that overseas helping hand for them.

Sam Gupta 25:46

Okay, so I want to talk a little bit more about the B2C aspect. So you did mention that you do a lot of QC, but when I look at QC, for each industry, the QC requirements are gonna be different. In fact, they might require the certificate of conformance, or maybe if they are in the electronics industry, they might require, let’s say, the certification of origin, because these manufacturers are the distributors might not want to take responsibility for doing the QC, they are relying on their suppliers.

So this could be a massive undertaking. And then I don’t know how your warehouse facility is. I mean, do you have a separate warehouse for every industry that you are serving in to make sure that you are not going to be mixing the quality practices for this different micro-industry? So tell me a little bit more about the QC processes for different industries that you are serving?

Francois Jaffres 26:36

Yeah, that’s a great question. So based on the current QC that we perform, it’s more of the higher level QC, it’s not materials testing, or ingredient testing anything that requires a lab, we will outsource, and we can utilize companies like SG&A, for example, just to make sure that we have all the proper certifications, whether that’s per order basis, or whether that’s just the factory needs help getting a GMP certification, in order to work with any level of Fortune 500 level company here, we may work with that factory to actually help them gather all the documents that they need and get those in order.

And we’re no stranger to that we’ve actually had to help a few factories move from China to Vietnam back in last year, a little bit over a year ago, once the US imposed, I believe it was a 260 or 270%, anti-dumping countervailing tariff on Chinese cabinet imports.

Francois Jaffres 27:25

So we had to help them transition into Vietnam, make sure that they had an ethical and legal upstream and downstream supply chain and ensure that they would be fully compliant. And so that’s something that we’re no stranger to. We fully understand all the compliance measures that every company has. The best part about it is every company tends to understand that the compliance measures that they need.

And so as long as they tell us these ahead of time, we’re able to find the right factory for them. And we’re able to coordinate with the right labs for the testing of QC, for example, basic things like obtaining SDS is or MSDA reports, that’s something simple, something basic. To your point, I guess anything that’s a little bit more than just the surface value of QC. We will outsource to a third party like SG&A.

Sam Gupta 28:07

Okay, and in terms of the ownership, so typically, do you ship these products in your warehouse, and then you ship it out to your customers, or is it when they’re directly shipping from their warehouse to customers’ warehouse? Tell me a little bit more from the warehousing perspective, how you are managing the fulfillment of the orders that you are taking from your customer?

Francois Jaffres 28:27

Yeah, I think it very much varies from industry to industry. So let’s just take, for example, a construction company because we do work with a lot of general contractors that ask their subcontractors to work with us that is very much a per-project basis. So let’s say that we are fulfilling two containers of doors, one container of cabinetry, half a container of countertops, and we understand the delivery schedule in those instances if we could get those products manufactured in time.

And let’s just take, for example, the project is here in Atlanta, where I am will utilize one of our Atlanta warehouses, get everything shipped in early and then just ship everything FTL to the project site, likely on a flatbed truck, make sure that it could go on to any of the lifts that they have at the project site to get it to the right level.

Francois Jaffres 29:11

And then we’ll work with our customers to make sure that everything is sorted out appropriately so that the containers are maximized or optimized for the space usage that the trailers that are delivering it are able to either unload them or load them onto a lift if they need to make sure that the manufacturers that are producing the item are protecting the items for ocean transport, as well as the handling at our warehouse into the project site. And so that’s just for construction. If it’s for e-commerce, or any online brands, or even retailers, it’s a lot simpler, actually.

Francois Jaffres 29:44

So you have the products you make sure that they pass the quality control report, get that over to the customer, the user, and from there that goes through our new VLAN Logistics Center in China goes through our secondary inspection make sure that everything is packaged appropriately that it is going to withstand any of the ocean transport Handling by customs, make sure that it has all the labels on it, whether that’s going again to an FBA fulfillment center or to, let’s say, one of the warehouses that we have, or to one of our customer’s warehouses.

And so from there, we handle all the export, get everything transported to let’s just say that us and then it can either be shipped directly to a warehouse for e-commerce fulfillment could be shipped directly to one of our customers’ warehouses, which we’re no stranger to we do that very often for whatever customers out in California, if it’s coming to the east coast, one of the benefits of our shipping is that we will find the most cost-effective, or I guess, a preferred method for many of our customers.

Francois Jaffres 30:37

So whether that’s time or whether that’s cost, if it’s cost, it may be going to the west coast and then hopped on a rail sent over, and then we handle the last-mile delivery to that warehouse that they’re being delivered to if it’s time, then we might find a fast ship boat or an expedited shipping boat.

And instead of using a 40-foot container, which you know, there’s a lack of them nowadays, maybe use a 20-foot container use two of them. So we find all these different options. And when it comes to logistics, it just varies from industry to industry. Really, I guess to answer that question, in a very short form, it’s whatever’s most beneficial to our customers could be Express air could be ocean freight, and it’s whatever’s best suited for that project. So again, if it has to go through one of our logistics centers, it can hit our China Logistics Center, our US-based fulfillment, and 3PL and then be shipped to the customer. It could go directly to the customer, whatever is in their best interest.

Sam Gupta 31:28

Okay, this has been an insightful conversation. Do you have any last-minute closing thoughts, by any chance?

Francois Jaffres 31:34

I think nowadays, the biggest thing that I’ve been noticing, and that when we audit our factories, one of the biggest complaints that they have just in, in passing sort of is that the industry has really moved to more of a transactional form of communication. And it’s something that will find its tipping point or its inflection point. And that’s where I think a lot of companies will start to suffer.

I think we need to pay back more attention and put more emphasis on relationship building on making sure that your vendors are just as happy as you are and making sure that they’re working with you through the bad times and the good. So I think in closing, really just re-emphasizing and refocusing your values to make sure that it’s relationship building rather than transactional.

Sam Gupta 32:17

Okay, amazing in my personal takeaway from this conversation is going to be your vendor relationships are equally important as your customers, so care for your vendors.

Sam Gupta 32:27

All right. Thank you so much for your time. Really appreciate your insight. Thank

Sam Gupta 32:30

I can’t thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Francois or Noviland, head over to noviland.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check out our latest episodes, including the interview with Harry Moser from Reshoring Initiative, who discusses how to compute the total cost of ownership of reshoring initiatives. Also, the interview with Sarah Barnes-Humphrey from Shipz, who shares her knowledge of international supply chain and trading.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I will try my best to respond personally and make sure you get help. Thank you, and I hope to get you on the next episode.

Outro 33:40

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Paul Critchley from New England Lean Consulting, who discusses practical examples of how to apply the 5S LEAN principles to your organization. He also shares his insights into how the needs for LEAN differ in high-volume organizations such as Automobile from job shops. Finally, he clears some of the misconceptions around LEAN and how applying LEAN principles can grow your organization’s faster growth.

Chapter Markers

• [0:28] Intro
• [3:15] Personal journey and current focus
• [4:49] Perspective on growth
• [6:19] How to grow by being LEAN?
• [14:42] How do LEAN practices differ in aerospace from the automobile?
• [18:35] 5S LEAN principles
• [24:25] The implications of not following 5S lean principles
• [29:07] Closing thoughts
• [35:45] Outro

Key Takeaways

• 5Ss is a LEAN tool. And it’s five words that start with S, and the English versions are sort, set in order, shine, standardize, sustain, and it’s kind of a step-by-step method.
• LEAN is all about just trying to talk to the people on the floor. The people who do the work know the best. They are the experts. It’s up to us leaders, CEOs, lean practitioners to ask the right questions. And the biggest one is, why do you do it that way? And if you get the answer, well, that’s the way I’ve always done it. That’s a big clue that there’s something there that there’s some waste in there that you could probably figure out.

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About Paul

Paul Critchley is a recognized thought leader on employee engagement and continuous improvement and has helped businesses around the world achieve greater levels of success through the application of Lean techniques. A frequent speaker, he has keynoted at numerous corporate events, as well as at international conventions such as AME’s annual Lean conference and at OpEx Week. He’s also the host of “The New England Lean Podcast”, a weekly show that features management thought leaders, TED speakers, world-renowned authors, and university professors. Paul is also a regular writer and contributor to publications such as Industry Week and Quality Magazines.

Paul is a former Board Member of the Northeast Region of AME, holds a B.S. in Mechanical Engineering, an M.S. degree in Management, and an M.S. in Organizational Leadership. He is a proud supporter of CT’s “Skill up for Manufacturing” program.

He co-authored his first book – The Whole Professional, A Collection of Essays to Help You Achieve a Full and Satisfying Life to bring a fresh perspective on Work/Life Balance and how individuals and organizations can work together to achieve greater levels of attainment.

Resources

• Connect with Paul
  • LinkedIn
• Connect with New England Lean Consulting
  • LinkedIn | YouTube | Twitter

Full Transcript

Paul Critchley 0:00

Look at all of the labor, and how much do these guys make an hour? Right? It’s 20-30 bucks. So it’s really easy sometimes to get people’s attention because they just don’t realize it. If you walk out on the shop floor, and you just see people being busy, they’re moving machines or running their spindles or cutting chips. So the belief is that we’re making money. Well, you are but are you making it as fast as you need to? Are you operating as efficiently as you could be?

Intro 0:28

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:05

Hey, everyone, welcome back to another episode of The WBS podcast. I’m your host and principal consultant at a digital transformation consulting firm ElevatIQ.

How busy is your shop floor? How occupied is your team? Is your machine always running? Are you happy with your growth and operational efficiency? When might you be content with what you have right now? The question is, why would you not make more money if you could without increased efforts or resources?

In today’s episode, we have our guest Paul Critchley from New England Lean Consulting, who discusses practical examples of how to apply 5S lean to your organization. He also shares his insights into how the needs for lean differ in high-volume organizations such as automobiles to job shops. Finally, he shares some of the misconceptions around lean and how applying Lean principles can help your organization grow faster. Let me introduce Paul to you.

Sam Gupta 1:59

Paul Chrisley is a recognized thought leader on employee engagement and continuous improvement and has helped businesses around the world achieve a greater level of success through the application of lean techniques. A frequent speaker, he has keynoted at numerous corporate events, as well as at international conventions such as Amy’s annual lean conference and at OPEX week. He’s also the host of the New England Lean podcast, a weekly show that features management thought leaders, TED speakers, world-renowned authors, and university professors.

Paul is also a regular writer and contributor to publications such as industry week and quality magazines. Paul is a former board member of the North East region and holds a BS in mechanical engineering, an MS degree in management, and an MS in organizational leadership. He is a proud supporter of CDs, a scaler for the manufacturing program. He co-authored his first book, big old professional, a collection of essays to help you achieve a full and satisfying life to bring a fresh perspective on workplace violence and how individuals and organizations can work together to achieve greater levels of attainment. With that, let’s get to the conversation. Hey, Paul, welcome to the show.

Paul Critchley 3:13

Hey, Sam. Good to be here. Thank you.

Sam Gupta 3:15

Okay, amazing. And we are super excited to listen to your insight. Just to kick things off. Do you want to start with your personal story and your current focus?

Paul Critchley 3:25

So I’ll keep it brief. I graduated with a degree in mechanical engineering went to work for a tier-one automotive supplier. And shortly thereafter, is really where I got introduced to lean, which is no big surprise, because back then, which was what late, the late 90s. Lean was just kind of getting a lot of traction, especially in the automotive industry. So I learned a lot about it.

From there moved over. I worked in aerospace for a long, long time, where I’m physically located is just outside of Hartford, Connecticut. And between Hartford and Springfield, Massachusetts was known as aerospace alley, we have a lot of very large aerospace manufacturers and their sub-tier suppliers along the I91 or so that’s where I spent a lot of my career moved up through the chain, the chain of command, I guess, if you want to call it that, spent a long time as a manufacturing engineering manager, eventual plant and operations facilities manager.

So I had the honor to be able to practice lean for a long, long time. And at a certain point, I decided I wanted to go out on my own. So I did that in 2012. And I started my company, which is New England Lean Consulting. And that’s exactly what we do basically all day every day, are we help organizations practice lean and teach and consult in that in that area.

Sam Gupta 4:49

Okay, so we want to discuss a lot of that. But before we do that, we have one of the standard questions that we ask all of our guests, and that is going to be your perspective on growth. What does business growth mean to you, Paul?

Paul Critchley 5:03

Well, so my background, again, is mostly manufacturing. So I’ll answer it from that perspective. Growth is all about. I think winning, winning new business. Okay, there are always folks out there that can do it better, faster, cheaper. So the objective of the game is to try to beat them to the punch, we say to all of our clients, we all have competitors, and New England Lean does as well.

And our competitors are all out there working hard to win your business away from you. And they’re going to do that on cost, on delivery, on customer service on the lead time, all of the important KPIs. So the goal is to again beat them to the punch and be able to service your customers because in lean, speak, value is defined by the customer. And different customers would define it in different ways. , some people just buy commodities, so they’ll buy on price. Other people will buy on customer service.

So that’s a big part of what lean does for you is it allows you to grow your business in a methodical, logical way. That’s not haphazard. You kind of have to steal a Stephen-Covey-ism. You begin with the end in mind. So you kind of come up with your strategic plan, and then you come up with a plan to execute the plan.

Sam Gupta 6:19

Okay, so when I’m doing my interview, I’m always trying to connect the dots. And here I’m trying to connect the dots with respect to lean and growth. So whenever I think about any buzzwords in the market, everybody’s gonna claim that they are Super Lean. Okay. Yeah, because it sounds cool. But obviously, not everybody is. So two things. Number one, we have to connect the dots in terms of getting leaner and how to grow by being Lean. Can you touch on that?

Paul Critchley 6:51

Sure, so it is your first question, and connecting the dots, you’re spot on, Sam. Unfortunately, so the term lean got coined in 1988. And it got popularized the next year when Dan Jones and Jim Womack wrote the book called The machine that changed the world. Yeah. Now I’ve had the privilege of meeting Jim Womack and hearing him speak numerous times.

And one of the things he said recently was, and I’ll paraphrase, because I don’t want to put words into his mouth. But he basically said, looking back, I wish we’d never used the term lean because and this is something that we do in our workshops. One of the first questions I ask is when I say the word lean, what do you guys think of, and probably 95 times out of 100, people will say, well trim the fat, use fewer people and it very quickly, because the term lean has that connotation.

If you walk down the grocery store, cereal aisle, or everything’s lean this or all kinds of, and that’s what it all it’s all about, right? Getting smaller and lean in terms of Toyota Production System lean, it’s not that at all. It’s all about delivering value to the customer. And that customer can be an internal customer or an external customer.

Paul Critchley 8:08

And so we focus on what is the value that you bring. And then, we focus on taking the waste out of being able to deliver that value to the customer. When I say waste, it could be transportation, defects, all of the things that get in the way of you being able to deliver your product or service to your customer.

So when we put it in those terms, people generally kind of come along, they’re like, okay, now I understand that you guys aren’t here, you consultants aren’t here to take my work, scale back from 10 people to six, and then fire or lay off those four people. Once we get over that hurdle, it gets a little bit easier. Now, as far as your second question on how to grow, that’s literally what lean is truly all about. It’s based on Toyota Production. When Toyota developed that system, again, it was all about being able to deliver the customer what they wanted when they wanted it.

Paul Critchley 9:03

So if you think about what the automotive industry looks like, in the 40s, the 50s, the 60s, if you look at the big three, which here in America, where Ford, GM, and Chrysler, we could pump out automobiles more than anybody. But we had that old mentality of setting up the machine and just hit go and run it and run it as fast as you can and just keep pushing product out.

And I use the term pushing on purpose. Where Toyota differed was they said, that’s great because if we can do it better because we’ll make a Toyota Camry, then we’ll do a Tacoma and then we’ll do a Corolla and then we’ll go back to a Camry and we’ll change the color every single time. Whereas the big three would be like, Alright, today we’re going to run F150s. And if they’re all going to be silver, tomorrow, we’ll change over to black, and the next day, it’ll be blue, but they’re all going to be the same truck. It was that kind of different mentality. So they were able to grow and now forward to today in 2021.

Paul Critchley 10:02

And we see what we can see what the automotive market has done. And again, it’s all about being able to give the customer what they want. The old belief was, well, people will come into the car dealer lot, and you pick from the lot. And that’s it. Well, what if I go to the light, and I don’t like any of these?

Well, I have to order it. You could say it was, but you’re talking 12-16-26 weeks, sometimes way back that. And in order to order a car, we actually just did this with Toyota, we went to the law didn’t find what we wanted, we ordered a minivan for Sienna the way we wanted it. Four weeks later, we had it exactly the way we wanted it. So when I talk about Lean and growth, sometimes you will believe that lean is a cost-cutting practice strategy. It’s not the main goal.

Paul Critchley 11:00

Now, by way of eliminating waste, reducing defects, or eliminating defects, your throughput, your WIP turns are going to improve. So you will eventually realize an increase in your plant capacity. Now how you use that capacity, obviously, you’re going to want to fill it up, one of the ways you could fill it up is, hey, now that we can get stuff through twice as fast, say, we can actually go to our customers and say, hey, you know this thing, this widget that we make for you, or the service that we provide you our old lead time was six to eight weeks.

Well, now we’re three to four or two to four, or whatever it is, customers oftentimes will pay a premium for that, because nobody wants to wait. think about Amazon now, right? Amazon prime is wildly successful because you don’t have to plan ahead. You don’t have to think. You just click click click tomorrow, this thing shows up on your doorstep.

Sam Gupta 11:43

There’s a term for that. It’s called Instant gratification. And it’s very popular all of us want instant gratification, right?

Paul Critchley 11:49

Yeah, as a society. You think about it. You can just say, hey, Alexa, or Hey, Siri, or whatever. And yeah, you’re right. I want to know, what’s the weight of a blue whale? Well, it’s whatever it is 500 times I’ll make that part. But you’re right. Our society is driving us to the point where I want this right now. Why can’t I have it? Yeah, and the closer we can all get to be able to provide things right now, the more business you’re going to win. And that’s the flywheel off, the momentum that you can get once you start practicing lean and instituting some of these ideas.

