Sourcing & manufacturing: how to build out (or improve) a supply chain logistics for your business
Darren Moffatt (00:05):
We need to talk about chocolate. Specifically eating chocolate. Dark delicious chocolate.
Darren Moffatt (00:15):
Millions of chocolate obsessives around the globe. Humans consume 7 billion kilograms of this stuff. Every year. For many people, eating chocolate is a sensory overload, akin to a religious experience.
Darren Moffatt (00:37):
But what’s actually in it? Hello listeners, and welcome to the Nerds of Business Podcast. My name is Darren Moffatt. I’m a director of WebBuzz, the Growth Marketing Agency. And I’m your host. If like me, you’re a chocoholic too chances are you’ve only really got a vague idea of everything required to produce your favourite confectionery bar. Sure. You might know about the cocoa, but can you really name the full list of ingredients? Neither could I, so I turned to the nerd bot for help,
Nerd Bot (01:10):
Cocoa solids. Cocoa butters. Sugar. Milk. Vanilla flavoring. Emulsifiers. Vegetable fats.
Darren Moffatt (01:21):
So you can see that the first thing any chocolate manufacturer needs is a supply chain of these inputs. Not to mention suppliers for wrapping, boxing, dispatch, shipping and cold storage. That’s essential to get the product from factory to shop. But what happens when this complex supply chain breaks down? How would the chocoholics of the world cope? Well, we don’t have to wonder it’s already happened as we’re about to hear in our opening story.
Speaker 1 (02:01):[inaudible]
Darren Moffatt (02:01):
The year is 1996. The famous confectionery brand Hershey’s decide it’s time to upgrade their IT systems. After a tender process, they select three technology vendors to cover different parts of the business SAP for the ERP software, Manugistics supply chain management software and Siebel for their customer relationship management or CRM platform. Their initial implementation timeline is 48 months, which makes them due to go live in the beginning of 2001. However, because of concerns over the Y2K bug, they shortened the timeframe and launched instead in July of 1999. To meet the earlier deadline, the company is forced to cut the number of cycles in the testing phase, skipping these crucial steps result in the transition team overlooking key in the configuration of the new it systems. Unfortunately for Hershey’s a peak trading season of Halloween is just around the corner. By September, 1999, the Hershey foods, former CEO and chairman Kenneth L. Wolf is on a conference call with wall street analysts. During the call, he reveals that the company is having major problems with its new order-taking and distribution computer system, for which it’s paid the three software providers combined $112 million. He doesn’t reveal the full details, but he does admit the issues are so serious they will stop Hershey’s from delivering $100 million worth of Kisses and Jolly Ranches for Halloween that year, the Hershey share price drops 8% on the news and millions of Americans are forced to enjoy a Halloween without their favourite chocolate.
Darren Moffatt (04:04):
At the time of that story, Hershey’s was a fortune 500 company. So it shows that no matter how big the brand or how good the product, no one is immune from the dangers of a collapsed supply chain. Although Hershey’s is very much a product based enterprise the same principle applies for service businesses, too. In the field of professional services for instance, your supply chain is dependent on your ability to recruit and retain quality people. If you can’t secure the right employees and contractors to fulfill the services, you supply. Then pretty quickly. You’ll lose clients and revenue and maybe even go broke. Although they’re really seen by the end customer, every business has a supply chain of sorts. They’re like the hidden subterranean energy system that powers the city above. If your business has developed a great product offer, what can you do to build out or improve a stable and scalable supply chain that will power your brand to massive growth?
Darren Moffatt (05:33):
This is Nerds of Business. We’ll start the show in a minute, but first a word from our sponsor.
Ben Carew (05:44):
Hi everyone! It’s Ben Carew here. I’m a director at WebBuzz, the Growth Marketing Agency. I work alongside the host of this podcast. Darren Moffatt. If you’re a business owner who wants to grow, but you don’t have the spare funds to invest in marketing right now, you’re not alone. Since COVID hit, we’ve noticed more clients suspending campaigns or delaying their marketing altogether due to cashflow issues. In response to this, we developed a solution called “Buy Now Pay Later” digital marketing. It provides eligible small businesses with nothing to pay on SEO, digital marketing, and website development for up to three months. We think it’s perfect for entrepreneurs who need a helping hand getting sales flowing again. I’ll be back later in the show to explain how it works, but if you can’t wait, you can download a free info pack now at webbuzz.com.au/bnpl that stands for Buy Now Pay later. That’s webbuzz.com.au/bnpl
Darren Moffatt (06:47):
So the title of today’s episode and the problem we’re trying to solve is “Sourcing and Manufacturing: How to Build out a Product Supply Chain for Your New Startup.” It’s a really important question. And we’ve got some great entrepreneur guests on the show today to help get you some answers. You’ll hear from the CEO of a hospitality group with eight venues across Australia and electronics hardware manufacturer who built a supply chain in China for her startup and the founder of one of the fastest growing health companies in Australia. And our two product design experts will also provide some invaluable technical perspective as well. But first here’s just a quick request. A lot of work goes into producing this show. So we really love to get reviews from our listeners. If you’re enjoying as a business, please take one minute. Now just to leave a quick review, it helps us climb up the ranks on the podcast charts and makes us more visible to other people, just like you, thanks in advance for your support.