Sam Gupta 12:25

Okay, so let’s talk about, and I’m, again, trying to connect the dots here, right. So obviously, you have been doing this in two different industries. And those are some of the top industries, in my opinion, when it comes to practicing lean. So you have done a lot of work in the automotive space and also in aerospace. So in these two phases, and you also talk about how values differ for everyone, also for every industry. So talk about the manufacturing processes for the automobile, as well as for the aerospace, how they differ, and what kind of values they deliver.

Paul Critchley 13:04

Sure, so it’s interesting that you asked that because they’re very different, which is always fun. I am famous for saying processes, processes process, right? If you’re making stuff, you’re making stuff. But yeah, when I think back to my time in automotive, it was very much high volume, low mix. And what I mean by that is, I can remember walking out of the plant in South Carolina, where I used to be, and we made. Specifically, I made bearings. So we made the bearing content for automatic transmissions.

And I can remember just looking out over this one, literally 1 million square feet of the plant under roof and just centerless grinders, we probably had 50 of these things, running 24 seven, and the rollers, the needle rollers that came off of them were coming off so fast, it looked like a little stream of water. And it was just it’s almost like when you watch on television, some of the shows that how it’s made or whatever, and they show you some of the insides, right of how it’s made. It was exactly like that.

Paul Critchley 14:00

And it was just volume-driven. Yeah, compared to aerospace is generally not very. It’s not a high-volume kind of a thing. Yeah. And then a lot of our clients who are in aerospace, they’ll make one or two of whatever this thing is, and then they’ll send it in to the customer.

And they’ll test this thing out. It might be a year or two before it ever comes back around. And the next time it comes around, it’ll be three revisions different because that it’s some internal thing that’s gone on at the customer. So they have to be able to be ready and nimble and agile enough to be able to change that quickly and be able to continue to serve as the customer.

Sam Gupta 14:42

Yeah. Okay, so let’s talk about Lean practices and these two industries. So in the aerospace, obviously, when I think about this, it’s going to be a completely different space where you are sending reports, and they are coming after three years.

So your raw material pricing is going to be tricky to manage there. And then You have to plan a lot more than you are doing, let’s say in the high volume shops, right? So if you were to practice lean in these two industries, how would you do it?

Paul Critchley 15:09

Sure. So I’ll just say that the principles are all the same, the tools are all the same how they get applied. I will admit that we do it a little bit differently. Every client’s going to be a little bit different. One of the rebuttals that we get sometimes is people say, especially in the aerospace, they’re like, Well, listen, we’re kind of a job shop, we might make one or two or three of these things, and we may never see them again, or it might be three or four years down the road versus this belief.

And it’s fairly accurate that in automotive, once you make something, you’re pretty much making that thing for a while until maybe there’s a design change or something down the road. But those generally don’t come, at least in my experience, all that often. So what I like to talk about when I’m dealing with, like, say, an aerospace client is saying.

Paul Critchley 15:55

Okay, I understand your high-mix, low-volume. So, in other words, again, you might make two of these, one of those four of these other things. And again, you might not ever see it again, but there are still principles within lean that you can apply that make things flow better. And I’ll give me a quick example. 5S lean is a great place to start, although I will say you don’t have to start there. But we generally do.

So, just if we quantify for a CEO or CFO, did you realize that you have ten people out on the shop floor running lathes and mills. And on average, each person spends about an hour every day looking for some tool that they need, that they don’t have, right where they need it.

And this tool is worth five bucks. But multiply that out every day. You’re losing an hour per person times how many people you have times five or six days a week. Look at all of the labor, and how much do these guys make an hour, right? It’s 20-30 bucks. So it’s really easy sometimes to get people’s attention because they just don’t realize it.

Paul Critchley 16:54

If you walk out on the shop floor, and you just see people being busy, they’re moving machines, or running their spindles or cutting chips. So the belief is that we’re making money. Well, you are but are you making it as fast as you need to? Are you operating as efficiently as you can? So when we do this kind of stuff, in a high-mix, low-volume environment, we like to work on these types of things, what I call the support mechanisms, making sure tools are where they need to be having a good visual management system, instituting daily management to make sure lines of communication are going it’s really easy, sometimes again, in that in that environment, to not communicate something that somebody would need to know.

And you get a couple of days down the line, you’re like, Oops, I forgot to tell you, we got a new print, or we got to go in from the client or, or we got another quote in we, they don’t want this revision, they want this other thing, or they asked us to split the order, or whatever it may be. It’s really easy to make those kinds of mistakes. So we standardize and apply the lean tools and principles where we can without straight-up changing everything that they do because, again, a lot of these places have been in business for a long, long time.

So it’s not like we have to blow it up and change everything right now. And that’s sometimes I think what people believe lean to be it’s like this whole extra thing. And it’s really not; it’s just about taking what you do best and allowing people in your organization to do those things more often and more hours in the day.

Sam Gupta 18:35

Okay, so you spoke about the 5S lean principles. I’m not familiar with that. So can you touch a little bit on that as well, because my audience may not be familiar with that either?

Paul Critchley 18:42

So yes, sorry. I sometimes rattle these things off because I deal with them all day. So I am sorry, Sam. So yeah, 5S lean. It’s a LEAN tool. And it’s five words that start with S, and the English versions are sort, set in order, shine, standardize, sustain, and it’s kind of a step-by-step method of kind of what I described. Okay, so I’ll give you a really easy example. So stand in your kitchen right now. Do you have a silverware drawer?

Sam Gupta 19:13

Um, I probably do. I never go to the kitchen, so I’m not too sure about it. Okay. You definitely don’t want to be me to be near the kitchen drawer that carries a knife.

Paul Critchley 19:31

So typically that it usually people would write, so you open up your silverware drawer, and I’ll bet that pretty much everybody who’s listening has a divider. So there’s a section for forks, a section for knives, a section for spoons. Yeah, right. And everything in there is clean and ready to go.

So you grab your yogurt for breakfast, you go to the silver jar, you need a spoon, you get a spoon. That’s basically the first three S’s right there out of 5S lean. Because, for instance, in our silverware drawer, we’re a family of four, we probably have eight forks, eight knives, eight spoons, right. So we don’t have 50 of everything. So we don’t have too much. And we don’t have too little. We don’t have one spoon to share with people. That’s part of what sort is of 5s lean.

You get rid of the stuff that you don’t need. And you can also sort in the things that you do need. Now the second S of 5s lean is set an order. That’s just like I described, where it’s divided up. Now, another question I asked in workshops is who has a junk drawer in their kitchen, and the vast majority of people will throw their hands up, and it’s alright, what’s in your junk drawer? It’s everything. It’s old batteries, pair of scissors, extra Christmas cards from last year? It’s junk. That’s all right.

Paul Critchley 20:51

How long if you need something in the junk drawer? How long does it take you to find it? And it’s not horrible. It’s not ours, but it’s not as easy as it is in the silverware drawer. That’s what set an order is. It just means everything in its place. Right? Yeah, the shine is. It’s clean. It’s operable. It’s ready to go. It’s in this example, again, you go to the silver drawer, it’s all clean, you don’t put dirty dishes back, right? That’s disgusting. It would defeat the whole purpose is, in industry, it’s all about it’s like gauges, tools, fixtures, are they where they need to be.

Are they where I need them? And when I go to the rack, or the shelf or the tool badge to get what I need, it’s going to be there. I know it’s ready to go, it’s not going to be broken, it’s not going to be out for calibration or any of that kind of stuff. It’s it’s ready. So those are the first three standardized is just like it sounds. So from work cell to work cell, you try to make things as standard, quite frankly, as the same as you can, because one of the other tenants of lean is you want a well-trained cross-functional workforce.

Paul Critchley 22:07

So if Sam, you, and I are working in two separate work cells, and I’m out one day, but they need you to cover for me, they want you to be able to come into my workspace and be able to tell what’s and whatnot. It’s one of those instances where sometimes I’ll hear from clients. Well, it’s okay because I know where everything is. And this is my space. It’s like, okay, it is your space, but only for now, what if you hit the lottery tomorrow, or what if you’re out sick or there’s got to be a way that other people can come in, get a lay of the land quickly and easily.

That’s what standardization is. Now one, Paul Critchley’s caveat to that is, I don’t prescribe to the notion that standardization means emergency room, clean hospital room kind of stuff. Sometimes I think people will misconstrue standardization to mean it absolutely. 100% has to look exactly the same, which means like an in lean office, sometimes people will struggle with this, they’ll say, Well, you can’t have pictures of your kids on the desk or I can’t have my plant anymore, I can’t have my jacket on the back of my chair. Because five, so the lean consultants said you can’t.

Paul Critchley 23:20

That’s not what this means at all. It just means if somebody needs to use your area, or come in, right and find what they need to find, they have to be able to do it quickly and efficiently. That’s all that means. The last one is sustained. But sometimes, as a community of manufacturers, we get into this habit of spring cleaning. So though, especially here in the northeast of the United States, it’s wintertime, and spring comes, and we want to kind of air things out, and we’ll just clean things out.

And then we’ll spend the rest of the year re-cluttering everything. So we have to do it again next year sustainment is all about keeping up with it along the way. So you don’t have to have that massive kind of event once a year, once every couple of years. So you never get to that point where you get so overwhelmed. It’s one of those things you just kind of keep up with along the way. So that, in a nutshell, is a tour of what 5S lean is.

Sam Gupta 24:25

Okay, interesting. So as you mentioned, and I mentioned that I’m not really interested in the kitchen, and I’m not qualified to be in the kitchen. Right. So what I want you to do now is we’ll touch on a couple of stories where the companies that you work with will not be in order. They were not sorted. They were not shining. They aren’t standardized, or they were not sustained. Just pick a couple of stories where you found that they were not following the 5S lean.

Paul Critchley 24:56

Sure, sure. That’s unfortunate. That’s pretty easy. Okay. Because it is something that people struggle with. So we had a client who specifically called us in for some help with 5s lean. So they had two of their biggest customers in for supplier audits. And independently, each client had told them, You guys really get a kind of clean this place up because you’re just you’re literally bursting at the seams with stuff, you just have a lot of stuff.

And we want to give you more business. But we’re afraid if we do, you’re not going to be able to keep things straight. Because it’s just when we walk around, it’s just racks and shelves, and everything’s chock full of just stuff. So they called us and hired us to come in and help.

Paul Critchley 25:45

And the short version is they basically had 30 years of accumulation of such a couple examples. They’d have a bill of materials that has 30 things on it. Well, a couple of those things would be ordered incorrectly. So they would come in. It may or may not be something that you could return. So because in some cases, this is pretty large equipment.

So they would make the decision, we’ll keep it, and we’ll use it on the next job. Well, they didn’t have a mechanism to track it. So the next job and jobs that came down the pipe, the engineers who were speaking out that job didn’t know that those items were available for spec-ing in, so they would just kind of sit out on the floor. And that multiplied again over literally over 30 years. Sometimes they were big. Sometimes there were small pieces.

Paul Critchley 26:00

So what they ended up doing was they would just stick things on a shelf. And again, they would say, well, it’s still an air quote. It’s a good part. It’s not scrap. It’s not inoperable. It just didn’t wasn’t the right part or piece for this particular thing. But we can still use it. And again, so they save it for tomorrow. But tomorrow never came until the point where they were just overwhelmed with the inventory. So that was a big part of what we had to help them with.

And if I’m honest with you, they finally admitted to me that they actually had a warehouse that they started renting to store all this same kind of stuff. Oh, wow. Yeah. So I’m like, alright, so you’re keeping all this inventory that you don’t need, and you’re paying rent to be able to do it. And they said, yeah, that’s what we’re doing.

Paul Critchley 27:26

Okay, well, so we sorted we had a heat burning. Yeah, right. So we had a huge sorting of that probably filled two or three, eight-yard dumpsters with just the stuff that was literally 20 some odd years old. Because it was, even though it was still good, it just didn’t have a purpose.

And I always like to say things have to earn the right to take up floor space in your shop. And in order to do that, it has to help you produce products that earn you money. So people, machines, equipment, right, all of these things take up space, and they have to be able to help move your company towards delivering value to your customer.

Paul Critchley 28:05

The dead inventory does not help you do that. And in fact, it hinders you because just like these clients told our client, we want to give you more business, but we’re not going to until you get this place cleaned up. And oh, by the way, it just doesn’t look good. It doesn’t look clean. It doesn’t look managed. It just looks like your basement or your garage. It’s like everybody’s favorite place on a shop floor is right here for now. That’s where everything goes.

And it’s like, well, right here for now turns into right here until somebody else needs that space for something. This will get shoved over into a corner, or somewhere somebody will come looking for it can’t find it. Maybe they go looking for it. Maybe they will go buy another one. I used to work at a company that had three Christmas trees that because they kept forgetting that they owned one, and every year they just go buy another one. So finally, you can’t make this stuff up, Sam. So finally, I go up on this mezzanine. And I’m like, why did we buy into the Christmas we already had to? They’re like, Oh, we did? Yeah, we did.

Sam Gupta 29:07

Oh, boy. So much fun. Alright, Paul, I think that’s it for today. Do you have any last-minute closing thoughts, by any chance?

Paul Critchley 29:13

Yeah, because again, I’ve been doing this for a long time. So I won’t say that. I’ve heard it all. But I’ve heard a lot. And one of the things again, getting back to what we started the conversation with, is LEAN, not just for automotive. It’s not just for high volume. We have clients. We have a public school. We have a major university. We have hospitals, medical offices.

And yes, we have manufacturers too. So again, you can apply 5s lean tools and principles to any industry. And you don’t even have to make anything you could be a service organization because, again, it all gets back to delivering value to your customers, whether it may be your work at a bank and you do mortgages.

Paul Critchley 29:56

Well, how long does it take to get the paperwork through for that? Well, why does it take that long? We’ve actually Value Stream Map this before. Over 90% of the time was this paperwork that was floating around this office was sitting in people’s inboxes, waiting that offers no value.

In the meantime, you have customers waiting for this stuff to get done. So how much is it worth to the business to be able to take that lead time and cut it in half tomorrow? What would that look like? So I just want to encourage everybody to give it a chance. I also hear a lot that people like, Oh, we tried it, and it didn’t work. But what did you do? How did you do it? Did you have a coach? Or did you just cut inventory? That was a huge problem in the late 80s, early 90s, where people followed the just-in-time model blindly.

Paul Critchley 30:41

And they said, Oh, yeah, I definitely want to do that. So they cut inventory by half or, or three quarters. And pretty soon, customers are calling and yelling at them, like, Where’s my stuff you’re late, they didn’t have they didn’t do the fives, they didn’t do the setup, production, and all that stuff.

First, they weren’t supported yet, in order to be able to cut inventory, which you can do, but you got to do some other stuff first. So I just encourage everybody just to give it a try. There’s what the worst thing that can happen is? I feel like sometimes people think that lean again is this whole big extra thing. And if the timing is not perfect, I don’t want to start because I don’t want to mess it up.

Lean is exactly the opposite of that. It’s all about just trying to talk to the people on the floor. The people who do the work know the best. They are the experts. It’s up to us leaders, CEOs, lean practitioners to ask the right questions. And the biggest one is, why do you do it that way? And if you get the answer, well, that’s the way I’ve always done it. That’s a big clue that there’s something there that there’s some waste in there that you could probably figure out.

Sam Gupta 31:43

So my personal takeaway from this conversation is going to be 5S lean principles can be not only applied to different industries but can also be applied to life as well. And what I’m going to do as I’m going to set my life in order to be sorting it more. I’m going to make sure that it’s shiny, it’s standardized, and it’s sustainable as well. On that note, Paul, I thank you for your time. This has been a fun conversation.

Paul Critchley 32:05

Sam, thank you so much for having me. I appreciate it a lot. I had a blast.

Sam Gupta 32:09

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new. If you want to learn more about Paul Critchley or New England Lean Consulting, head over to NewEnglandLeanConsulting.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check out the related episodes, including the interview with Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further. Also, the interview with Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 33:18

Thank you for listening to another episode of The WB s podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Amanda Schleede, who discusses how manufacturers and retailers can better manage disruptions associated with COVID spread. She also provides insight into reporting requirements related to COVID. Finally, we have had a chance to describe how contact tracing works and how it can help manufacturers understand and analyze trends.

Chapter Markers

• [0:20] Intro
• [2:30] Personal journey and current focus
• [4:47] What is contact tracing?
• [9:25] Industries relevant for contact tracing
• [12:25] Technology architecture for contact tracing
• [15:50] The limitations of Bluetooth technology
• [22:13] Data points available through contact tracing
• [26:33] The financial implications due to the lack of contact tracing
• [30:11] How manufacturers can prevent COVID in their facility?
• [33:12] Closing thoughts
• [35:45] Outro

Key Takeaways

• If somebody can prove that they contracted COVID from their workplace, it is actually considered a workman’s comp claim. And so there are situations where we’ve seen them in the news where, employees are suing their employers because they got COVID on it, and their employer site and so on.
• The downstream effects of showing your employees that you care about their health and safety, that you’re putting risk mitigation in place. So from your insurance carriers to your workman’s comp carriers, to your lawyers, all of this, you’re really showing that you’re doing something to mitigate the risk of somebody coming in whether they know it or not, being COVID positive, and, infecting your entire employee pool.

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About Amanda

With over twenty-five years of healthcare-focused experience within the management consulting, service, and venture capital worlds, Amanda has honed her skills to get the job done. Her previous experience working for multiple entrepreneurial-based organizations provides her with the experience to grow Vital Circle. She can anticipate client needs and the road ahead. Her extensive experience focused on organizational design and needs assessment, provides Vital Circle clients with an inside perspective in developing and implementing a full health protocol playbook for their organization. 