Darren Moffatt (07:50):
Although product designers themselves really get directly involved in the manufacturing process, they can still offer a highly valuable perspective on the sourcing and supply chains that bring their vision to life. Carrie Peters is product design principal at Sydney agency Ustwo. Carrie is one of our two product design nerds for this series originally from Oregon via New York, where she designed for the likes of Nike and ClassPass. She’s now a leading exponent of human centered design. Have a listen to the insights that Carrie’s gained from years of experience,
Darren Moffatt (08:27):[inaudible] product development design perspective. You know, what tips do you have for constructing a supply chain? Now I know that you work, predominantly in digital, but, you’re obviously interacting with businesses and products, post design, or as they’re sort of coming into the real world, you know, as a finished product and hitting the market. What have you noticed? What tips can you give for people, around constructing a supply chain?
Carrie Peters (08:57):
Great question. And I think so I did work, briefly at Nike and so within like product physical product signing shoes. So I did get to see a little bit I guess under the covers of like what it’s like to work with a supply chain or manufacturers, especially in other countries. And then when I moved to San Francisco the startup that I built, the design team within, we were working with a physical product. We were working with a Bluetooth scale, a food scale. And we had to make, we had to have that manufactured physically. And so we worked with different suppliers of different materials and talk to them about little, you know, LED lights, what the different colors, how they worked and what they meant and battery life and et cetera, et cetera. So I have worked a little bit within that world.
Carrie Peters (09:45):
But interestingly, it’s quite parallel to really working with digital, I guess, suppliers if you will people that are going to build the thing that you have in your head. And essentially the key thing that I would say is just bring them all in really early, bring people in to the table to sit with you and ideate, because you don’t know if that firmware guy knows about this new thing that just came out in his firmware, where world that’s going to change your life and going to make that product a little bit different. You don’t know if some guy who’s got some you know, materials that he’s been looking at and he knows they have some special properties are going to shift what you actually end up making at the end of the day and completely making the product a better thing.
Carrie Peters (10:30):
So I would say bring everyone into the process as early as possible. And if you can sit next to them, I think one of the biggest failures within the tech world, but also in just like traditional manufacturing is that we often have, we often outsource and send all of the, the making of things very far away from us and where people are required to just sort of take instructions and do the things by whatever sort of roles you’ve given them. And, it’s been proven that innovation works much better when you have the makers right there in the room, ideating with you. So bring it, bring them in for sure. There’s this sorry. And I’m talking about there’s this really beautiful anecdote, which I think is based on a real story of a manager in a some sort of manufacturing company where they had assembly lines and they were just not producing enough product, whatever the thing was.
Carrie Peters (11:31):
And so whoever this guy was, he decided to tell everyone every day, you’re going to shift to a different position in this assembly line. And you’re going to do the work of that person in that job, not just you, you know, screwing this little screw in that little bit, you’re going to move up the line. You’re going to attach this bit to that bit. And then the next day you’re going to move on to the next one, until everyone had sat in everyone’s chair and understood what everyone else along the assembly line needed to do. And what, what ended up happening is that the times, the time and the production went up the time went down and the production went up because basically that person that the normally just screwed the screw in that little hole, they now knew that the next person down the line needed to attach this thing in this particular way.
Carrie Peters (12:17):
And if they set it down this way, you could pick it up much quicker and maybe you didn’t even need to pick it up. And so there’s this kind of understanding that if you know, what other people need to do, you know, what other people are working with or what their jobs are that you’ll just naturally work with them better. And you’re going to be much more efficient as a single cohesive team. And I think that’s a really lovely way of explaining how, when you, when you need to get a designer and a developer and a QA and a product owner and business person, and everyone to do the things, to make this thing a reality, the more you can all sit next to each other. And that’s true, obviously for manufacturing to where you can sit together and solve those problems, the quicker and more efficient you’ll be. And you’ll make better product.
Darren Moffatt (12:59):
Now, I don’t know about you, but I sometimes dream of opening a bar or restaurant and being the bond vivant host while everyone else around me does the actual work. But after speaking to my next guest, I’ve come to realize it’s a lot harder than it looks. Sven Almenning is the CEO of the Speakeasy Group. They have eight venues across Australia and Sven revealed just what it takes to put together a supply chain that has become a real growth engine for their business.
Darren Moffatt (13:29):
Putting together a supply chain is a challenge for most businesses. Probably less so businesses that follow a fairly established models. So hospitality, there are clearly suppliers to the industry, but in your case, you’ve got some really bespoke elements to the experience. So, you mentioned earlier that you had to source some product from all around the world. Can you step us through that process for finding suppliers and manufacturing partners for your supply chain and how long did that process take?
Sven Almenning (14:04):
Oh, it’s. an ongoing, never ending process. Right? I mean, a lot of this stuff and alcohol side is relatively, uh, kind of systematic and they’re big suppliers to provide you with things. Food is a bit more, diverse offering if you like. What we tend to do now is, we look for, like, on the alcohol side, we will choose very specific brands you want to work with. And we approach them with a proposal. So quite often, the way this works is brands come to us. Um, that’s just a lot of noise, a lot of noise for us. So instead of constantly getting run down by what other people’s agendas on other people’s businesses want, that’s them wanting to sell us stuff. We try to cut that down as much as we can. And we look for suppliers that have products that we love, or, and ideally also have a culture and I suppose, a brand that we, that we love and stand for something.
Sven Almenning (15:03):
And then we go to them with our proposal and go, this is what we want to do. And then we try to make it collaborative as much as we can. So a transactional relationship with suppliers. Of course it has to be to some degree transactional, but not all of them should be. I think if they’re all transactional, then you’re just a number. Um, whereas if you build a deeper relationship and there’s benefits on both sides, I think we both get more out of it. But the really good example for us is Mjolner. And again, we have this hammer, right? And it stores hamlets actually it’s meant to [inaudible], you know, shaped up to the Marvel stories. And it’s made by Sam Bloomfield. I think working on, he worked on, I believe Lord the Rings movies and made weapons for them.
Sven Almenning (15:48):
And he’s a great artist. And he made that in conjunction with a whiskey brand called The Balvenie. And so they spend a lot of money on this, on this hammer. And for us, it’s a, it’s a great talking point in venue. People come and take photos of it that posts with it. It’s a decanter that we see that we pour whiskey from. And when it got stolen in Melbourne, it was national news, you know, and, you know, it was covered on the evening news. It’s a decanter, they get stolen from a restaurant. They wrote about it in America. They wrote about it in the UK. It was the police commissioner Melbourne, or the police department in Melbourne had to do a press conference to tell the press what they’re doing to recover this is decanter you know. I mean, it’s ridiculous.
Speaker 6 (16:36):
But it would never have happened if we hadn’t gone to a brand and said, you know, we want to do something unique and they came back. So here’s some crazy ideas and, and we just worked on stuff. Right. So I think, you know, for your product, if it’s going to be great, I, what I try to do is we try to find the suppliers that we think are the best for us within the price point that we have rather than sitting back and having everybody approach us. Because when people come to the people that come to you are the ones who have resources, right. It’s going to be more mainstream. It might be cheaper, may not be the same quality though. And so by you going out to the sourcing them all, I think you end up with, at least in our case, quite often, you end up with, a more authentic, product and also slightly more unique experiences. We do of course, you know, take proposals and people that come in as well, but we try to minimize that down. And vast majority of our deals and suppliers, you know, we look for the people we want to work with and approach them.
Darren Moffatt (17:38):
And I think that must go to correct me if I’m wrong, the clear vision at the start, right? So if you have that clear vision defined of the product and the brand and the whole experience in your case, then it’s less about suppliers trying to flog your product. And it’s more about, well, hang on a minute, does it fit within our, vision another quick digression? I think there’s a risk with what you guys do to become, to step over the line of kitsch and become a theme restaurant, right. And you have very successfully avoided that. Now, can you give us some insight into how you, how you, how you’ve done that? Cause that must, I would imagine that would be something that you’d be sort of talking about it amongst yourselves, when you were sort of executing the it’s, like, we don’t want it to become so kitschy that it’s just like a theme restaurant, you know and you bring it in the right side of that line, but it’s so could have gone the wrong side. If it wasn’t done carefully,
Sven Almenning (18:45):
It was the hardest thing. So with me on that, that was the most difficult thing to do. But we always refer to as a Viking inspired restaurant, not a Viking themed restaurant. And, I think that, you know, words are extremely powerful, but how you talk about something, how you frame something in words is insanely powerful. So even that, for us like that consistency, we train all our staff and we’re not feeling we’re inspired by. And then again, though, like if we were themed, we probably would have gone for like not up casual, fine dining, more like really casual comfort foods, massive plates. We would have gone for huge tank. It’s a beer, there’s a lot of, you know, there’s a lot of other stuff you may have allowed like horned helmets, you know, so we were like no horned helmets in venue.