Resources

• Connect with Amanda
  • LinkedIn

Full Transcript

Amanda Schleede 0:00

Then that way, an organization can say okay, instead of shutting down an entire plant or an entire line in a manufacturing situation, we only have to identify four or five, six people who we need to say, hey, we need to put you on Cobra pay, or we need to have you work from home. And so, really, what it’s doing is creating a situation where there aren’t these downstream effects.

Intro 0:20

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:56

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

COVID has been harsh on everyone. But if you have a COVID incident in your facility, not only will there be significant disruption with your operations, but there may also be additional overhead of reporting for your already overworked HR department. What can facilities do to manage their facilities better while taking care of their employees’ health?

In today’s episode, we have our guests Amanda Schleede, who discusses how manufacturers and retailers can better manage disruptions associated with COVID spread. She also provides insight into reporting requirements related to COVID. Finally, she has had a chance to describe how contact tracing works and how it can help manufacturers understand and analyze trends. Let me introduce Amanda to you.

Sam Gupta 1:50

With over 25 years of healthcare-focused experience within the management consulting service and venture capital worlds. Amanda has the skills to get the job done. Her previous experience working for multiple entrepreneurial-based organizations provides her with the experience to grow Vital Circle, anticipate client needs and the road ahead. Her extensive experience focused on organizational design and needs assessment provides vital circle clients with an insight perspective and developing and implementing a full health protocol playbook for the organization. With that, let’s get to the conversation. Welcome to the show, Amanda.

Amanda Schleede 2:28

Thank you, Sam. Thanks for having me.

Sam Gupta 2:30

Just to kick things off, do you wanna start with your personal story and your current focus these days?

Amanda Schleede 2:36

Sure, so my name is Amanda Schleede. I am the CEO of Vital Circle. I have started Vital Circle with a friend of mine who is actually the Chief Nursing Informatics Officer at Atrium Health in North Carolina. Prior to starting Vital Circle, I owned my own consulting firm, which focuses on helping organizations identify pain points within the organization, really providing that outside consultant exposure.

So previously, or prior to starting my own consulting firm, I spent six years in an operating partner role at a Chicago-based venture capital firm, and we focused on healthcare and really digital advertising technologies. And so, the work that I was doing with them was within the healthcare space startup’s entrepreneurial environment.

Amanda Schleede 3:22

Prior to that, I had a number of years at large consulting houses really focused on the healthcare industry. So for me, as I’m aging myself by saying this, the last 25 years of my experience have been on business operations within the healthcare space. So focusing on biotech pharma and the payer-provider space. And so, really, when COVID itself hit, I went and connected up with Becky. I pivoted my business, which was Consult27.

Amanda Schleede 3:48

We created Vital Circle, which is web-based, so it’s a downloadable app, but it’s a web-based app focused on daily symptom tracking of COVID-19. And then, in addition to that, we have added in contact tracing technology, and I know that’s a buzzword for right now, but also usually a high-stress point for employers, but we have developed and implemented a contact tracing device that does not use GPS it is no way uses any biometric data, so you’re not getting like a Fitbit where you’re getting steps and heart rate and all that stuff.

We have no dependency on cell phones. Yeah, and our and our really our overall goal is to provide organizations with data and analytics to really reduce the potential for employer exposure and, within the manufacturing, standpoint was what we’re gonna talk about today is really, reducing the potential for factory or manufacturing shutdowns or department shutdowns.

Sam Gupta 4:47

Okay, love it. Obviously, that’s a big theme right now. So you are definitely helping in a big way. But we are going to be digging deeper into all of what you mentioned because that’s a pain point right now before we do that one standard. A question that we have for all of our guests is going to be your perspective on business growth. So what does growth mean to you, Amanda?

Amanda Schleede 5:07

Obviously, there’s the financial side of it, if you’re looking at from the financial aspect of CEO, CFO, it’s like, how do we, in this pandemic state, continue to grow, the services and the offerings that we have, and really continue to build our business, but I also see growth from an organizational standpoint as to how do you consider or how do you increase the loyalty of your employees to you? There’s a ton of studies out there about, from a human resources standpoint, about how to lose an employee and the cost of bringing that new employee on and getting them trained, and really what the cost is when people leave.

So for me, it’s not only the growth of, okay, we need to get ten more clients. So we need to hit a revenue number of $10 million, or whatever the actual physical numbers are there, but also looking at like, how do we grow our organization internally? And how do we provide an environment where our employees have a loyalty to the brand into the name and long-term employment? And then also how do we grow and get them to understand that we as an organization are really focused on them individually and their health and welfare and wellness?

Sam Gupta 6:14

Okay, amazing. So we are going to go back to the manufacturing aspects and contact tracing as well. So yeah, only if I’m the manufacturing CFO, and I have no idea what contact tracing is and why I should care. Tell me what that is.

Amanda Schleede 6:27

Okay. So contact tracing is a fairly new thing in the US. There are really, as I see it, three ways in which you can do contact tracing. So number one is the person-to-person contact tracing. So you physically have a person who picks up the phone or is doing an interview of another individual. The other way we can do it is through cell phones. So through GPS pinging or phones to phones, the downfall of that is, you can turn your Bluetooth off on your cell phone, and it’s not being traced.

And then we have device contact tracing, which is what we focus on but is really, it’s just a device to device looking for another device and recording, what is the interaction between those two devices, and really all is creating is that data and analytics, i.e., Amanda and Sam were together on February 2, for 30 minutes at four feet, like that’s the data that we need. And overall, the contact tracing side of COVID or any type of pandemic research or data analytics is really the whole idea about if we have a situation where we have an employee or somebody in our population, that is symptomatic for in this case, COVID was symptomatic for COVID, or becomes confirmed positive for COVID.

Amanda Schleede 7:40

How do we, with data and analytics, and in real data and information, identify those people that this person has come in contact with, so that instead of one person affecting 100 people, maybe one person has had a significant amount of contact with, say, five people, and then that way, an organization can say, okay, instead of shutting down an entire plant or an entire line, in a manufacturing situation, we only have to identify four or five, six people who we need to say, hey, we need to put you on COVID pay, or we need to have you work from home.

And so, really, what it’s doing is creating a situation where there aren’t these downstream effects of one person who may or may not know, they’re symptomatic or COVID positive at the time, affecting a business. Because we’ve all seen it, the pork industry was hit very hard early on with COVID.

Amanda Schleede 8:29

And we saw how the cost of a pound of bacon spiked to almost $10 a pound. All those things are things that when you’re in a manufacturing situation, and from a financial like CFO standpoint, it’s, what type of investment can we make in a technology that’s usable and usable beyond COVID, but usable, and will provide me with the data and the analytics and the information.

I need to mitigate the risk within my population, so that I’m not in a situation where, I have one person who, is COVID, positive or COVID, symptomatic, and then I need to turn around and say, oh, my gosh, we got to shut down the entire plant and the entire line for two or three days, and we’ve got to clean the plant. And that’s gonna cause us to lose revenue of X number of dollars, instead, let’s just identify that handful of people that we need to put on COVID leave or COVID break, and we can continue business as usual.

Sam Gupta 9:25

Okay, amazing, so let’s talk about some of the verticals. And I don’t know if this is going to be useful everywhere. Do you believe that every manufacturing vertical can take advantage of this technology? Or is this primarily prevalent in the food and beverage manufacturing space, which you mentioned in your description? So walk us through different verticals, and where do you see the usage of this device?

Amanda Schleede 9:48

Yeah, I personally feel number one, I don’t have this grandiose idea that every manufacturing company is going to use our technology, so I’ll put that out there.

But we’ve really felt that we are industry agnostic, we are working with Primary medical groups, we’re working with schools, manufacturing we’ve been doing in-person events during the pandemic.

So really, the ease of our technology itself is so easy to customize, and so easy to roll out that we can really use it in any situation, when it comes to manufacturing, specifically, it really can be used across any type of manufacturing, industry or setting because our devices and because we’re using physical devices, people where there’s no need to rely on your employees, personal cell phones, or even quite honestly, you may have people who don’t have cell phones, or don’t have smartphones that work on your plants. And we want to have a device that is noncumbersome, meaning that, it’s not huge, you can’t get stuck on equipment, that kind of thing.

Amanda Schleede 10:44

What we find is by having a device is basically it’s not basically all it is reporting device to devise interactions is, our devices are small, they’re non-cumbersome, people don’t even realize they’re wearing them. We don’t have to rely on cell phones. And as we know, in many manufacturing situations, you’ve got people who are on the on assembly lines, who are driving large pieces of equipment, you don’t want them distracted with their cell phone with their pocket, a lot of manufacturing situations, I say like, here’s your locker, put your phone in it, put your car keys in it all your loose, apparel, that kind of thing.

We want to make a situation, and we want to create a situation where, number one, police feel safe and that their employers are focused on their health and safety. Number two is that they don’t feel like their privacy is being somehow dug into or known. Yeah, compromise. We have what we call the three Ps. So it’s privacy, protection, and peace of mind. So we’re providing peace of mind to employers and employees that we’re doing something to mitigate the risk of COVID. We’re providing that privacy aspect. And then we’re really just creating a situation where leaders of organizations have the data and analytics they need to make business decisions.

Sam Gupta 12:00

Okay, so I have some background in the medical device space, right. So I’m going to ask you a couple of questions related to the form factor. So how does the device look? Let’s say if I am the manufacturing CFO, and I’m asking my employees to wear the device, what is the form factor light?

Amanda Schleede 12:15

It’s really small. It’s about the size of an apple watch face or smartwatch face. So if you want to think of it that way, and the way that we have actually developed the form factor is, it’s wearable as a bracelet. You can clip it onto your current badge or name badge that you already have for your employer. And that really makes it easy that it clips onto that. We have a strap that goes around a hardhat. So if you’ve got employees who wear hard hats, they can do that, then easily on a lanyard clip onto the zipper of your jacket or uniform.

For schools, we tell parents to just tie into their kid’s shoelaces. So it’s really not a huge device that you’re wearing, like a clip to you on your wrist and that kind of stuff. And the big thing that we are doing is we’re doing real-time contact tracing. So it’s not like you have a device where you’re wearing it for the day. And at the end of the day, you put it in a holder, and then the data gets downloaded, and then you have access to it. We have real-time data, that if you have somebody who does pop up symptomatic or COVID positive, you’re running data and getting the information in real-time.

Sam Gupta 13:20

Interesting. So tell me a little bit about the technology architecture. What is technology? And I don’t know if you are comfortable revealing that? Are you guys using the near-field technology as part of your contract racing? So tell me how the technology works?

Amanda Schleede 13:33

Yeah, so we are using Bluetooth technology, really what’s happening is the device to device, so the actual what we call mini, so the devices that individuals are wearing are they don’t know where they are in the world, they just know they’ve been assigned to a person. And what is happening is as you’re wearing this device, it’s looking for other people or other devices. So it’s looking for the other devices other people are wearing, you know it’s not recording, are you in the lunchroom? Or are you on the plant floor? Are you at the McDonald’s down the street, it’s literally just saying okay device, and they have 12 digit numbers, but it’s easier to talk in smaller numbers?

But device A and device B were together on February 2 for 11 minutes at four feet, that’s what it’s recording, it’s the recording of the devices, device numbers, the date of the interaction, the length of the interaction, and the approximate distance and we can get it down to a shorter amount of distance.

Typically, especially with COVID, people want to look at that six feet or less. So that’s what we look at. And so what’s happening is those devices that you’re wearing, the individuals are wearing are recording those interactions. And then what we do is we actually set up what we call a hub. It’s a cellular hub in the plant facility, and we plug those in there a plug and play. So literally, I say plug and play, we literally go in, we plug them in the wall, and we add it here to the wall, and we’re done.

Amanda Schleede 14:50

We don’t have to log into a Wi-Fi system or anything on the plant floor or manufacturing floor and what happens is whenever a device that people are wearing and many that people are wearing comes within 150 feet of our hub, all of that data is downloaded off of the wearable device into the hub and then sent to our secure servers. And we have a military-grade server. As I jokingly say, no 13 year old from Russia is gonna be able to hack into it. But again, our devices are all they’re assigned to is a 12 digit device number is assigned to x manufacturing company. Yeah. And then that company knows who they’ve assigned that device to. So it’s really super secure.

So it really does, again, encourage that whole privacy side of the work that we’re doing. And being able to say to an employee, like, we’re not recording where you’re having dinner, we’re not recording where you’re going after hours, I don’t know, if you spent X number of minutes in the break room or all that stuff. It’s literally just recording those device-to-device connections.

Sam Gupta 15:50

Okay, amazing. So obviously, when we look at the Bluetooth technology, Bluetooth technology, from my experience, and again, I’m talking more from the layman perspective. Bluetooth has its issues. Let’s say if I am using the Bluetooth on my phone, and if there are going to be nearby devices that might be in the range, then obviously, there is going to be a little bit of conflict.

And because of that, my device is not going to be able to track the other device, and it might be detecting the device that I don’t want it to detect. So how are you managing this risk? That sometimes, the contact tracing may be there, or the contact may be there. So contact may have happened, but because of the interference with the other device, your hub may not be able to track? Do you guys face this issue? Do you guys not face this issue?

Amanda Schleede 16:35

We have never had that issue. So knock on wood that we don’t, yeah, um, I think the thing what we have done in the development of the physical device that you wear, and then the connection to the hub is that they are all on that same signal. So really, what’s happening in the devices? Wearable devices are only looking for other wearable devices that are getting off that signal.

And then it’s when you come in contact with the hub where the hub is looking for that same signal and pulling all that data off of your device and really clearing your wearable device to add to be able to collect more data. And so we don’t have the issue where we’re connecting with cell phones at all. We’re not connecting with your Bluetooth speaker or with your Bluetooth earphones or anything like that on your cell phone.

This is a different level of Bluetooth. And as you say, your the layman’s Bluetooth information from your perspective. And this is where I would say, Paul, my developer, I’d say, Paul, I need you to provide the technological side of this, but we have not had any type of situation where we’ve interfered with cell phones with any other type of Bluetooth speakers or systems in workplaces are manufacturing places, we are completely separate from, in a sense that cellular network that would be connected with cell phones.

Sam Gupta 17:50

Interesting. So I wasn’t aware that you had the encoding available in case of the Bluetooth case typically. That’s a problem that I see as a layman. It so seems like you have figured out you know how to encode the specific signal for your hub. And that’s how you’re able to readjust the other devices and not the other Bluetooth equipment that might be in the facility. Because these days, I don’t know if any of the floor equipment is going to use Bluetooth technology as well. Because there could be some interference there as well with those machines.

Amanda Schleede 18:20

Yeah, no, we haven’t had any situations, and any of the manufacturing companies that we’ve worked with today, or even employers who are using any kind of Bluetooth technology, I think it’s because it’s just again, this is where it gets the technical terms. And I raised my hand and said help. But it’s different. I don’t think the right word is wavelength. But it’s a different technology from Bluetooth. It’s not the Bluetooth that we’re thinking of, like, Oh, I want to connect to the Bluetooth speaker in my living room and play music off my cell phone.

It’s really, I believe what the technical term is IoT, but the connection between the same or similar devices like devices. And so, really, our wearable devices are what we are looking for each other. And then what our hubs do is, those are what’s attached like in major, major areas where people like a major, entrance or exit in the manufacturing plant, or even the lunchroom or by the restrooms anywhere where people are going to walk by on a pretty consistent basis. They basically create like a bubble 150-foot to 200-foot bubble around where they’re installed. And really, whenever you walk into that kind of imaginary bubble, the system knows to connect and then download all that data.

Sam Gupta 19:31

Okay, amazing. So one of the comments that you made related to using this device after the COVID, and personally, I just want to be done with COVID. I want to be done this summer, and we are not going to have any more COVID as soon as everybody’s vaccinated. Okay, but you are telling me that the contact tracing is going to be there after the COVID, so tell me why contact tracing me is going to be there after COVID.

Amanda Schleede 19:59

Yeah, I mean no, I think contact tracing is here to stay. I know half of America is probably not going to be happy with me saying that, but I think it’s just a fact of life in today’s environment. COVID is really, I don’t wanna say it’s the first, but it’s the first major pandemic that has hit the United States. I think we’re all learning from that right now. There are future pandemics coming down the pipeline, and how we handle them is really what we’re going to be focusing on.

I think we don’t really think of the flu as a pandemic, but our contact tracing and our symptom tracking, or even providing some type of service like that, whether it’s Vital Circle or anybody else, but providing something to the population of your employees or people, showing that you care about their health and safety. we could have been for years tracking the flu, seasonal allergies, like all of these things, sound kind of dumb now.

Amanda Schleede 20:54

But what do you think about it? These are all things that, over time, we could have been tracking. And, from a financial standpoint, an organization can look at that data and say, Wow, like, we seem to have an influx of flu in December in January, which seems to create a situation where 10% of our staff or are not showing up for work, are there further shifts? What can we do as an organization to decrease that number?

Or what do we need to do as an organization to prepare for the fact that we may need to bring on additional part-time staff or temporary staff to cover those voids? And I think just in general. There are going to be more pandemics. There are going to be more things that we’re going to need to start tracking and tracing. And how do we do that without interfering with people’s personal data and personal information or privacy?

And, the other thing we’ve looked at really is pivoting Vital Circle in the future, because our plan is to not stay in COVID only is, what are those other things that within organizations that we can be looking at? Like what, like the workflow? How are people interacting with each other in the workspace? Or, within the plants, how do we reduce the amount of movement within the space. So there are different things that we can really look out from a data perspective that we see as really the next step with regard to the technology that we have.

Sam Gupta 22:13

So as part of the next question, I’m really going to be interested in that in terms of everything. So I know that you are probably worried about privacy and other things. But as a manufacturing CFO, let’s say if I’m trying to create a workflow where I really want to understand how people are interacting on my shop floor, and I’m trying to capture specific data points, other than just the contact tracing, what all are you able to capture, let’s say, if you were not worried about the privacy,

Amanda Schleede 22:38

If we weren’t worried about the privacy standpoint, we have the capability in the future to turn on the GPS tracking, within, a manufacturing plant or within, the flow and really watch as people interact between what are hubs. So, basically, as people interact and move from one spot to another, and really put up additional sensors so that we can see what their workflow is, what their pattern is. So, do you have the best workflow and pattern?