Sven Almenning (19:30):
Like ideally people don’t wear that unless they book it out for a function. You know, we keep the photography very clean and focused on the, on the casual fine dining piece. The fit out is very, delicate whilst being so Scandinavian kind of like a delicate and so it’s not massive clunky tables and clunky chairs. So it was very easy to, it could easily become themed and, which does a lot of success in that, but that’s not really what we wanted to do. We wanted to more trade on, on a quality and a good experience, but it remains an ongoing challenge to avoid that. Yeah. Cause in people’s mind, a lot of people, they will come, we had this enormous success with a video that quantities did for us and that pooled in a certain type of clientele that thought we were a theme restaurant. As amazing a thing that [inaudible] for us. But, it did bring in a certain type of clientele. It was hard for us to satisfy cause they were expecting, you know, arm wrestling competitions and pouring beer on your head kind of vibe, which is not what we do.
Darren Moffatt (20:43):
Yeah. Yeah, that’s right. Yeah. It’s way more sophisticated. And in a sense it’s harder. So I think this is an important point to make for our listeners, like what you guys have done there. It seems to me is that you’ve, you’ve taken the harder decisions. You know, it would have been easier to go down that more of that themed restaurant, you know, but it’s harder to work out what you say no to these. This is not what we stand for. These are the things that we don’t do, uh, almost, more powerful in terms of defining the end experience and what it actually is
Sven Almenning (21:17):
A hundred percent. You also, I mean, you have to, we try to think long term. So I mean, another example we have on [inaudible] when we first opened that that’s a cocktail bar, uh, it wasn’t, you know, world specialty cocktail bar, we open and won best cocktail bar in Australia several times. And I think in the first six months we opened, we had a huge nights. We nearly doubled our trade on Friday and doubled our trade on Saturday. I called our manager and asked what the hell happened on the weekend is that goes amazing. It’s just busy and you’ll have to go to the bottle shops like several times to buy more beer. And I was like, what, why are we buying beer to bull shop or something? All we’re drinking all this Coronas and stuff. And I’m like, you know, hang on. If we are selling beer in here, then we are competing with other venues that sell beer.
Sven Almenning (22:02):
That’s now a competition. If we ever become a venue, we can drink beer. So as an, if we do that, we don’t have the fit out. We don’t have, we don’t hire models. We don’t do, we don’t have DJs. We don’t don’t have the budget to compete, but then you say going to sell your beer. And it, the staff that worked, they weren’t hired to sell beer, but beer so quick to sell you make way more money. I could see just way more turnover on beer. A cocktail costs twice the money, but I could take five times, 10 times a time to produce. So we then made a rule. We said, any beer that sells more than a case a week is bad. And it goes in a black book. So we basically banned or top stock, top selling products was removed from the menu because they were off-brand, [inaudible] in business.
Sven Almenning (22:47):
You do not remove your number one selling products. That’s like a hard rule, but the top selling problems off brand. And by getting rid of that and focusing on what we really wanted to do, eventually our sales reached that level that we had with a beer. And then when 50% beyond what we had with a beer, and then you see in there for for 11 years. So is that kind of the idea of not taking the easy, short term kind of quick fix and kind of thinking what will survive 10 years time? And that really relies on, on a quality product. People need to come back for quality. They go once for the novelty, they return for the quality.
Darren Moffatt (23:30):
I like that. That’ll be in the trailer. You’re giving me gold spin. I it’s just I’m overwhelmed. No, seriously, that’s a great line.
Darren Moffatt (23:41):
With the proliferation of tech platforms, such as Shopify, in theory, it’s never been easier to create an e-commerce business, especially with the rise of China as the world’s leading source of cheap manufacturing. But developing a killer product range is just the first step creating an international supply chain to bring the product to market can be a new level of hell that can break even the toughest entrepreneurs. One founder who’s conquered this and lived to tell the tale is Dr. Wei Shin Lai of SleepPhones from Pennsylvania in the U S. Now, if you can visualize a soft aerobics type headband with tiny speakers inside, that’s what it is. SleepPhones allow you to listen to music in bed via Bluetooth as you go to sleep. Regular listeners will remember SleepPhones from earlier episodes in this series. And in today’s show, I asked Dr. Lai and her husband, Jason Wolf to reveal just how they built their international supply chain and what tips they can share for others who are seeking to do something similar.
Dr. Wei Shin Lai (24:49):
Right? Yeah. So, so do it yourself first. And then, and then the next thing that we did once we codified it, took pictures. We wrote it all up, and you know, and, you know, I knew how much time it took me to make it. And so then I basically wrote out, okay, so this takes, this step might take you 20 minutes, for 20 pieces. And so then, uh, you know, we’ll, we’ll pay you at a certain rate. Uh, and we hired some contractors and they, you know, would just take our materials and then just, you know, work on it at their homes in their own time sewing it together and then bring it back to us for the next steps and stuff like that. And so we were, we just hired out some independent contractors. And then they brought back the finished products and we were able to sell those after, you know, we did that for about a year and a half or so.
Dr. Wei Shin Lai (25:44):
People started dropping out, you know, one person got pregnant, didn’t want to work anymore. Another one had was going through some family issues, et cetera. So, and the other one moved. So, uh, you know, that that’s kind of a hard HR thing to manage. And so then we decided to have HR when you don’t have HR. Right? Yeah. And so then we happened to find a friend [inaudible]. We talked about this company with some of our friends and our friend found another couple who were manufacturing their stuff through a local company. And so, you know, it just, it was just kind of it was a coincidence. Yeah. We found a company that was that had contract sewing. And so then we outsourced to the contract sewer who was about an hour away from us and there were professionals.
Dr. Wei Shin Lai (26:37):
And then after working with them for about three years, we, were selling so much at point that we kind of outgrew that capacity and had to put together an international supply chain, and really step up our game. Right. And so, at that point, my cousin came into the picture. She, had been working in supply chain in Taiwan, which is where, yeah, I was born. And then, and so I hooked up with her and started talking and we were able to, find some suppliers from overseas, using family connections. And so then we went to Asia, met with the various factories and, and started working with, with some overseas suppliers.
Jason Wolf (27:27):
And we had the opportunity then to shop around a bit, but also just to be obsessive about asking them to improve the process and approve of the process. And even like is nailing down that speaker design, we went through a lot prototypes and we finally get, you know, cause we do have an unusual form factor. It’s remarkable for the, the quality of the sound of that does put out.
Dr. Wei Shin Lai (27:50):
Yeah it’s super thin. Right. And at the same time, it can’t be compressible with all the fabric around it. So there are some special requirements.
Jason Wolf (27:56):
And that was not easy, but I’m so happy with what we ended up with
Darren Moffatt (28:00):
And, and, thank you for sharing that. That’s very, very interesting. And when it came to building that international supply chain, it’s a very interesting story. There, there, the importance of family connections and so on that’s that, obviously serendipitous another serendipitous, element, but interacting with the manufacturers around this, the speaker technology and so on. How much did they bring to the table in terms of innovation and design that, that helped you get the product to where it is today? Like, was there were you being prescriptive and saying, we, we need it like this X, Y, and Z, or was there a bit of, to, and fro collaboration there? That, that was also important.
Jason Wolf (28:43):
There was, you know, clearly they have the basic expertise with the, you know, the processes for the machines and stuff. Right. And, and we knew enough, to drive them toward what, we really felt we needed. Yep. So, yeah, it was a great, great partnership in [inaudible].
Darren Moffatt (28:56):
Right. But essentially they created some that I knew does speaker design for you. Yeah. Great. And so that supply chain that you just explained, then that’s the one that is still exists to this day, is that right? Or
Dr. Wei Shin Lai (29:15):
Right. We we’ve been lucky in that, you know, these partners have been very reliable, to work with. And, you know, can’t say that we haven’t had some quality issues every now and then, but, you know, we’ve had to work through those and, you know, send things back and forth overseas, and you’re gonna run into that. Um, but you have to, you know, in some ways, um, the more you communicate with your suppliers and, you know, really forced that relationship, we talk weekly, every, every single week, not, not just, you know, when we need the next order, uh, that, that really cements the bond. And, and I think, uh, especially in Asia, uh, it’s, it’s, there’s a lot more of that interpersonal relationship that’s needed than just the straight transactional relationship.