All of the stuff that we have started working on and really looking at is version 2.0 and a sense of Vital Circle? But how do we look at the flow of an organization? Are we using the right flow to increase revenues and decrease costs? What are the situations? Or where are the people that we’ve identified that maybe there’s a higher risk for them in what they’re doing for from an organizational standpoint? So, we’d have to dig into this a little bit more, but could we use it to be tracking workman’s comp-type claims?

So I think the possibilities are endless, a lot of what I say to organizations, especially manufacturing, but organizations at all is a complete group is come to us with ideas like let’s number one, let’s start mitigating the risk of COVID. Within your organization, like that’s front and center now, like, it’s all everybody’s, talking about it looking at it. So like, let’s do that is step one. And then step two, like, let’s explore together ways that this would be the most beneficial for you as an organization. And we’ll work on we’ll develop that.

Sam Gupta 24:13

Okay, so I forgot your comment, whether this is going to be covered by insurance. Do you know if they might be covering this either today or in the future?

Amanda Schleede 24:21

As far as I know, they don’t cover this, but I don’t think they’re going to in the future. My thing is our service is risk mitigation. And really, any of these services that are out there, this is really a way for an organization to provide risk mitigation to their population. On top of that, in many states, if somebody can prove that they contracted COVID from their workplace, it is actually considered a workman’s comp claim. And so there are situations where and we’ve seen them in the news where, employees are suing their employers because they got COVID on it, and their employer site and so on.

This really the services we provide. And really the idea behind risk mitigation is, how can we provide employers and leaders with the data and analytics, they need to manage their population of individuals on a day to day basis, but then also provide the data and analytics they need, in case they get sued by, an employee for future COVID infection. Or if a workman’s comp claim comes in, they can use this data and information to say here, it’s not like we just throw our hands up and said, good luck, we’re going to figure out, as case by case, like, we actually implemented something, we ask for everybody, we’re all in this together.

Amanda Schleede 25:30

So for everybody to complete these daily symptom tracking or symptom reporting, to let us know how they’re feeling based on that, then, we could do contact tracing and identify who, what individuals and who are the individuals are at most risk that we need to identify and quarantine and separate from the larger group of our population. And so I think it’s an overall financial aspect. Yes, it is money that a company has to spend. But I think the downstream effects of showing your employees that you care about their health and safety, that you’re putting risk mitigation in place. So from your insurance carriers to your workman’s comp carriers, to your lawyers, all of this, you’re really showing that you’re doing something to mitigate the risk of somebody coming in whether they know it or not, being COVID positive, and, infecting your entire employee pool.

Sam Gupta 26:33

Yeah, as a CFO, I’m definitely going to be worried about getting these lawsuits from the workers’ comp perspective. So from your experience, let’s say if I have never had this as a manufacturer, I’m a small manufacturer, and I’m inviting my employee to work on my shop floor, and there may be a chance that they contracted COVID. And sometimes, when these employees are going to claim, if I don’t have data to prove that they contracted because of my facility, then obviously I’m in trouble. So what is the financial damage you are talking about? Do you have a sense of that, by any chance? How much are these claims going to cost? Typically, for a CFO so that I can plan as a manufacturing CFO?

Amanda Schleede 27:17

It’s really a case-by-case situation. I think there are situations where we’ve seen a lot of stuff in the news, where there have been workman’s comp claims, or there’s been an employee, or even an employee’s family who’s come back and sued the organization because their loved one has passed away or died from COVID, or can’t, so, these are all things that I think from a risk mitigation standpoint, employers need to look at, I think, I wish I could put $1 amount on it, I think it depends on, I hate to say this, but who’s the judge?

And what state you’re at, and what are their political feelings? And all of that comes into account, and what are they? It’s on a state-by-state basis. So sometimes there are caps on what people can be awarded and all that. So, I think that is. We are providing and, services, similar charges for us, we are providing a service that is showing people outside of your organization that you are doing something to mitigate this risk. And so, yes, there is a cost to the organization.

Amanda Schleede 28:24

But if you weigh that against, what could be possible or is a forthcoming lawsuit, to be able to, go to, say, a judge or an arbitrator and say, hey, here’s what we’ve done to mitigate the risk. Like, here are the steps we took in place, here’s the application, the process, the procedures, like, here’s what employees had to do, here’s what we did as an employer to we’re all in this together, and there is still a chance that somebody is going to contract COVID.

But it’s not like we just said Good luck and show up for your shift, or you’re fired, we actually put an effort towards it, because it’s better to go into, a lawsuit, arbitration, a payout, whatever that is to say, hey, we did something, it’s not like we’re sitting here going, Yeah, we didn’t do anything. Like we just kind of told everybody you got to be here, first shift, and good luck, what we did is we actually looked at what is the best way that we can mitigate that risk.

Amanda Schleede 29:14

And really, we look at if we look at a manufacturing plant, so let’s say, we want to look at their whole health protocol plan. And so it’s not only just what are the daily symptom of how are you feeling today and who have you had contact with, but let’s also look at on-site testing, follow up telemedicine services, when people arrive, what is the arrival process, are people just standing all in one big area out of the cold packed in a room or are people social distancing are people walking in and having a quick like, temperature check, and proof that I’ve done a check-in for the day.

We’d like we have an authentication screen that people can show and then that way, individuals are able to, get into their spaces quickly and safely. So it’s the full mix of like, what is the whole protocol that you as an organization has set up? And how are you implementing that across your population or shifts of people?

Sam Gupta 30:11

Okay. So tell us a little bit about the manufacturers who might not be familiar with the guidelines in terms of what they need to do to prevent COVID in the facility. Do you have any advice on that guideline?

Amanda Schleede 30:22

Yeah, I think I met a lot of it is, making sure that employees themselves are social-distancing and following the rules or the guidelines set by the CDC. I think it’s not only limiting people to be six feet apart in their workstations and all that, but it’s really thinking about, what is the process as people get out of their cars and enter into the plant? How are we setting up break times, and are people taking 200 people off the plant for sticking them into a small room to eat lunch next to each other?

But for the rest of the day, they’re six feet apart. So it’s thinking about that whole process. And then I think it’s also almost overstepping what you think, would be a great idea for in the sense of sanitation side of it. So are we providing enough sanitation stations?

Amanda Schleede 31:07

Have we provided enough touch-free situations were, think about when you go into a bathroom, and you go to wash your hands? like, Is it an automatic soap dispenser? is it is the sink, automatic inserting up, or am I touching everything as I’m going through this process, because if I’ve now sanitized my hands, and I got to touch the faucet and turn it off, and then touch the paper towel holder, like all of that stuff is things you need to think about.

So I think it’s, looking at that whole, as we call the whole health protocol of what’s the processes, people come in? How are we keeping them safe throughout the day? What are their processes going out? And then also in a manufacturing situation? Because many of them were on multiple shifts? What are we doing about cleanliness and cleaning, and sanitizing between shifts? So we’ve had a manufacturing client who had this situation early on, where they had three individuals who were all forklift drivers, but it worked on three different shifts, that became symptomatic. And what they realized is that in-between shifts, they weren’t doing a good enough job or even thinking about sanitizing inside the forklifts. So the guy on the first shift was symptomatic and COVID positive.

Amanda Schleede 32:18

And unbeknownst to him, he had no contact and a sense of the second and the third shift, but because we were able to track how it was the first shift, forklift driver and the second shift work, and the third shift forklift driver that became COVID, symptomatic and positive. They realize that in between shifts, they weren’t wiping down the inside of the forklift, they weren’t all the candles, and all that stuff they used to wipe down wasn’t being done.

And so the next shift was coming in and just grabbing it and go, and it’s just, here’s the thing we all have to remember, it’s human nature, like, we have had years of muscle memory training about just shaking hands, hugging people standing close in line. And so it’s all about like, really kind of looking back at what are the things that we in, I don’t wanna say, say, take for granted. But the things that we’ve just normally done, that we now have to be more cautious and more apparent about how that interaction is happening in the world.

Sam Gupta 33:12

Amazing. So that’s it for today. Do you have any last-minute closing thoughts?

Amanda Schleede 33:18

Yeah, I think my biggest takeaway for everybody here is to do something. It’s better to say that you have done something to mitigate the risk for your population, whether that is using a system like Vital Circle or doing something that really creates a situation where your employees feel there’s health and safety there. But don’t just throw your hands up there and say, this is somebody else’s problem, or it’ll go away in six months, and we’ll be fine.

I think it’s really apparent that leaders, CFOs CEOs need to be focused on how this is affecting my organization and the mental health of my organization. Then I think the other thing to really think about is the HR departments, the Human Resources departments are the ones who are managing this process. And they were busy before. And so now you’re adding even more work and more tracking of people. So like, how can we create a situation where we’re creating the time of effectiveness for these individuals and also helping to lift the load for them?

Sam Gupta 34:13

Okay, amazing. And my personal takeaway from this conversation is going to do not take COVID lightly, and this is the mistake that a lot of us have made. So it is definitely not to be taken lightly. So on that note, I want to thank you for your time, Amanda. This has been an insightful conversation.

Amanda Schleede 34:29

Awesome, wonderful. I’ve had a great time as well. Thanks for inviting me.

Sam Gupta 34:32

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Amanda, head over to Vital Circle. She can help implement a full health protocol plan for your organization focused on COVID risk mitigation, daily symptom tracking, contact tracing testing, and telemedicine services for your employee population. Links and more information will also be available in industrial notes.

If anything in this podcast resonated with you and your business, you might want to check out the related episodes, including the interview with Carol Marzouk from Leadership and Soul, who discusses how to uncover and correct lingering toxicity before it extends your business growth. Also, the interview with Ben Baker, who discusses how internal communication influences growth. Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to do this one personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 35:45

Thank you for listening to another episode of the WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Lorena Acosta, who takes us through her journey of amassing millions of followers on LinkedIn. She also discusses the most critical factors that are important for anyone to be successful on social media and with thought leadership content. Finally, she discusses the mistakes executives make in focusing on subject-matter expertise and knowledge rather than trust and authenticity.

Chapter Markers

• [0:18] Intro
• [2:27] Personal journey and current focus
• [8:53] Perspective on growth
• [11:28] Lorena’s journey of gaining 1.3 million LinkedIn followers
• [19:33] Lorena’s thought leadership content strategy for LinkedIn
• [21:49] LinkedIn vs Facebook
• [22:41] How to create thought leadership content and personal brand?
• [27:27] LinkedIn recent trends
• [30:59] How to create trust with your social media strategy?
• [33:09] Closing thoughts
• [34:18] Outro

Key Takeaways

• People really have forgotten that we are human beings, and we are driven by emotions. And we need to be relatable. Yeah, people start getting memories when you start sharing stories.
• There’s a lot of opportunities every day to demonstrate your values and connect. You need to turn yourself into a brand that people admire. That’s thought leadership content strategy, their core values, reflect in their persona and in the persona and make them the brand that people love to follow and admire. Personal branding gives you an edge to stand out as a popular leader in your industry.
• Your personal brand is a journey, and you need to start creating content that is going to be compelling to your audience. Now, you need to remember that anybody who, with any title that they have CFO, director, President, whatever title even C-level executives, we are still human beings, and we need to be relatable with somebody.
• Thought leaders sell silently to their audience. Because their people follow them, like them, and trust them. So how do you develop trust by having alignment with your values and your beliefs? By being a thought leader and once they start liking you then showcase your product and your services.

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About Lorena

Lorena Acosta is a mother, a coach, a mentor, a proven-sales expert, and the creator of the Trust Factor System ©.

As a Thought Leader and Personal Brand Evangelist, Lorena helps individuals and companies to reassess their strategies and discover their true path of success by becoming the voice of their industry!

Lorena has leveraged her experience and leadership to build a tribe of over 1million LinkedIn followers that she engages with via daily posts and her #BeBusyBeingAwesome podcast.

Resources

• Connect with Lorena
  • LinkedIn

Full Transcript

Lorena Acosta 0:00

I can’t create that interaction between me and my audience. And people really have forgotten that we are human beings and we’re driven by emotions. And we need to be relatable people who start caring with memories when you start sharing a story.

Intro 0:18

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:53

Hello everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

We all understand the power of social media and influence, but how to build authority and your tribe on social media. What works when it comes to building a large audience around your expertise and interests? Is it the subject matter expertise, industry knowledge, or something else? These are the questions you will have if you wish to have a strong personal brand and thought leadership content in your industry.

In today’s episode, we have our guest Lorena Acosta who takes us through her journey of amassing millions of followers on LinkedIn. She also discusses the most critical factors that are important for anyone to be successful on social media. Finally, she discusses the mistakes executives make in focusing on subject matter expertise and knowledge rather than trust and authenticity. Let me introduce Lorena to you.

Sam Gupta 1:47

Lorena Acosta is a mother, a coach, a mentor, a proven sales expert, and the creator of the trust factor system. As a thought leader in personal brand evangelist, Lorena helps individuals and companies to reassess their strategies and discover their true path of success by becoming the voice of their industry. Lorena has leveraged her experience and leadership to build a tribe of over 1 million LinkedIn followers that she engages with via daily posts and her Be Busy Being Awesome podcast.

With that, let’s get to the conversation.

Hey, Lorena Welcome to the show.

Sam Gupta 2:27

So just to kick things off? Do you want to start with your personal story? And current focus?

Lorena Acosta 2:33

I’m gonna start telling sharing my story about who I am. Or who I became. Yeah, because this is, I think this is important. People need to understand that most of the time, we share our success stories. Yeah. And that inspires a lot of people, you know, but we never talk about where we are coming from and who we really are.

And what makes me do what I’m doing right. And what makes what is what pushed me to do what I’m doing every day, which is, I think this is the most important thing. Yeah, people need to really focus on those things, not only on the success story. Because it’s nice to see somebody succeeding, but how your story can help me really to do what I am supposed to be the one or to embrace what I’m doing, or continue pushing on what I’m performing. So my story began. I’m gonna talk to you when I was in my 20s, my late 20s.

Lorena Acosta 3:31

Yeah, I was working for a big corporation. I was traveling around Latin America, opening markets around the world for this big company. Yeah. And I was feeling very lonely. I was feeling really lonely because I used to work from nine o’clock in the morning until one o’clock in the morning. You know, that stuff? I guess. Right? It was really hard. Because I mean, I was single at the time, and I was at the top of my career. Yeah, I have been on that in that industry for almost nine years prior.

Okay. So companies now were hiring internationally to open markets for them. And other countries, so to brand them to create the name and also to start opening salesrooms and hiring people like telemarketing promoters, and salespeople and teaching people how to close the deals. And you know, the whole thing. So, you know, it was a lot of work. Yeah, I was not the branch owner. Yeah, I was in charge of the marketing. So it was a lot of responsibility, because without my efforts and my input, I mean, we won’t have clients showing up.

So I used to work in the mornings on the marketing performed and then in the evenings I used to help the salesroom to with the cells. So I used to close deals. So the shows that we used to do whatever the evening. So our guests used to come at six o’clock in the afternoon on some of them, they used to live at one o’clock in the morning, or 12 o’clock in the evening after they finished the presentation on they buy the product, or they don’t. But we used to close the office. So I used to work so many hours, you have no idea.

Sam Gupta 5:17

And I’m pretty sure you are working those many hours today as well. The only difference is that now you probably love your job and you’re not feeling lonely anymore.

Lorena Acosta 5:27

Yes. So and also, this is my business. In the past, I used to make good money. Very good money for my age, I will say, you know, I had everything that any 20-year-old or 25-26-27-year-old wishes to have right now. I had everything, everything that you could imagine on one day after all these years working. I just had burnout because I was feeling very, very lonely. I mean, I didn’t have time to even establish a relationship with anybody. Okay, or to date because who was going to handle my schedule?

Lorena Acosta 6:04

Yeah. And, and then one month in Guatemala and one month in Honduras, or in Chile, so it was very hard. Yeah. So one day, I called my boss, and I told him that I was just burnt out and I needed to take a break. I needed to find a partner. I’m about to turn 31.

Sam Gupta 6:27

he would have never heard a reason called finding a partner for the resignation.

Lorena Acosta 6:34

So when I sit with him, I remember. And I told him, you know, this is what I what is happening to me right now. This is what I’m going through, and I need to take a break. I need to vacation before I have children. I plan my future. Okay. So he was like, What do you mean, and as he’s like, you traveling all the time, and I say, here’s what I need to, I want to travel to the places that I want to visit.

I want to spend six, seven months in Europe with no pressure that I have to come back to work. And I need to really find my partner, my lifetime partner. So I resigned. I sent everything that I had to my home, and I just flew to Washington, and I took off the next flight to London while I was in London. I was sitting in my bed in the hotel.

And I was thinking that morning when I used to arrive at Heathrow Airport, and I went to my hotel that I wanted to enjoy this trip as much as I could. Yeah. Because I don’t know if I’m gonna be able to make this trip again. So for me, it was very important to enjoy the trip, even though that I was by myself, so I learned from that moment that happiness is within. Okay. It’s not with a company that you have. Yeah. And you create your own happiness.

Lorena Acosta 8:01

I meet a lot of people in Europe. I used the seven months. I went through most of all Italy. Yeah, I went to Sweden. I went to Denmark. Yeah, I went to Paris. I really enjoyed my trip. And I came back to the states right after September 11. I was in there when this happened. We were all freaking out. So then, you know, after I came back to the States, and I went back to the same industry, and I went back to the same industry because I used to stay for around ten years, 11 years as a homestay Mom, I was raising my daughter, and then I came back to the workforce again, and I went back to the salesrooms, and I become one of the number one sales rep again. Okay, so I have been working directly with clients every single day.

Sam Gupta 8:53

Okay, so let’s talk about your perspective on growth. So tell me, what does growth mean to you, Lorena?