Jason Wolf (30:06):
I think we felt empowered not to accept the first solution or the first design that they came to us with. I think that’s very important
Darren Moffatt (30:14):
You kept pushing until you got something that you were really, really happy with. Yeah. Yeah. Great, great. So I think the message there for our listeners, there’s so much to take out of that, but one of the key messages I’m getting from that is that the more prepared you are, the more developed your vision is, um, then the better result you’ll probably get from taking it to, an international supplier or manufacturer. Yeah,
Dr. Wei Shin Lai (30:43):
Absolutely. Yeah. Cause you, uh, oftentimes, you know, if you just tell them a rough vision they’ll have in their mind kind of more of an engineering perspective, Oh, I can make this process really easy this way, but that might not be exactly what you need. So you need to really communicate, you know, the end product, and the specifications, you know, have that really clearly laid out
Darren Moffatt (31:07):
Clear vision yep. And documentation. Yeah.
Dr. Wei Shin Lai (31:10):
Right. And, and also really a clear understanding of the process. Cause I think, you know, had I not gone, uh, on, you know, those Asia trips, to see how they do things, I might not understand every single intricacy on where things might go wrong and it’s where things might go wrong, that you need to understand as, as you know, a mass production manufacturer.
Jason Wolf (31:36):
And sometimes even pushing beyond that, I always think of the story of Steve jobs being very particular about what the inside of the computer looks like when, when nobody’s ever going to see it, you know, you have to maybe not push for that level, but to always be pushing for one more level. Yeah. I mean, this has, some interesting engineering inside of it and you may not think of, it’s not just the speaker with a wire coming out there is more to it and nobody sees it, but it still matters. It really matters because that determines the longevity
Darren Moffatt (32:11):
Longevity. Right. Okay. So that goes to, product quality control. And I’ve got a couple of questions here. One of them, if you don’t want to answer this step, that’s fine. But, um, I’m just curious, like, what’s your, your unit, your volume turnover, like how many units are you, are you guys selling these days? Are you able to give us some indication of that?
Dr. Wei Shin Lai (32:33):
Well, we’ve sold over a million. I think we’re, you know, on our way to 2 million at this point. Okay.
Darren Moffatt (32:40):
Yeah, that is, yeah. That’s, that’s some big numbers there. Oh, wow. Congratulations. That’s awesome. Now, if you’re a tech startup or a purely online business, your technology stack is a really big part of your effective supply chain. Ross Gales is director of design and strategy at Sydney agency. Pollen. Ross is one of our two product design experts for this series. And he has designed product solution for some of the biggest brands in Australia, including Gumtree, which is owned by global giant E-bay. I asked Ross to share some of the top tech traps that can undo the best laid plans of entrepreneurs and startups.
Ross Gales (33:23):
Yeah. So technology and choices are super important, particularly when you’re kicking off a new app and a new product, you want to make sure you’re building on good foundations. And one of the key recommendations I’ve got is, is flexibility is key. Lots of people come to us and they’ve, they, they invest in either offshoring their product because it’s cheaper or they, they choose a preexisting off the shelf solution, um, just to help get their business into market. And look, that can be, that can be right for some people. Sometimes you do just want to get things out there, cheap and fast to see if there’s an appetite. And I advocate for that. In some instances, I caveat this by saying every, every business is different. But what I find is if, if you’re doing it properly in building from first principles, flexibility is the key. You want something that’s going to grow with you as a business. All too often, we get companies that have, um, offshored or gone with an off the shelf solution, and it’s no longer flexible to their needs.
Ross Gales (34:18):
It can’t be customized, or the code base is unstable. And it’s really hard for us to then take that product and continue to iterate on it, to make it better without costly redevelopment or entire you know, ripping up key components of the infrastructure and putting new things on is very costly, very costly. So, the key is, um, make the right decisions early on, build on good foundations, ideally big advocate of where you can, in-housing your own developer, at least get somebody on your team who understands the infrastructure and the technology, it’s the foundation of your business. So it’s critical that somebody has that IP with you. So we help some of our clients, particularly smaller startup clients that come to us with, with no understanding of the technological side of the business that they’re trying to build. We can help act somewhat as a CTO, as a service. So we can, we can provide.
Nerd Bot (35:15):
Ross Gales (35:15):
CTO as a service. So that is a bit bit nerdy, but it’s a CTO is the chief technical officer. And as a service just means that we can, they can outsource that capability to us so we can advise them on the right technology solutions. We can help to design and architect that infrastructure. We can get them set up with the tools and the, that they need. And we can even help to hire their own internal development team, um, just to get them started and get their off on the right foot. And that can be really critical for a small organization, to do that. And then to onboard, um, seamlessly into their organization, the right person, who’s the right fit for the role and with the right skills and building on the right technology foundations.