Lorena Acosta 9:00

Well, everything in common with my experience, I’m gonna tell you why. Because during my career, I learned how to really understand the consumer perspective and how to really interact with consumers face to face. Yeah. And then I start moving to more from face to face but screen to screen. And how you can really start interacting and sharing perspectives through your content on social media.

What I have seen on most of the channels on social media is most business owners, or companies don’t share a human interaction when they try to promote their businesses. Everything is so cold when you read something from any corporation or from a company on social media that you don’t even want to interact. I don’t even want to click that link because it often is not compelling to me. Yeah. So what I have not used on what I have mastered on social media. Mostly on LinkedIn is how to craft my messaging in a way that I can share my values and my beliefs, the beliefs of my company, and myself as a human being. Yeah, and the promise of my company, the brand promise, but also how I can create that interaction between my alliances and me.

Lorena Acosta 10:19

Okay, and people really have forgotten that we are human beings, and we are driven by emotions. And we need to be relatable. Yeah, people start getting memories when you start sharing stories, right? Like yesterday, I posted a video of me teaching my daughter, my 16-year-old daughter, how to drive. Yeah. And it was the first time I saw her drive from her school to my house, which is around seven miles or 10 miles. Or probably 12 miles.

So she drove by herself, and I was shaking, I was afraid. But I shared the experience with all my audience. And it was fascinating to see how people were being relatable to that moment. I mean, there were men who were saying the first time I was in my mother’s car, 25 years ago, 40 years ago, she taught me how to drive. And then parents came to say, Oh, I’m teaching my daughter right now how to drive. Oh, my daughter just got her car. So then you start getting an interest in that interaction? That is the human interaction that really makes you close to your audience. So when you don’t create that kind of atmosphere on your content, then it’s not gonna succeed.

Sam Gupta 11:28

Okay, amazing. So tell me a little bit about your journey. Did you always know that you are probably going to spend a lot of time on LinkedIn, the kind of presence you created? Obviously, 1.2 million followers are what you have right now. Right? Did you always know that you are going to have 1.2 million followers on LinkedIn? Was this always the goal when you started now? Tell me your entire journey from the beginning, how it began, how you started believing in LinkedIn, and how you got to this point where you have 1.2 million followers.

Lorena Acosta 12:00

So when I resigned from a job, I came to LinkedIn to really connect with people that I knew from the past. Okay, from my journey in the past.

Sam Gupta 12:17

Okay. 2016 was when you started. How many followers did you have at that time? I had probably like 80 followers. Look at 80 to 1.2 million followers? Yes. Phenomenal growth for a CFO. Okay, they like to see numbers. So tell us how to draw this hockey stick, Larena?

Lorena Acosta 12:38

Yes, of course. There is no secret. The only secret of growing your network is to have empathy, to have compassion. Yeah. And to be inclusive and practice diversity. That’s the only secret that you will have when you’re on social media. Of course, you need to have techniques of how you develop your brand, or how you want to embrace the brand awareness of your company, or how you want to create your content, right? Because your content has to be compelling to your audience and has to be targeted to your audience. But those are the main components that you are gonna have if you want to be successful on social media.

Sam Gupta 13:17

When you started, obviously, you had 80 followers, right? And initially, you must have made some mistakes. I don’t know if you knew this from the get-go, that, okay, if I post something, then I’m going to get, let’s say, 10,000 followers, or whatever. So tell me your journey in buckets. When you started, maybe from 80 to 10,000 followers, what was your journey? What was the content? What did you learn? And then what was the next step after that? And then how did you get to 1.2 million followers?

Lorena Acosta 13:42

So what happened is when I started looking for a job, yeah, all the messages that I was sending to my contacts, probably they were going through the junk, the junk mail because nobody was reading any mail from LinkedIn. So the people that I was trying to connect with didn’t want to connect with me. So they will come and say, Well, why do I have to connect with you? We don’t have anything in common. I was looking for a job, right. So I was like, I feel bad because I was very vulnerable. I needed to find a job, and people were rejecting me.

So I decided that I would not send any more connection requests to anybody ever again, okay, that whoever wants to connect with me, they will connect with me because they like me, because they like what I post, and because they really want to be connected, not because I’m searching or looking for them. And this is why I preach all the time that don’t just say connect with me. You need to connect with somebody because you really like them. Because you really like the way that they think, not just to have one more connection that doesn’t help.

Lorena Acosta 14:30

Yeah, so I started posting things. I started observing the platform at that time, there was no other way to communicate than only narrative and pictures, but most of the people weren’t posting pictures. They were just writing. It was like a kind of blog thing. Yeah. So I started posting pictures, I started talking about who I was. And most of it, I was a start point. I started posting most of my values, what I believe in, what I stand for because from those balances from where my content was coming from, and this is how I found the alignment between me and my audience. And this is how people started following me because they believe in the same thing. And they stand in the same form, the same thing that I stand for.

Lorena Acosta 15:30

So I started creating more content about my values, what was important for me, and I started seeing the reaction from people that was important for them as well. So then, little by little roster, built my tribe of people who were following me because they were standing and believing in the same things that I was believing. Yeah. And little by little, you start, I start with a tweak in my content, and I start posting trips because I was in the vacation industry.

So start posting travels all around the world, places that I have been. I’ve been to more than 65 continents, and I live in 14 countries. Okay, so I start posting my experiences and the places that I have visited. And that was a boom. Everybody loved that content. And they also wanted to travel. They were asking questions. People will start contacting me and ask me if I know anybody that can help them to find a trip to Bora Bora to the Maldives or places like that. So, and many CFOs and CEOs and CTOs and bosses vice presidents are connecting with me because of the content that I was sharing. They love to travel, so they all loved travel-related content.

Lorena Acosta 16:37

So then I start mixing my content between traveling and my values. And also spirituality. I took a course on mindfulness. And I wanted to start helping people because, at the time, we had the election of Donald Trump.

So many people were fighting on the platform. Right now, it is super peaceful, but four years ago, it was a terrible time. And many people get fired from their jobs because they were so opinionated.

And their points of view. And HR starts catching them. Many people start fighting with each other. So, I didn’t want to get involved in that situation. So what I thought is that I want to start creating content that can take people out of that situation and focus on things that really matters to them, which is ourselves. So I started learning from my mother as a Kundalini yoga instructor for the last 45 years. Yeah, and I grew up with that, in that mode.

Lorena Acosta 17:38

So I started sharing with their mantras and meditations that I used to practice when I was a child and what makes me help me to get rid of anxiety or situations if you feel that you are in a bad situation, or you want to have peace. All these kinds of things I start sharing as well on LinkedIn. And people, I found out that people really like to meditate. People really like to learn how to be mindful and be in the present. So I started sharing more content about that because all this content that I was sharing is part of me.

I’m gonna post about something that is part of who I am. A little bit of spirituality, mix it with travel and mix it with quotes that are posting and then I start also talking a little bit about NLP because I’m an NLP practitioner. So I was talking to them about the subconscious mind and how our words can affect you. Whenever you say something about yourself or anybody else, those things go through your subconscious mind.

Lorena Acosta 18:42

And anytime you say something negative, if you don’t change your line or your narrative immediately. Those lines are gonna go to your subconscious mind, and they’re gonna come back to you all the time. So I start talking to people about how important it is that they need to really think what is going to come out of the mind of their mouth. And if it’s something negative, they need to really erase it right away and change it for something positive. So I start talking to people about all these things as well. So I bring another subject through my content.

So my content is not only one thing. I share a lot of things in my content. And I think that is why I’ve been so successful on LinkedIn. I have my own niche. Everybody knows who I am, what I do, and what I do best, but the way that I share the content is the way that I showcase who I really am as a human being.

Sam Gupta 19:33

Okay, interesting. So let’s study the competition a bit, right? Because at the end of the day, we are the CFO audience, and we like to study the situation comprehensively. So here, obviously, you are posting, let’s say, content about travel, spirituality, etc. And I have seen a lot of people posting content, but I don’t see them being as successful. So what was your reason for being successful in reaching 1.2 million followers when others could not, with similar content?

Lorena Acosta 20:01

Because they are copying, because it doesn’t come from their heart. I mean, if you’re an individual or if you’re a CFO or you want to start creating your content, you need to start right now. The new marketing is thought leadership content strategy. So if you are a CFO, and you are part of an organization, and you really want to start your social presence on social media, you’re gonna start with your values and your beliefs, you’re not gonna start talking about business because nobody cares.

Sam Gupta 20:30

And why is that? Because we don’t care. Like nobody cares for business.

Lorena Acosta 20:39

We know we care about the business of the people who are really taking the time to showcase who they are. Because at the end of the day, right now, somehow many strategies have you seen on social and on LinkedIn? There are millions.

Lorena Acosta 20:57

In 2020, everybody will become a brand strategist. Yeah, I’m a brand personal branding strategist, and which is fine, but who will you choose? If you really need to develop your own personal brand, you will choose somebody who really has a background in marketing, probably somebody who has been successful, somebody who has been on sales, because I mean, branding is selling. Yeah, and somebody who has been successful on the platform.

So this is what I’m talking about that and how-to, you’re gonna choose that person because that person is showcasing who they are. So it’s very is very important for CEOs or CFOs, to really take time to develop the personal brand on social media and to start showcasing what kind of human means they are. So they can develop trust. Trust is only developed by sharing common beliefs.

Sam Gupta 21:49

Okay, so here’s my problem with this approach, right? I mean, we have other social media platforms such as Facebook. They are meant to be slightly more for this content, where you are probably going to be sharing personal values. And if everybody starts sharing who they are on LinkedIn as well, then LinkedIn is probably going to become Facebook. But LinkedIn was designed to be a business network, the professional network. So do you recommend that everybody should start posting their personal values?

Lorena Acosta 22:17

People will start taking that approach. When I say share your values, everybody starts making videos about their values.

Lorena Acosta 22:26

You need to learn how to create your narrative and your storytelling, where you include your values, your beliefs, and also you create common beliefs between you and your audience. You need to remember that trust and credibility play an essential part in the success level of any business.

Sam Gupta 22:41

So we are going to take an example here. Let’s say I’m the manufacturing CFO, Lorena. And I don’t have a background in sales and marketing, but I’m actually trying to create a personal brand, right. So obviously, one thing I can do is I can hire a professional like you who has been successful, that is number one, but I need to know a little bit more in terms of creating this journey for myself. So at least I’m educated in terms of what I’m getting into.

So let’s say if I want to go through the journey of creating a personal brand. Obviously, my end goal is to sell something, right? Because if I sell them, I’m going to be probably successful. In my career, my family is going to be happy. My employer is going to be happy. And my employees are going to be happy. If I’m the executive of a company, so the end goal is obviously to sell. But let’s say if you are the manufacturing CFO of a company, what narrative would you recommend for the manufacturing CFO? Is it going to be around their personal interest? Is it going to be around their personal hobbies related to, let’s say, engineering projects? Or is it going to be his personal belief or travel? Tell me what manufacturing executives can do to create their thought leadership content and personal brand?

Lorena Acosta 23:54

Okay, so you run off you to portray your public image and stay aligned with your career. There’s a lot of opportunities every day to demonstrate their values and connect. And they turned herself into a brand that people admire. That’s thought leadership content, their core values, reflect in their persona and in the persona and make them the brand that people love to follow and admire. Personal branding gives you an edge to stand out as a popular leader in your industry.

So you don’t have to share what you have for breakfast. But let me give you my story. You know, I have a client. His name is Nick Gallo. Nick Gallo started working with me last year in January. His company turned out to be one of the Inc 5000 magazine last year. He was number one in his state of the number 23 in the whole United States. Okay, when we talked last before last year, he was not very positive about this approach.

Lorena Acosta 24:54

And I’m talking to you about it. Yeah. And he is in a state, we continue with it with the training, we continue with it with our company side and with his brother, but they were very focused on how they can start sharing and showcasing who they are as a brand as a company. And what is what they do. So what happened is that his engagement wasn’t that good. Yeah. Because people didn’t care. Yeah, they were reading what he was posting, but they would not engage him because his content was not relatable.

Now, if you’re a CFO, you don’t have to share. Where do you go on vacation? So how much do you spend? Or what kind of eggs do you have this morning? But I have another client who is a president of five different franchises here in the United States. And he’s sharing his beliefs and his share. He’s given his opinions. He’s sharing with all his audience the best way of living life. He’s a really thought leader. He’s a Taekwondo instructor. Yeah, black belt, and he’s being more relatable.

Lorena Acosta 26:01

He’s sharing things that people are related to, he’s not sharing about his business, probably he will play in the future and whoever is aligned with his message, and whoever is developing trust with him, during all his journey, probably they’re gonna become his clients. A personal brand is not something that you are gonna have from tonight and tomorrow morning. Your personal brand is a journey, and you need to start creating content that is going to be compelling to your audience. Now, you need to remember that anybody who, with any title that they have CFO, director, President, whatever title even C-level executives, we are still human beings, and we need to be relatable with somebody.

Lorena Acosta 26:43

Yeah, and if you don’t share something that people is gonna be relatable to you or related to you not gonna work. And that is why so many people right now on LinkedIn are struggling to create content because they don’t know what kind of content they need to create. Now, there is a technique. You need to involve your values and your beliefs in your content. And also, you need to create common beliefs between you and your audience. You’re not gonna show up your social opinion list and give your opinion because then guess what, everybody’s gonna come and say, well, that is your opinion. That’s not what I think. Good luck, goodbye. Yeah. But if you create common beliefs between you and your audience, and you start creating that dialogue between you, and your audience is when the magic happens, is when trust is become developed.

Sam Gupta 27:27

So tell me some of the best practices that you may have come across for the CEOs and CFOs as they come to the platform because obviously, they are not going to be as experienced as you. So what are some of the new trends that you have seen on the platform?

Lorena Acosta 27:44

Well, I’m gonna go back with Nick. I had a conversation with him two weeks ago, and I really had a strong conversation with him. And I said, Listen, you need to really become you. You are the CFO of the company. And you really need to start showcasing who you are. As a human being, people will relate to you. And, maybe the people that are gonna, like your content, are not gonna be your client. But maybe somebody who is connected with that person who liked and engaged in your content is gonna see your content in his feed, and he is gonna be your client.

Sam Gupta 28:17

But I mean, we only have so many hours in the day, right? So if we keep doing that, then we are going to be investing a lot of time praying that the client is going to show up.

Lorena Acosta 28:28

Thought leaders sell silently to their audience. Why? Because their people follow them, like them, and trust them. So how do you develop trust by having alignment with your values and your beliefs? That’s the only way. If you showcase right now with your new product and say, Well, I am the CFO of this, or I’m this attorney, or I’m this doctor or whatever, whatever it is, and just showcase your product and your services.

Sam Gupta 29:05

So let’s take the example of the bigger game, right. So Nick is the CFO, and he was trying to post the content related to his own product and offering, and obviously, that wasn’t working because the engagement was low.

Lorena Acosta 29:18

He was engaging only with people that were in the same industry, but these were not the people that were gonna hire his services. Right. So he needs to have all their audience right. I mean, if I am a doctor, and I’m trying to promote my clinic, and I just have all these connections, doctors, they’re not gonna be my clients. If I am a branding evangelist, and I just have connections with people who do branding, they are not gonna buy my services. Yeah, right. So you know, you need to really start to open your eyes and be an innovator, you know, try different things. And I told him, You need to start showing up who you are, who you are as a human being. What is the brand message that you have in your company?

Lorena Acosta 29:59

What is that your company stands for, and really make a video from your heart because you are one of the biggest brands for your organization? So he completely changed his content. He even shared yesterday a picture of his family. He has never done that before. And he shared yesterday a beautiful picture with his three kids and shared how grateful he is for having his family and the time that he can spend with his family.

And that picture when you know, I think he has like 200 likes on that picture. Something though he never imagined why because people are skinny, you need to be relatable. I have a child: I have a daughter. And when I saw those pictures, really, you know, I felt good. I feel good that a man is telling dad about his kid, that the man is really being present with his family, that there are many men that have the title of CFO of a big company who are humble enough to share his emotions and his vulnerability with his audience.

Sam Gupta 30:59

I have seen these things work as well on social media, especially when you share your personal stories. They perform far better than any of the content. So yes, be personal stories work. And I’m sometimes surprised that these are the same executives who are probably not going to pick up any cold calls from a person who is actually trying to help them with their day job. But they have time to like these posts on the personal story, which is good. They are finding time to be able to relate to being able to trust their audience.

Lorena Acosta 31:29

Well, if it’s up to anybody, I mean, if you really want to create a strong presence, and become a thought leader on social media, because this is a new way to be outside to raise above the noise. Otherwise, you’re gonna be always behind your business card. And if you’re willing to do so, you need to do it in the right way. And if you want to add weight, you need to create a tribe. You are not going to create a tribe only of people that is related to your organization and is only related to your own business because then you are inside a one, one bubble.

Sam Gupta 31:59

Yeah, let’s talk about thought leadership content strategy and personal branding how important that is for number one CFOs. And number two for business growth. Have you seen any cases where the businesses could go? Or if they don’t have the personal Branding or thought leadership content strategy? Is that going to be a challenge in the next few years for them to be able to grow?

Lorena Acosta 32:19

Yeah, let me give an example. You know, personal branding becomes necessary for C-level executives and board directors is also at. This is also the best business strategy companies can use to significantly strengthen customer trust. But utilizing that executive social presence, COVID-19 helps us to increase the growth of social media and influencer marketing.

Personal brands are now well recognized and essential while building social presence and reputation. So I don’t understand why all these CEOs or CFOs, or C-level executives are still behind their computers, just watching and reading. They need to start participating. They need to start showing up. They need to start developing their own personal brand and become a thought leader. They are leaders already; they need to reassess their brands.

Sam Gupta 33:09

Yeah, I completely agree. So that’s it for today, Lorena. Do you have any last-minute closing thoughts, by any chance?

Lorena Acosta 33:14

Well, I will add that being authentic is your most valuable asset. Authenticity is your most significant asset. And it’s such a powerful factor while bringing you to run that being authentic on business is the force when you use it strategically and mindfully with your clients. So stay unique, be kind to your purpose. And you know, while you’re building your personal brand and just do it, this is something that I will encourage everybody to do. Whenever you lead a company, you are climbing the corporate ladder, or you’re disrupting your industry, a strong personal brand that demonstrates your expertise will get you wherever you want to go faster. At the same time, it will open the doors for you and those that work with you. And never forget personal branding is the nucleus of the trust factor.

Sam Gupta 34:03

Okay, amazing. I loved the insight, and it was a fun conversation. My personal takeaway from the conversation is going to be authentic. On that note, Lorena, I want to thank you for your time.

Sam Gupta 34:18

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Lorena, find her on LinkedIn as Lorena Acosta. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Katie Thomas from Leaders Online, who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. Also, the interview with Chris Grainger who discusses how a large electrical distributor changed the way they sold to their customers.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 35:30

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Jeff White, who discusses why it is so important to identify the ideal customer profile for your offerings to streamline your growth. He also discusses why mapping customer journeys are critical to providing a seamless customer experience irrespective of whether you acquire customers through physical or digital channels. Finally, we had a chance to discuss the nuances of account-based marketing and channel conflict issues for manufacturers selling through distributors.

Chapter Markers

• [0:58] Intro
• [2:34] Personal journey and current focus
• [3:43] Perspective on growth
• [6:51] What is Account Based Marketing?
• [10:12] Account Based Marketing in the post-COVID world
• [12:25] How to sell into complex accounts?
• [16:49] How to align various functions of a company?
• [20:34] The ideal customer profile for companies selling to multiple industries
• [26:00] The use of intent data for account based marketing
• [29:00] The customer journey mapping for manufacturers selling through distributors
• [34:09] Closing thoughts
• [35:27] Outro

Key Takeaways

• What a lot of people think of when they think of account-based marketing is there actually talking about account-based advertising so being able to use a tool like Terminus or demand base or something like that, in order to choose which departments in which organizations that you would like to serve advertising into, but that’s not what account based marketing is as a whole.
• When you have that many people who have to be involved in making a decision, you have engineers, procurement, the C-suite, you have others who are involved. And the messaging to each one of those types of people within an organization and within an account is going to be different because their needs are different.
• With a lot of B2B manufacturers, simply attracting more top-of-funnel traffic is just going to dilute the quality of leads that you get. So if marketing is working closely with sales, the content that they’re creating can be much more tightly aligned with what those personas are looking for.

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About Jeff

Jeff White began working in the web space in 1994, initially as a user experience designer. He is the co-founder of the B2B manufacturing marketing agency, Kula Partners. Currently, in its 18th year of business, Kula focuses primarily on helping mid-market manufacturers take an account-focused approach to sales and marketing.

Resources

• Connect with Jeff
  • LinkedIn
• Connect with Kula Partners
  • Website | Twitter | LinkedIn

Full Transcript

Jeff White 0:00

There’s a lot of inertia in something like that to just do nothing. Yeah, when you have that many people who have to be involved in making a decision, you have engineers, you have procurement, you have the C-suite, you have others who are involved, and the messaging to each one of those types of people within an organization, and within an account is going to be different.

Intro 0:22

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned in to the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:58

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.

Selling complex products involving several buyers is challenging. Each buyer persona is different. Each channel they prefer to hang out with is different. And each piece of content needs to have appropriate messaging that resonates with the customer persona you might be targeting. But the most crucial element of mapping your customer journeys would be the ideal customer profile, which most companies struggle to identify.

In today’s episode, we have our guest, Jeff White, who discusses why it is so important to identify the ideal customer profile for your offerings to streamline your growth. He also discusses why mapping customer journeys are critical to providing a seamless customer experience, irrespective of whether you acquire customers through physical or digital channels. Finally, we have had a chance to discuss the nuances of Account Based Marketing and channel conflict issues for manufacturers selling through distributors. Let me introduce Jeff to you.

Sam Gupta 2:04

Jeff White began working in the web space in 1994. Initially, as a user experience designer, he is the co-founder of the B2B manufacturing marketing agency Kula partners; currently, in his 18th year of business. Kula focuses primarily on helping mid-market manufacturers take an account-based approach to sales and marketing. With that, let’s get to the conversation. Hey, Jeff, welcome to the show.

Jeff White 2:32

Thanks very much for having me, Sam. Of course,

Sam Gupta 2:34

Just to kick things off, do you want to start with your personal story and current focus there?

Jeff White 2:38

Sure, absolutely. So I mean, it’s a bit of a long and winding road for sure. But I started my company back in 2004, primarily as a Web Design and Development Agency. That’s my background. I’ve been teaching and doing usability and UX and things like that for a very long time. That was the primary focus when I initially started the agency that became Kula Partners.

And over the last 17 plus years, we’ve grown quite a lot and moved into a primarily manufacturing and B2B specific focus and, and we really kind of helped manufacturers get aligned and terms of how they sell from an account-based perspective and bring ROI to their organizations using that. We really help them by focusing on the niches or niches, you know, depending on where you are in the world. And that’s really what we focus on is helping them understand how to how to sell into those specific categories and subcategories that they target.

Sam Gupta 3:43

Okay, amazing. So before we dig deeper into that, and obviously, there are some interesting aspects, we have one standard question that we ask every single guest, and that is going to be your perspective on growth. Jeff, what does growth mean to you, man?

Jeff White 3:56

I think you can go a lot of different ways with growth. But I think one of the things that we’ve seen, and I mean, we, like you, host a podcast that specifically targets manufacturers, although our audience is primarily marketing and sales. And one of the things that we’ve really seen over the last three years of doing that podcast, plus our time, as an agency focusing on these manufacturers, is just how important it is for them to be looking for an opportunity in specific areas.

So we’ve all heard of the ideal customer profile (ICP). I think it’s still the case that a lot of manufacturers don’t necessarily know who their target accounts are beyond perhaps the current customers that they may have. And if you ask a lot of manufacturers, who are you selling to? They’ll say, Oh, we can sell to anybody, like, there are all these different areas.

Jeff White 4:54

We work with a lot of companies that may sell to. There may only be ten organizations in the world that can actually buy from them because of scale or because of specific focus and products and things like that. So really understanding who you’re targeting, and how you’re going in there, and exactly who are the personas within those individual customers, and truly kind of breaking those down into groups and targeting them quite specifically, being able to break down and know, you know, these are our ten tier-one accounts, then we have these 100 tier two accounts, and the way that you’re going to talk to them is going to be different. And I think this is where growth is for a lot of organizations, for larger manufacturers who have a very strong kind of customer base.

Jeff White 5:45

We see this a lot with the kinds of companies that we have on our podcast, like Schneider Electric and TE connectivity. These are huge companies that have a huge base. But one of the things that they’re frequently telling us is that the opportunities for them are finding those niches that the small groups that have previously been potential, you know, maybe they were too small for them.

So they’ve developed an offering for those. We recently hosted Ball, who is involved in an aluminum can manufacturing and things like that, you know, huge customers, the biggest beer brands and soda, soda brands in the world work with them. But their real focus now is on getting down into the craft beer market. It’s a very different buyer, a very different level of sophistication. You have to talk to them differently. And you have to train your sales and marketing team differently in order to target those kinds of companies. I think this is true. We’re seeing this across all scales, and all levels of manufacturers from you know, the billion-plus organizations on down to, you know, smaller $50 million companies, they really need to understand who they’re selling to and know exactly how to go after them. And it makes for very interesting work.

Sam Gupta 6:51

Yeah, so let’s talk about Account Based Marketing a little bit more about how that differs from any other marketing that you might have. What would be your perspective on Account Based Marketing?

Jeff White 7:01

Account Based Marketing is really interesting because it’s not just Account Based Marketing. It’s also account-based sales. You’re talking about there is very much looking at the specific accounts that you’re targeting, and figuring out exactly how you want to talk to them, you know, and, and this is you’re linking a lot of different things together. What a lot of people think of when they think of account-based marketing is there actually talking about account-based advertising, you know, so being able to use a tool like Terminus or demand base or something like that, in order to choose which departments in which organizations that you would like to serve advertising into, but that’s not what account based marketing is as a whole.

I think even a lot of those organizations are moving away from the term ABM and more into just like this is just selling now, this is how we do this. This is how we generate profit and grow our organization is by truly understanding the nuances of selling into those markets and selling into those companies and understanding also the scale and size of the buying committees that we’re seeing, I mean, gardeners telling us that in a lot of cases, some of the buying committees are we’re in double digits now 11-12-13 people involved in making a purchase, and there’s a lot of inertia in something like that to actually just do nothing.

Jeff White 8:00

Yeah, when you have that many people who have to be involved in making a decision, you know, you have engineers, you have procurement, you have the C-suite, you have others who are involved. And the messaging to each one of those types of people within an organization and within an account is going to be different because their needs are different.

The C-suite wants to know how this is going to impact their bottom line. Engineering wants to know that this product is going to integrate well with the other products that they’re designing and making. Procurement wants to know if it’s going to fit within the procurement standards and the budget.

Jeff White 8:53

There’s just all of these different things. What account based marketing enables you to do is to say, Okay, I’m going to send different messaging to each of these different types of people. And I’m going to choose the channels with which to do that based on where I know that they are. And this requires a reset and how a lot of salespeople think because what we hear from a lot of organizations is that, generally they send in a sales engineer or an engineer, and that person wanders the halls of a factory and, you know, generates conversations within the organization that they’re talking to, and that that generates sales.

Well, post-COVID, that style of sales is probably done for it’s very much a different world that we have in this day and age. And I think that really what we’re talking about is using technology using even more traditional advertising and marketing mediums like print and billboards and things like that. You have geography as an option. If you know that there’s a billboard outside of a specific factory or a specific headquarters, then you could be using that as part of your strategy to drive interest from the C-suite but your products. There’s a number of different tools at our disposal. And we’re really talking about all of the different things that go into a campaign and looking at exactly how you’re going to target those different individuals within your ideal customers.

Sam Gupta 10:12

Okay, so tell me a little bit more about the post COVID world. So you made a comment that it’s going to be a completely different world from the sales and marketing perspective. So yes, I mean, we are kind of aware that technology is going to be prevalent in every single conversation. We are probably going to be more virtual. But tell me the specifics of how you see this differently?

Jeff White 10:32

I think there’s a massive change afoot right now. I think it’s as we’re talking in early 2021, and the vaccines are rolling out. That’s probably going to reshape in-person meetings again, but I think they’re going to be different than they were. The fact of the matter is, the number one budget line item in every CMOs toolbox in the manufacturing space is trade shows. And it always has been. This has always been the way that they have generated opportunities.

It’s the way that they have connected with their customers. It’s the way that they have found opportunities. And it’s incredibly expensive and incredibly inefficient. But it worked because this is just how the industry always works. Now, we may get back in Q4 2021, to a world where trade shows exist again, yeah, I think there’s gonna be different, you know, like, I think the spend is going to be very, very different. I talked to the CEO the other day, and he said I had the best year I had ever had in 2020., which is really interesting. I had no idea that I could sell without flying and saved $600,000 this year, and to me, that’s indicative of the fact that people are going to want to do things differently.

Jeff White 11:48

I mean, although we’re all itching to get out there and kind of meet with people again, and kind of be together in spaces, again, I think we’re going to see trade shows are going to be very different than they were before. And a lot of this is going to show that that kind of outside sales model where you have people who are traveling around and going visit customers and getting into their operations, and really understanding that is not going to be as desirable as a buyer potentially. And I think that we’re going to look at reinvesting what was being spent on trade shows in more modern marketing methodologies.

Sam Gupta 12:25

Okay, so let’s go back to your conversation about defining the customer personas and finding the relevant channel where they hang out. So if we define the individual personas for those 12 to 15 buyers that are involved in the purchase cycle, and they might each have a bunch of channels they are hanging out on. So in total, we are going to get, let’s say, I don’t know, 50 channels plus persona combination.

And I don’t know what the term is for that. But now, we need to create the content aligned with the persona plus the channel. So how do you do this? I mean, in my mind, if I think about it, this is almost like you have to have a salesperson who understands these personas deep enough so that they can create the appropriate content for these personalities. Do you see this as a marketing play or a sales play? How would you create this content for each of the channels as well as a persona?

Jeff White 13:22

That’s a great question, Sam. And I think that the reality of it is and what COVID has forced us to do within our organizations is to create a much tighter alignment between the sales and marketing functions. No longer can marketing generate a whole bunch of leads, and then transfer them over to and just toss them over the fence to sales, and then sales work those leads or more often than not say these leads are junk, we can’t use them. You know, like it really is the case that those two functions need to be more tightly aligned than ever. And sales. People know what their personas and the people that they’re selling to, and the people that they’re talking to are interested in. They know what their pain points are and their budgets are. They know all of this different information.

This is not something that marketing has traditionally had access to. Because these people have often been on the outside sales side, they’re not in the office. They’re out there meeting with customers. They’re doing all of these different things. And, they’re not necessarily providing that intelligence back to marketing who have the ability to craft content that can be used both in a more inbound style of marketing, where we’re getting that content published on the website, attracting people to that, and pushing them through the funnel.

But the fact of the matter is, with a lot of B2B manufacturers, simply attracting more top-of-funnel traffic is just going to dilute the quality of leads that you get. So if marketing is working closely with sales, the content that they’re creating can be much more tightly aligned with what those personas are looking for.

Jeff White 14:56

And they may find that in some cases, the content could be anything from something that is written, it could be a calculator of some description that actually helps you to understand exactly which product makes the most sense for you, or the providing of 3D models, we need to think of content is more than just a white paper, or more than just a video content could be an augmented reality application that shows your product content, in this case, could also be like I was saying, a calculator or configurator, or something like that. I mean, we’ve seen as an agency that that type of content, more interactive type content, actually, generally, when put into an inbound situation, converts at more than double the rate of traditional written content.

The other thing, too, is that every one of these manufacturers has 3D models of their product that’s content to those are things that engineers want to be able to download and put into their own models and spec those things within the product. In a lot of B2B situations, especially when you’re selling into OEMs, we’re going to be including your product in something larger, getting prospect as the first part of the battle, like getting in there and being there and being the brand that’s on the ground can really help you to do that.

Jeff White 16:00

We’re in a time right now where simply having an availability of product is a marker of being able to get a prospect, you know, in this day and age where there are supply chain disruptions and other issues that are going on, being out there and being available. And being in front of those customers, hey, this is our product, this is what it does. But it’s, also, this is how much stock is available, and then working very closely with your distribution network to ensure that you’re getting that product out there to the appropriate locations and having it available to your potential customers.

Sam Gupta 16:49

Okay, so we are going to talk about the ICP a little bit, right. So from the perspective of this podcast, my ICP is the CFO. So CFOs, the way they like to think is obviously sales and marketing are great sales, and marketing alignment is great. But for CFOs and CEOs, the real deal starts when you have a signed contract. And in my mind, I think not only do sales and marketing need to be aligned in an organization. Everything needs to be aligned. That is going to be your sales, marketing, operations, finance.

And if any of that is not aligned, our company is going to lose on significant opportunities. Because even if you close the order today, and if let’s say the sales or marketing over commits on their promises, and if operations cannot deliver, then what is going to happen, it’s going to fire back, you are going to get a refund request form that customer and probably you are going to get really bad reviews, maybe in the community, they are probably going to blast you on social media. So sales and marketing are equally relevant after signing the order. So what do you think we need to do in terms of aligning all of the functions of an organization, not only just sales and marketing?

Jeff White 17:55

Oh, man, like the organization has an alignment of all of these different organizations, you mentioned operations. The other one is service, you know, services, a huge component of this, you know, the post-sale service and, and troubleshooting, and all of that sort of thing is obviously very important as well. And I think where this really starts to come to life is in the integration of the different MarTech stack and other parts of the operations tech stack, where you’re integrating your ERP with your CRM with your product database that is going into your product information management or PIM system and having all of these different pieces talking to each other, so your marketing automation platform on your website is talking to your CRM, which is communicating with your e-commerce platform.

So, when somebody’s making a purchase, which is tucked into your ERPs, what your distributors are doing, and all of the product data is being sent out in the appropriate ways and appropriate formats to all of these organizations. Is this the norm? No. You know, like, it’s a very complex web of applications that generally aren’t made by the same manufacturers that have APIs that may talk to each other but require custom integration in order to do that.

So you’ve got all of those different pieces. You need to have the reporting of what’s going on and what orders are coming from, where’s you understand your channels, and how all of that’s working. And this is really where it rolls up to the CFO is like being able to see all right, where are these opportunities coming from?

Jeff White 19:27

Where are the new closed deals coming from? What tools are actually providing that return on investment and using your CRM in a way that truly has an understanding of the sales process that’s gone on for a new deal truly having an understanding of what each person is working on. And reporting up to appropriate managers is a massive component of this and making sure that everyone is on the same page and working towards the same goals.

So this is very much the state of where we are right now. Now is that a lot of these applications are kind of coming into play, we’ve got the sales forces of the world and others where they have all of these different tools that are now kind of talking to each other. They can plug those into each other. And there, they’re able to provide appropriate APIs so that things from an operations perspective, from a servicing perspective, from a sales perspective, and marketing perspective. And obviously, how all of that rolls up into the different channels of distribution is going to be a really important bit of knowledge for different members of the C-suite to have.

Sam Gupta 20:34

Okay, so let’s go back to again, talking about the ideal customer profile. But now, we are going to talk from the perspective of either manufacturers or distributors. So let’s say if I’m the CFO of an organization, and if I have my salespeople, they might be selling to different industries, they might be speaking their language. And my primary channels at this point in time could be just traditional, where the customer either calls or emails, or we go to a trade show, and then we can customize the messaging as per the need of the customer.