Darren Moffatt (35:59):
In episode four, you might recall, we spoke to a healthcare entrepreneur whose business has really taken off like a rocket here in Australia. Her company just received the Deloitte Technology Fast 50 Australia Rising Star Award for an astonishing 21,540% jumping annual growth. That it’s really quite remarkable. Jessica Sepel is her name and she’s a health and wellness expert. And she’s the founder of JS health. Jessica is a qualified nutritionist. Who’s built really a massive online community, which now encompasses more than 400,000 people across Instagram, Facebook, and email. And in 2018, she launched a vitamin range, which has absolutely exploded. I asked her to share the story of how she built out her supply chain. And in my view, this is essential needed for anyone, particularly in the fast moving consumable space.
Darren Moffatt (36:58):
Um, what, what about that, uh, the distribution process. So you, you know, the manufacturers help you with the formulation and the testing and so on. You get it to that point. I get to prove that then get, um, you know, manufactured, bottled and labeled.
Jessica Sepel (37:14):
Yeah. So it gets, sorry. Yeah. So it gets put, so the formulation gets manufactured, then it arrives at our sorry it get the formulation gets put together in the lab. Then it arrives at our manufacturers and they bottle label, and then it’s ready to be sold online on retail.
Darren Moffatt (37:29):
And so do you have your own kind of warehouse and distribution center or is it coming straight from, have you partnered with a manufacturer for that as well?
Jessica Sepel (37:38):
Yes. No. We’ve partnered with a distributor. Fantastic. Okay, great. Yes. So manufacturer is one thing and our distributor is another, so the product will go from manufacturers to the distributor and anybody. Right. They need to be focused.
Darren Moffatt (37:53):
I had a logistics company doing the, the distribution for you. Got it. Okay. So that’s what I mean, that’s something that our listeners will find very interesting, like, you know, so you’ve, you’ve found one partner there for the manufacturer and then you had to go out and find another partner for logistics. Yeah. Um, and so tell me about the logistics. Was that easy to put together or did you, did you talk to two or three different providers?
Jessica Sepel (38:16):
That’s so funny. Yeah. That was like that’s sometimes who, you know, so that was my husband’s best friend who had just started a health distributing health distribution company. I’m happy to tell you guys the name Epic, he’s amazing [inaudible]. We met him on a plane. We were discussing it, funnily enough, going to the same destination. He was like, I’m about to start this health distribution company. And I was probably, right then and deep in the middle of manufacturing, my first vitamin. And he said, well, let’s chat. Let’s make our coffee when we get back. And yeah, he’s been out distributor for three years now.
Darren Moffatt (38:52):
Wow. It sounds like there’s a few serendipitous moments in your DNA. Just sort of people that we knew that just happened to be sort of, you know, doing the right thing at the right time.
Speaker 9 (39:01):
In one stage, we were definitely going to be selling or sorry, sending out the vitamins from the back of our house. Because up until now, we were working in the back of my house up until six months ago and we were happy. We were going to be the ones sending the vitamins to people’s homes, you know, because we didn’t know how big the company would get.
Darren Moffatt (39:21):
Well, that’s the thing. I mean, I think that’s a lot of small businesses, start that way, you know, um, they it’s in the garage or in the back room and they’re doing it all manual and then they, they often fly him out because I can’t take that next step into,
Jessica Sepel (39:36):
If I could give anyone else out there, who’s starting their own company or selling their own products an advice. I would say, don’t try and save the money to do it yourself because you will just lead to burnout and overwhelm because you just want to focus on the quality of the product and making sure that, that you focus on your strengths. My strengths always product development, the community nourishing the community, making sure that the formulations were the best of the best. Um, and with my manufacturers and then the team of health experts, rather than having to put my time and effort into, how am I going to get this vitamin to the customer? I think you really have to pick and choose where you want to put your time and effort. And ultimately if you can’t do it all, you have to try and lean on people. And having a distributor, just my husband in the beginning was like, you know, we have to, it’s obviously going to cost us to have a distributor, but I kept saying to him, no, it will cost us more in the long run. If we are going to overwhelm ourselves with trying to get this product out into the universe.
Darren Moffatt (40:36):
And now another word from our sponsor.