But now, if we talk about getting this traffic through the web, right, let’s say if I want to implement the ideal customer profile through the web, and each customer journey is going to be different, as you mentioned, that each channel is going to be different, each customer persona is going to be different, the kind of message that they are going to understand is going to be different. So how do you structure this in a website where I can target each of the customer profiles so that the messaging is going to be relevant for them? So talk about the customer journey of each of the persona, and probably channel as well? And how would you implement that for a complex manufacturing organization that might be sold to multiple industries?

Jeff White 21:47

Yeah. That’s also a great question. Sam, I think a lot of this comes down to spending the time there are the fundamentals of truly understanding what your ICP is. So sitting down looking at your current customers, what are what’s the psychographic information, the demographic information that we have about these organizations? You know, where are they located, what you know, what kinds of issues do they have all of those sorts of things.

But we have a bit off from an account based marketing perspective. We also have another tool at our disposal called intent data. And I’m not sure how familiar you are with the idea of intent data. And it comes to life differently with different tools. But one of the things that it allows you to do is to say, Alright, I understand who my top 10 tier one ideal customers are that I would like to be talking to. So you can put those into your account based marketing program. And then you can begin to see when those different organizations or the different kinds of groupings of people within those organizations are actually spiking on intent.

Jeff White 22:47

So you can see if somebody if there’s a spike in a large number of extra searches for the kind of product that you sell, you can tell that that’s coming from that company, and then you can use that information to fine-tune the information on your website specifically for that customer. When they click on your ad, that you’re serving to them on the news site where they’re reading about that particular thing, you know what I mean? So, like, you’re able to tell, like, this organization is actually spiking on intent for my product.

I’m going to serve them an ad that’s about that. And then, when they come through the website, I’m going to fine-tune the content of that specifically for them. And this is where truly having an ideal customer profile comes to life on the site. So you know, you may have other tools in place that allow you to be able to tell, you know, when a new customer or when somebody comes to your website, where they’re coming from, and perhaps fine-tune the content that way as well. So personalization is a really huge thing.

Jeff White 23:00

And I think being able to customize the information that you’re serving into each one of those organizations, as well as the personas within it, and knowing what the things that they’re looking for are going to be and serving them, is going to help you to fine-tune the kind of information that you’re giving to your ideal customer profile. And it really is a matter of doing that that hard work of sitting down and figuring out alright, who are the people within these organizations that we sell to them? What do they need to know? And how can we help them? You know, what can we surface to them within our website?

Jeff White 24:19

What can we serve to them via LinkedIn? What kind of ads can we serve on that platform as well? I mean, there are all of these different tools available to us. And I think it’s important not to get too overwhelmed with the sheer variety of availability of tools because you can just completely blow your brains out trying to make sure that you’re on everything, but really, that’s not necessary. I think you can become very, very focused, do the research and truly understand who your ideal customers are.

And we’ve done things in the past when we’re working with some of our clients, and they may only have like ten companies that they can sell to well, that means that you can truly invest a lot of time and research about those specific target accounts. Find out who the people are by name within those organizations find out what they’re interested in craft content that shows an alignment.

A lot of traditional manufacturers are family-owned organizations that go back generations, they’ve grown through mergers and acquisitions, but the company’s 150 years old, and it’s always been in one family’s name, well, you know, you may be selling into another company that is of similar stature and has that same kind of thing, you can talk about some of the shared values that you have as part of your advertising when you’re going to CEO, for example, and crafting video content specifically for those people.

Jeff White 25:30

So there are just lots of different ways that you can use these tools. And I think that simply making sure that you’re doing it with an eye to being very specific about the content that you’re serving, and making sure that it’s relevant, and then seeing what the results are and focusing on that and making sure that you’re fine-tuning it as you go to make it better and better.

Sam Gupta 26:00

Okay, so I’m kind of not sure if I follow the intent data completely. So do you have any story or the example where you have utilized the intent data and got results from, and so I would like to hear any stories that you might have?

Jeff White 26:15

Sure. So I mean, intent data is really interesting. And there’s a number of different platforms that provide. Bombora is, is a relatively well-known intent platform that one’s baked into the terminus account based marketing system DemandBase, as an example, has its own intent platform. And so what intent data is, you can say, these are the topics or the things that I know that my ICP is interested in.

So, for example, as like yourself, where you are selling ERP platforms or working on the implementation of ERP platforms, a lot of those are known by name. So you can put your target accounts into your intent platform and say, so these are the ten accounts that we’re interested in. And I want the platform to show me when that account is showing interest in the name of the specific ERP that I’m targeting. Yeah, and we’ve done this with a few of our clients as well who work in the software space that sells into manufacturing.

So they can actually get notified when one of those target accounts is showing intent they’re interested in, in making a purchase in some way, shape, or form, or interested in that platform, or doing research on something related to it or a competitor.

Jeff White 27:29

That’ll give you a notification that, hey, this account is spiking on intent. And in some platforms, they’ll even show you what articles they’re reading, it’s kind of creepy, but you know it, it’ll actually show you that kind of level of information. And then you can decide what to do with that. If you’ve planned out your account based marketing campaign that you’re going to be doing, so when somebody spikes on intent, this is the campaign that we’re going to deploy, these are the ads that we’re going to send out, these are the emails that we’re going to follow up on because this is definitely a multi-pronged approach.

So you know, when you’re seeing that someone is spiking on interest in something that you provide marketing is going to be serving ads into that audience sales is going to be contacting the people that they know that are kind of responsible for that at the same time. So you’re coming at it from different ways. And that’s when you begin to get interested. You might get a meeting booked to give a demo, or to show a product in use, or talk about what the next step is.

And I mean, a lot of these organizations have massively long sales cycles, you know, not only do they have huge groups of buyers, but it may take two or three years to close a multi-million dollar deal. And so simply getting them into your world and seeing that your product is an option by understanding when they’re actually interested in looking for it is a massive tool in your arsenal in order to be able to properly target those target accounts.

Sam Gupta 29:00

Okay, amazing. So let’s talk about the customer journeys a bit more. Let’s say if I am selling through the distributors, but because of COVID, I’m actually trying to go direct to the consumers. Maybe when I had the distributors, I already had my relationship. They only came to a website as a brochure just to learn what my organization did. They never placed an order through the web, but as you know, because of COVID. Now everybody’s trying to go to e-commerce. So how would you structure the customer journey on the website? Let’s say if I want to, you know, transform my existing relationship with the distributors through my web, and then I want to go direct to consumer as well.

Jeff White 29:40

I think this is a conversation that is on the minds of a lot of manufacturers because they have these existing distributors now works who often are the people that have the relationship with the end customer. The distributors are probably the ones who know what the pain points are specifically with someone because they’re the ones are, you know, making the purchase and ordering through the distributor because perhaps as a manufacturing organization, you’ve never gone direct to consumer or direct the customer before.

So this is where you get into the nuances of manufacturing distributor channel conflict is that distributors don’t want you as a manufacturer to sell direct. So what we see with a lot of these organizations, like TE connectivity, is a great example. We’ve had them recently on the podcast.

Jeff White 30:28

And one of the things that they do is not only do they make the product available on their website, but they also show you exactly where you can get it at the distributors nearest you. So there are e-comm channels, and they’re using those as well as brick and mortar channels. And they’re listing out who has what in stock and how many they have. I mean, this is an insane amount of data that you’re required to drive a platform like that.

And you truly have to have good data about your product content as well, in order to be able to kind of be the one who has the most high-quality information about a product as well as having the information about where it can be purchased. And I think you know. There’s a number of different ways that manufacturers can overcome this potential channel conflict. One is to always redirect the sale to the distributor. That’s one way that you could do it. Others might spiff a distributor.

Jeff White 31:00

If the sale actually comes through their site, they were going to pay them the commission on that sale if it went through the distributor. So you know, if we’re selling in a particular geography where we have a distributor, but they buy it directly on our website, then maybe we piss of that distributor because they’re the ones who generally have the relationship with the customer.

So there’s a bunch of different ways that you can manage this. It’s on the minds of an awful lot of manufacturers right now. Because they’re stepping back and saying, you know, why can’t we do e-commerce on our own, and their distributors are saying, Well, you know that that’s our job. But in a lot of cases, the distributors aren’t even up to speed with their own e-commerce platform. So sometimes forcing their hand a little bit by developing a great platform yourself can be a way to make your distributors step up and provide the appropriate service that their customers are looking for.

Jeff White 32:12

One of the things that we do know currently is that a lot of the buyers that are coming into the manufacturing space are younger, they’re used to e-commerce experiences in their personal lives, and they want to have that in their commercial lives in their job, they want to be able to buy the same way that they do when they’re buying groceries online.

So providing an optimal ecommerce experience is part of that. And this, again, comes back to that earlier point that we were making around the importance of the integration of the different tools that you have so that you know the appropriate product data, you know, stock information about that you know where it is you’re providing that information via your website and funneling it out to your distributors as well. And giving the experience that your customers want to have in order to make that purchase from you and making it easy.

Jeff White 32:59

That’s what this is all about. I mean, that’s where we’re moving now. And a lot of the not so much distributor networks, but the Amazons of the world that are kind of getting into the business side of marketplaces and selling are helping to accelerate that thought. And there’s an awful lot of CFOs and CMOs who are thinking about how do we tackle this and use the channels that we have and make this better and better.

So it’s really it’s an interesting time. Because there’s a whole lot of manufacturing organizations that are really getting into this space and dealing with the channel conflict and other issues that they have. And some are dancing around it a little bit. I’ve even heard some organizations that are saying, well, we’re gonna start up an e-commerce platform, but we’re not gonna call it by our name, we’re gonna call it something else, but they’re gonna sell entirely our products like, Okay, do you think they’re not gonna know exactly who this is? You can’t play hide and seek with your distributors. These are some of your most important sales team members. So you really have to develop an understanding of that and work with your partners in order to achieve the best results. That’s really all there is to it. Communication. Who knew?

Sam Gupta 34:09

Well, again, communication and relationship. Absolutely, it’s all about relationships and in the business market. So hey, Jeff, I really want to thank you for your time. And we are about done here. Do you have any last-minute closing thoughts?

Jeff White 34:22

I think I’ll reiterate what I said off the top, and for a lot of manufacturers in this day and age, the opportunities are in the niches. They’re very much about understanding who you’re selling to and organizing that information in a way that is consumable and understandable by your potential customers. And really getting down to you’re truly providing value there from every moment when they first interact with you all the way through to a sale to servicing that customer for years is going to be about showing that you truly understand their needs and is available in all of your channels, whether that’s sales, marketing, product information or what have you and making sure that you’re truly fine-tuning and providing the information that your target accounts need.

Sam Gupta 35:08

Okay, I love it from this conversation. My personal takeaway is going to be an ideal customer profile. If you don’t have the ideal customer profile right, then it’s going to be really harder to grow and develop the infrastructure that you need to be successful. So on that note, Jeff, thank you so much for your time. This has been a fun conversation.

Sam Gupta 35:27

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Jeff and the Kula Partners team, head over to kulapartners.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Joe Sullivan from Gorilla 76, who touches on different aspects of social media and marketing and why manufacturing organizations need to rethink their marketing strategy with COVID-19. Also, the interview with Greg Mischio from Winbound, who talks about why manufacturing organizations need to adopt the approach of a digital twin to augment their sales teams.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 36:38

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Susan Walsh, who discusses how to normalize your product, customer, and vendor master data to avoid planning and forecasting issues with your inventory. She also shares several stories where she has been personally involved in cleaning companies’ financial and operational data and the impact such activities have had on operational efficiency and growth. Finally, she shares the differences between good vs. bad data and how to stop piling up on bad habits of dirty data syndrome.

Chapter Markers

• [0:18] Intro
• [3:23] Personal journey and current focus
• [4:08] Perspective on growth
• [8:26] Return issues due to the incorrect data
• [10:13] Impact of classification on forecasting
• [12:28] The process of taxonomy or SKU normalization
• [17:15] The data governance process for the ongoing maintenance
• [20:15] The data training process
• [26:43] The implications of having multiple vendors
• [30:42] Closing thoughts
• [31:12] Outro

Key Takeaways

• Returns of one product could have a knock-on effect on forecasting, because suddenly if people are buying the next size down, you need to be able to forecast to account for all that change in volume. So are you going to lose customers because you don’t have enough stock.
• So instantly, you can save some money by selling to customers. Are you giving them the best customer service because you don’t realize that actually, they’re buying double work from you, they should be getting extra benefits, extra discounts. And if they did have those things, they might buy even more from you.
• You can’t underestimate the power of just purely normalizing your suppliers. And I’m not talking like Parent-Child relationships here like you would in financial. I’m talking just standardizing the names. And that can be so powerful.
• Within procurement, you want to minimize the number of suppliers you have. So you certainly don’t want to be letting everybody set up new vendors, which might end up being all over the place.

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About Susan

With nearly a decade of experience fixing your dirty data, Susan Walsh is The Classification Guru. She brings clarity and accuracy to data and procurement; helps teams work more effectively and efficiently; and cuts through the jargon to address the issues of dirty data and its consequences in an entertaining and engaging way.

Susan is a specialist in data classification, supplier normalization, taxonomy customization, and data cleansing. She can help your business find cost savings through spend and time management – supporting better, more informed business decisions and has developed a methodology to accurately and efficiently classify, cleanse and check data for errors, which will help prevent costly mistakes and could save days, if not weeks, of laborious cleansing and classifying.

She is passionate about helping you find the value in cleaning your ‘dirty data’ and raises awareness of the consequences of ignoring issues through her blogs, vlogs, webinars, and speaking engagements.

Resources

• Connect with Susan
  • LinkedIn
• Connect with the Classification Guru
  • Website | Twitter | YouTube

Full Transcript

Susan Walsh 0:00

It will have a knock-on effect on other parts of the business where you can save time; you can save costs; you can increase your margins without really having to do very much just by tidying up your data. I mean, that’s the most amazing part of this that cleaning data is highly underrated.

Intro 0:18

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:54

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.

Remember going to a well-organized library or a store where you didn’t need the endless merry-go-round to find the product or book you want it. That’s the power of clean master data and organized systems for manufacturing and distribution companies, with the never-ending need for balancing control and agility. The task is easier said than done. You might have further challenges if you don’t have systems that minimize the master data entry or experience significant churn with your team.

In today’s episode, we have our guest, Susan Walsh, who discusses how to normalize your product, customer, and vendor master data to avoid planning and forecasting issues with your inventory. She also shares several stories where she has been personally involved in cleaning a company’s financial and operational master data and the impact such activities have had on operational efficiency and growth. Finally, she shares the differences between good versus bad data and how to stop piling up on bad habits of dirty master data syndrome. Let me introduce Susan to you.

Sam Gupta 2:09

With nearly a decade of experience fixing your dirty data, Susan Walsh is the classification guru. She brings clarity and accuracy to data, and procurement helps teamwork more effectively and efficiently and cuts through the jargon to address the issues of dirty master data and its consequences in an entertaining and engaging way. Susan is a specialist in master data classification, supplier normalization, taxonomy, customization, and master data cleansing and can help your business find cost savings through spend and time management supporting better, more informed business decisions.

She has developed a methodology to accurately and efficiently classify, cleanse and check data for errors, which will help prevent costly mistakes and could save days, if not weeks, of laborious cleansing and classifying. Susan is passionate about helping you find the value in cleansing your dirty master data and raises awareness of the consequences of ignoring issues through her blogs, vlogs, webinars, and speaking engagements. With that, let’s get to the conversation. Hey, Susan, welcome to the show.

Susan Walsh 3:21

Thank you for having me.

Sam Gupta 3:23

Of course, it’s my pleasure. Just to kick things off, do you want to start with your personal story and your current focus?

Susan Walsh 3:29

Yeah, sure. So I set my business up almost four years ago when I saw an opportunity to help organizations and save money through the classification of their master data. I had worked for a spend analytics company before and had noticed that while companies were happy to pay for analytics and software, and the real problem was in the quality of the master data. And so, I have spent the last three years just building my business, helping clients save money, save time, save stress, and get projects completed quicker through my normalization and classification services.

Sam Gupta 4:08

Yeah, so I’m definitely going to dig deeper into all of that, that you mentioned, that quality of master data is absolutely critical for any system and the organization. That’s where the problem is, in my opinion. And the second could be people. Those are the two biggest issues in my experience for any system implementation. But before we get there, I’m going to have a question for you. And that is intended for every single guest that we get on this podcast that is going to be your perspective on business growth. What does growth mean to us?

Susan Walsh 4:37

Personally, and it’s not necessarily financial, it could be personal growth, personal development, and for my business, in particular, growth is the growth of my team members, which is a result of financial but I want to spread the growth of my awareness of my business of me and the services that I can provide. And but for larger organizations, they have a bottom line to hit, and they have to be profitable and grow the business and get more customers and be efficient with their members of staff. So it really depends on who you are and what your definition of growth is. I’m sure that if you’ve asked that question, you get lots of different answers.

Sam Gupta 5:20

Always. That’s why this is my favorite question. And I don’t give them any clue. And you know, you can take it the way you want. Sometimes I get from the perspective of sales and marketing. Sometimes I get from the operations and finance. But growth in our experiences is far more than that. It’s a comprehensive experience because your growth can be impacted in a lot of different ways.

So let’s go back to your comment about the quality of master data, right? And I want to capture some of these stories here. So obviously, you do a lot of work from the master data perspective. And I can feel how messy this data could be, just because if you don’t have control, then your master data is going to be messy. If you have too much control, obviously, your employees are not going to be happy. So, there is the balance, right? So tell me some stories where you had these quality problems, and you had to go there and fix them. And then you had some sort of impact. So walk me through that story.

Susan Walsh 6:14

Okay, so the first thing I would say is, I think I said it before, but then the main thing that I help anybody with is solving a problem first and foremost, that sometimes others can’t, then it’s financial and time-saving. Yep. And a client that I worked with, and they sold sportswear all over Europe online, they shipped a lot of product to the UK in Europe, and they were having an issue with a lot of clothing being returned, which costs a lot of money to ship back and then also send out an exchange product or give a refund. So what I did was, first of all, I tried to group their product into clothing areas such as, trousers, tops, belts, that kind of information, then I looked at all the reasons, it was a free text box. So it was very hard to quantify.

Susan Walsh 7:09

So I tried to categorize the reasons that products were coming back. So it tended to be it was too big, it was too small, it didn’t suit them. Or maybe it arrived too late. To categorize all that information. And what we can see from that was the main product, which was significantly higher than all the other products that were being returned, had one main reason that it was coming back. And that was because the people buying it found that it was too big. Yeah. So what I suggested to the client was that they could then put some kind of note on their website, when for people when they were buying this product to see that actually, it’s quite large sized.

So hopefully in that would then start to minimize the number of returns for that product. And it was the same for other products, but there was one that stood out more than any other. And you know, if they could minimize the number of returns on that product, then they would save a lot of money and a lot of time because it’s not just the cost of shipping something back and shipping something else out. You’ve got your hidden costs there. The extra packaging, the warehousing costs, the staff costs to package it and send it out. So you know, all those things add up that you don’t always account for.

Sam Gupta 8:26

Yeah, so interesting perspective there with respect to the size. And obviously, you put the note that is great. But why are people buying this in the first place? So let’s say if I’m buying a shirt or a piece of cloth from a website, I’m going to look at my size that it is probably medium or large or whatever. And I probably know my size when I’m buying as a customer. So why were people buying the size? And why was size so inaccurate that they had to return?

Susan Walsh 8:51

Well, I guess I would assume, and this is an assumption that people were buying the size that they normally bought for other clothing products. Yeah. But this was a sports product. It was jujitsu, or it was a commercial type thing. So yeah, I would assume that they are possibly made slightly larger because you have to move freely in them. I see. So it could have been something like that. And that could have been the reason. But I mean, that’s very speculative.

Sam Gupta 9:16

Interesting. And sometimes it’s very hard to forecast in terms of what people are going to like, and this is the problem in the e-commerce and the distribution space, especially when you’re selling something that is going to be apparel or shoe it just sometimes you know, it’s good to be the same size, but it doesn’t fit the same way that you would like I mean, I have personally experienced this. So I can definitely see this problem in this particular space,

Susan Walsh 9:38

Actually, the problem is discovered that so many returns of that one product could have a knock-on effect on forecasting, because suddenly if people are buying the next size down, you need to be able to forecast to account for all that change in volume. So are you going to lose customers because you don’t have enough stock? Yeah. Are you going to sit on inventory that you don’t need because suddenly you’ve realized that people aren’t buying that size anymore? So you know, there’s a whole range of areas that that one little change could affect.

Sam Gupta 10:13

Yeah, it’s interesting the way you bring this point because your skill classification could have impacted a lot of places that a lot of manufacturers, distributors, and retail companies don’t think about. So the way you categorize your product, the way you classify your product could have an impact on your forecasting. It could have an impact on your inventory. So tell me some stories where you have had the forecasting problem because of incorrect classification of the product.

Susan Walsh 10:44

Well, that’s a huge problem. For a lot of clients, I deal a lot with procurement, so they don’t have visibility on their data, then they’re working blind or going on what people suggest without actually looking at the facts. And but another project that I worked on was a food service company in Germany, and they had a master skill list at head office. But they also had about 500 hubs around Germany. Yeah. And those hubs were creating their own descriptions, their own SKU codes for the same product.

So, for example, you have one can of Coca-Cola or a pack of Coca-Cola. And it could be called different things. And it could have different chords, but it’s actually the same thing. So they had 34,000 SKUs on their system. I managed to rationalize that down to 24,000. And that was all in German as well. I don’t speak German. So I think I did pretty well with that.

Susan Walsh 11:50

That’d be a fun project, I guess

Susan Walsh 11:52

You know what, it was really interesting, actually just learning some new words in German. And more than that, they could then see that actually, like this, this hub is buying their Coca Cola from their friends down the road, but they should be buying it from our preferred supplier. And they’re paying twice as much, yeah, or to buy from their friend as they are from our preferred supplier. So suddenly, they have visibility on what’s actually going on within the business, and they can start to control the purchasing, monitor it, and ultimately save money, make more profit.

Sam Gupta 12:28

Yeah, amazing. And so, how would you recommend anybody who’s starting on this journey? So let’s say if I am the manufacturer or the retail organization, and obviously, I don’t want my employees to be buying from their friends. So I need to start some sort of initiative that I may have three different locations, and I want to give them enough autonomy to be able to buy a product if they are short on that product. Because if they cannot do that, then they are probably going to lose on a lot of different opportunities and the customers.

So let’s say if you were to start on this journey, where you have three different locations, and you want to create a plan where you can have the centralized skill planning so that I’m not selling three different products when I’m actually selling the same product across three locations? How would you recommend an executive who’s going through this journey in terms of creating whether you want to call this taxonomy or the SKU normalization? You tell me what is going to be involved in creating this for me.

Susan Walsh 13:33

So first of all, it’s going to be a really manual process. There is no magic software or a button you can press that will magically fix this problem. You have to really work with the master data, get some humans involved, you start to read the data as you work with it. And you will pick up trends and areas where maybe the information isn’t being input correctly. Yeah. And sometimes, the data can be in separate systems. So I have the ability to pull all those systems together and look at it as a whole. And so, if you’ve got siloed information, you won’t know that you have duplicates. So by pooling all that information together, you get the full picture.

Susan Walsh 14:29

And again, it’s manual, you tidy it up, and then suddenly, you realize that you are purchasing or selling as much of something as you thought because they had different codes, or they have slightly different descriptions. So suddenly, oh, are we going to make more money? Or can we purchase the raw materials in bulk and bigger bulk so that we save more money? And do we need five suppliers for this item? Or could we do it with one or negotiate a better rate.

So there’s a number of different ways, and it really depends on the circumstance. So you might have the master data all in one format and one file, or you might have it separately, and then it’s going through and working out what you need as a business. You’re kind of agree on some standard terminology. So liter is a great example. Is it liter spelled the European way? The US way? Common standard use of all those different weights and measurements? And have them all the same? Because again, that can really and through the number of products that you think you have? Yeah, and that’s how I managed to rationalize so many of those SKUs because they had liters, all kinds of crazy spellings.

Susan Walsh 15:53

Even Coca-Cola, and you know, you think that one, I’ve seen that misspell as well. So I’ve got a check for things like typos and spelling mistakes and cut and paste errors. Yeah. And you’ve just got to methodically go through it and rationalize those down and name the product in a standard way. And then, if you want to categorize them as well, you have to look at them. Do you want one level? Or two levels? Or three levels of categorization? Do you want it to just be food and drink? Do you want it to be food and drink? And then beverages? And then fizzy soft drinks and water and tea and coffee? Do you want to separate it out to that level of detail? Yeah. Or do you just want to know that it’s a beverage?

So it depends on the needs of your business. And but by having that information to hand, you know, like all the other examples, it will have a knock-on effect on other parts of the business where you can save time, you can save costs, you can increase your margins without really having to do very much just by tidying up your master data. I mean, that’s the most amazing part of this. Yeah, and I think that cleaning data is highly underrated as a cost-saving and time-saving tool. And I always say to people. Data is an investment, not a cost. And if you invest in your data, you’ll reap the rewards.

Sam Gupta 17:15

You bring up a very interesting perspective there. Because so when we look from the process perspective, and master data cleaning is not going to be just a one-time exercise, because you are going to be requiring these reports all the time, you are going to be requiring additional units of measures all the time, maybe payment terms, right? Maybe new vendors.

So let’s say if I am going back to my same example, manufacturing, or the retail example, and I have my three locations. And from the process perspective, let’s see if I have the ongoing need for this data. So what will be the process? What would you recommend, from the process perspective, let’s say if my retail location is trying to add one specific skill, or the part or maybe payment term, and they are stuck in adding this. So the process is going to be that you have a centralized authority that controls the whole master data governance, or they can add on their own. And then you can clean this after the fact. So what is the process for the ongoing master data cleaning? Because it’s not the one-time process that you clean it and say and do, it doesn’t work that way.

Susan Walsh 18:17

Because that’s what I’m always saying that you know, it’s you can get me into fixture detail. But if you don’t maintain it, once I’m gone, then I’ll see you again in 12 months because it doesn’t stay the same for very long. And I think what we’re a lot of organizations miss a trick is that we have to target the people who are inputting the master data. They’re the most important people. They’re the people who make or break the data quality. Yeah, and most of the time, they are not at or data people. So we need to talk to them in their language and get them on board in ways that they can relate to they understand. So really intensive training at the start and a manual with us specifically how to this is how we set up products.

Susan Walsh 19:03

This is what you must fill in this is the way you must see liters, or grams or kilometers or meters. If you’re having any problems, when you set up a product like this, you know, there’s a helpline that you can call. Yeah, but if you allow the data input or have too much control over the data, then then you’re going to have real data problems. But if you can put roadblocks in place so for example, as they type in liters the wrong way. Yeah, and it won’t let them or a drop-down menu. However, drop-down menus can have a lot of problems within themselves.

Yeah. And if you minimize the amount of information that they have to put in and make sure they know how they have to put it in and make sure and explain to them the consequences of what happens when they don’t get it right and how that can hold up a supply chain or you know a massive sales order. Some are: we need to order a new product, but the SKUs are not on the system yet. So it holds up so many of their colleagues’ work and their colleagues’ time.

If they understand that, then they might be more thoughtful about what they’re doing when they’re inputting that information. Because I think a lot of the time people think, Oh, well, nobody notices. Nobody’s going to mind if I don’t fill in this box. Yeah. But actually, if you fill in that box, it makes a huge difference.

Sam Gupta 20:25

Yeah. So that’s a very interesting perspective. And again, I want to touch back on the training aspect, right. So you mentioned that everything is dependent upon the people and their training. And let’s say, if we try to train them on everything that they need to do, sometimes it could be 1000, page manual, which might derail people’s interest.

But once they come to the real scenario, in their real life, that’s when they are going to realize that I’m not sure what to do, and they are probably going to make a mistake. And by the way, from the training perspective, it’s not that the people I have today, they could leave, and then I could have somebody else working in the organization. And then they have to go through the same manual again. So how do you minimize this? What can we do to make sure that the process is streamlined, it is not overwhelming for people? What are some of the best practices that you might recommend to a manufacturing executive like me?

Susan Walsh 21:21

Okay, so the first thing I would say is if you have a really thorough, detailed, but easy to follow manual, it doesn’t matter if your staff is replaced, because if it’s a lead, a relatable, usable makes-sense manual, then somebody, anybody should be able to pick it up and follow that process properly. So I think maybe that’s where we kind of the process starts to fall down. And there’s a whole other piece around staff welfare and well-being, and there’s that I’ll never forget this phrase that I learned at university that contented cows produce more milk.

Susan Walsh 22:01

If your workers and your employees are happy, if they feel valued, if they feel that they are contributing, like to in a really important part of the process, then that can help. And you know, I’m not naive, it can, it’s not the most glamorous job in the world. Yeah, but it’s a really important job. And maybe if the organization viewed it as more important than the employees would see is a more important job as well.

Sam Gupta 22:26

Yeah, and this is great. Okay, and let’s talk about the scenario. So let’s say if I have an extremely contented employee that is actually working on the floor, and they might have a customer knocking down their door to be able to ship the product because the customer is mad. And now I’m actually having to go through this 1000 page manual, which might not be updated, let’s say, in the last two months, just because it’s very static information.

Then finally, there are things that are going to change, so somebody may have forgotten to update them. And because of that, now, I cannot perform my tasks. I cannot relate to it. Because of the information that I’m looking for, I have to go through 1000 pages. So this is a real problem. And I am simply trying to close my transaction so that the customer is pleased. And it’s not that I’m not committed or contended, but this is a real-life scenario. Okay. So how would you overcome this?

Susan Walsh 23:18

So I go back to the manual again, right? I do training for a lot of my clients, in-house teams so that they can take over the data process. So the first thing is, there are no bullet points and very little text in my manuals. It’s all pictures, like screenshots on where you need to click what you need to do and speech text bubbles on what to do. So let’s keep it to a minimum, make sure the sections are clearly described and named so that if someone needs to jump to Section x, they can find it quickly, then you’ve got colleagues.

So does someone else within the team know what’s happening here? Can they help you? Yeah, you have a well-trained team that should be knowledgeable to show you. In fact, I would recommend that you don’t have just one person doing that task. If you share the knowledge, then you shouldn’t have an interruption to your supply chain as much because you will always have a backup. And then, maybe at that point, you do have a centralized team that you can call for support as well.

Sam Gupta 24:17

Okay, so let’s say if I have the screenshots in the training manual, and especially if we are talking about the newer SAAS products, they are getting updated, let’s say on a monthly basis, or maybe on a quarterly basis, sometimes on a semi-annually basis. And when the product changes, there are going to be changes in features and functions, and the manual needs to be updated as well. Yeah, but typically what happens is if the information that this person is looking for if the manual is not updated all the time because you are not going to know when this change is going to happen in the product. So how would you make sure that whenever the changes pushed in the software are also reflected in the manual?

Susan Walsh 24:56

If you have a team, you might have a supervisor and or two supervisors. And it may be their collective responsibility to make sure that that manual is updated and maintained. And that’s what I would suggest.

Sam Gupta 25:15

So the next question is going to be to tell me a scenario where you have seen super messy data, and what were the problems that you found. So help me visualize the problems that you have seen, let’s say in the recent project or in the recent five projects that you have done?

Susan Walsh 25:43

Well, I can tell you every single project that I work on is messy data, and but it varies from vendors being misspelled. So there, you have multiple versions of the same vendor. And I have seen terrible and description-free text descriptions with non-descript information. And I have seen at least six ways that you can spell the word screw and its description.

Susan Walsh 26:18

So we’ve got screw screws, SCR WSW, Sc, Ws, STS, and that’s just the screws. There are bearings. And then you know, I could go on about this.

Sam Gupta 26:33

You might be selling 20 products, but in the system, you probably have 1000 products that you’re selling.

Susan Walsh 26:38

Yeah. Yeah. What do you think? Yeah, it’s, it’s more common than you think.

Sam Gupta 26:43

Yeah, I agree. I see that all the time in the ERP world as well. I mean, this is definitely a problem. So tell me, what are the implications of having multiple vendors in business?

Susan Walsh 26:54

Well, first of all, you have no true visibility in your business of what you’re buying or selling to specific vendors. Yes. So you know, and within the procurement side, yeah. And quite often, a great example is Price Waterhouse Coopers, so you can have price space Waterhouse, Coopers PricewaterhouseCoopers. Without the “s” on end, you can have PwC PwC, Inc, PwC. Limited, p dot w dot c, there are so many different versions of that one supplier. So if you’re looking at a global data set, you might suddenly find that if you normalize those suppliers to one PwC Yeah, oh, my goodness, we’re paying 10% more and region eight and region B with PwC.

For the same services, why don’t we have a global contract in place? Yeah. So instantly, you can save some money, again, by selling to customers? Are you giving them the best customer service because you don’t realize that actually, they’re buying double work from you, they should be getting extra benefits, extra discounts? And if they did have those things, they might buy even more from you.

So you can’t underestimate the power of just purely normalizing your suppliers. And I’m not talking like Parent-Child relationships here like you would in financial. I’m talking just standardizing the names. And that can be so powerful. Yeah, for example, I had a client recently. They had 43,000 vendors. Her normalized vendors came down to 34,000. So they had around 10,000 vendor suppliers that were the same, just slightly differently.

Can you imagine the value in that and how much that would SKU the numbers that they were looking at? And, imagine if that’s on, on a manufacturing site, and you’re using Cost of Goods as a measure, and you’re buying an X amount of nuts and bolts to make a product? Yeah, but you hadn’t normalized your suppliers. So actually, you’re using twice as much, but you’re not getting the right discounted price, your cost of goods could come down. Yeah, if you’ve got that visibility to be able to buy smarter.

Sam Gupta 29:11

Yeah, interesting perspective. And I can definitely see how centralizing the customers and vendors are going to be beneficial. So now, let’s talk about one more interesting scenario. And I’m pretty sure you have come across this one as well. For example, let’s say if a customer is a vendor, and that could be probably employee walks if that is the scenario. And let’s see if your system does not allow you to have the customer as a vendor. If that is the case, then what would be the implications in the business process?

Susan Walsh 29:41

Well, that’s definitely going to hold things up. So okay, I mean, I would assume that you would have some kind of new vendor form, and the other thing I would actually check is that are they known by another name. We just talked about Parent-Child, so IBM has a lot of subsidiaries. Let’s check they’re not under the system or something else, and it could be a historical name.

So that company doesn’t even exist anymore. It’s been bought by someone else. But it’s still under the old name or, or it’s under the new name, but nobody knows it by the old name. Such things like that. And that’s something I see a lot, or you know, they just don’t check properly. If you don’t know the name, check by the address, etc.

And then I guess the process for setting up a new supplier because certainly within procurement, you want to minimize the number of suppliers you have. So you don’t want to be setting up, you don’t certainly don’t want to be let letting everybody set up new vendors all over the place. That’s how you end up having to come to me to fix it.

Sam Gupta 30:42

Do you have any last-minute closing thoughts for this conversation?

Susan Walsh 30:51

Yeah, check your data, maintain your data, and see it as an investment. Not a cost.

Sam Gupta 30:58

Yep. Amazing. So my takeaway from this conversation is going to be data is everything. But clean data is more important than that. Yeah. On that note, Susan, I thank you for your time. This has been an insightful and fun conversation. Great. Thanks so much for having me on.

Sam Gupta 31:12

I cannot get enough to come on the show for sharing the knowledge. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Susan, head over to theclassificationguru.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check the related episodes, including the interview with Kevin Lawton from the New Warehouse Podcast, who discusses why standardization plays a key role in inventory planning. Also, the interview with Ian Pratt who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 32:22

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.