Ben Carew (40:42):
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Darren Moffatt (41:49):
The problem we set out to solve in this episode was Sourcing and Manufacturing: How to Build Out a Product Supply Chain for your new startup. Our product design experts, Carrie Peters from ustwo. And Ross Gales from pollen revealed some really valuable insights and common pitfalls for building out a supply chain or technology stack. And we’ve also heard some fascinating, real life stories from our entrepreneur guests, Sven at the Speakeasy group, Wei Shin at SleepPhones. And of course, Jessica at JS Health. I hope their wisdom and insights have given you ideas to crack the code to growth in your own venture for me. However, there are three important takeout from this episode. Number one, start with your family network. Both Jess and Wei shin leveraged of existing connections. First, before they went out looking to build their supply chain. I really think that in this case, it helped them avoid a lot of false starts and dead ends that can often arise when doing business in foreign markets.
Darren Moffatt (42:53):
And with suppliers that you don’t know. Number two, communicate with your suppliers clearly and often talk weekly. Don’t accept the first solution or design that they offer. You. You need to articulate your end product vision clearly, and be really quite hardcore about your technical specifications. This will really pay dividends with quality control later on. And number three, make the relationship with your suppliers collaborative, wherever possible. The importance of collaboration was a running theme in the experience of each of the entrepreneur guests on today’s show, but to make that work best, you’ll need to make an effort to understand every step in the whole production process. As we heard at the top of the show in the Hershey’s story, supply chains can quickly unravel if too many components change at once. So proceed with caution if you’re looking to change suppliers or re-engineer the systems behind your production or fulfillment within the whole product development cycle, building out a supply chain can be one of the most arduous tasks that you will face as an entrepreneur, but it’s crucial.
Darren Moffatt (44:05):
You get this right. I loved what Sven said about his customers. They come once for the novelty, but they return for the quality. So suppliers and the systems that drive your production and distribution are actually a key growth engine of any business. It doesn’t matter how good your product or service idea is. If the way it’s delivered is poor or inconsistent, then repeat sales and referrals will dry up and you won’t get to scale. It’s a sobering thought, but perhaps in the end, you’re only ever as good as the supply chain. You build.
Darren Moffatt (44:43):
We’re coming to the end, but before we go, it’s time for our regular segment Nerd Under Pressure where a guest has to share one killer hack or tip they recommend for you – our listeners. Let’s find out who our nerd under pressure is today.
Darren Moffatt (44:58):
So Jess Sepal from JS Health. Um, we now come to another recurring segment here at nerds of business called pressure under pressure. So Jess, you are the healthcare vitamin nerd. Um, you’ve obviously built a thriving business for yourself in this area. Can you give one killer hack or tip to our listeners around, um, manufacturing, sorting, building out a supply chain? I’ll give you five seconds thinking time.
Darren Moffatt (45:35):
Okay. Over to you.
Jessica Sepel (45:37):
Okay. Well, I think it’s all about, you know, a good team. A good team in place to help run the business properly. And as entrepreneurs we tried doing all about doing it all ourselves, and unfortunately that normally leads to burnout overwhelm and a little bit of just confusion. I think it’s really important to delegate and hand over where you can and remember what your strengths are. So if your strengths are product development, focus on that and hand over the rest. So for me personally, my strength is product development. And from there after I really do hand it over to the team and it’s, it’s very hard as an entrepreneur to hand over the trust to someone else, but you just need to, for the long-term success of the company, that’s definitely my advice. And remembering that it’s the team, a team, a huge team in the end, that’s going to create a successful company and you cannot possibly be the entire team.
Jessica Sepel (46:28):
And everyone, you know, my husband always says, find people who are smarter than you and lean on them for their expertise and don’t be afraid to do so. I think a lot of us, you know, business owners and entrepreneurs try and do it all, and it really does lead to the sense of complete overwhelm. And for so many people I’ve met, um, who started their own business, that leads you to sometimes not wanting to do, to complete the business, like wanting to actually quit altogether because you’re just trying to do too much. So I think definitely trying to find a brilliant team that can, put everything into the place in a professional way.
Darren Moffatt (47:05):
So thanks for listening to Episode 18 of nerds of business. If you’ve enjoyed it, please leave a review on Apple, Spotify, Google, or wherever you listen to your podcasts. It helps us climb up the ranks and become more visible to other peoplejust like you. Remember, we want to help as many entrepreneurs and businesses as we can.
Darren Moffatt (47:26):
If you’ve got a question, awesome feedback. We’d love. Hear from you. You can engage with us at webbuzz.com.au/nerds that’s webbuzz.com.au/nerds.
Darren Moffatt (47:38):
So feel free to reach out and say hello. I want to thank all our guests and the team at WebBuzz for helping me put the show together. We’ll be back in two weeks with our next episode, which is Business Models: Choosing the Right Pricing and Distribution for Your Product. Until then I’m your host, Darren Moffatt. And I look forward to nerding out with you next time. Bye for now.