Transcript:
Jared: 0:27
Hey guys, this is OPS UnFiltered. This is Zech. Zech is our guest today. He has deep background in operations for both massive companies like Smithfield Foods.
Jared: 0:42
Pattern, a massive local company. A lot of people have probably heard of Pattern in Utah. He was VP of operations at Pattern. That'll be an interesting story to go over everything you did there, everything you built over there, and then, most recently, Zech has his own brand called Glitter Faced. He's the co-founder, right, yep? Okay, so we're going to dive into that conversation. First, Zech, can you introduce yourself and give a background to some of the operators watching right now? What have you done in the past when it comes to e-commerce operations and warehouse operations?
Zech: 1:11
Yeah, great, well, glad to be here. Thanks for having me. You know, kind of fell into it. I went to school to be a farmer. That didn't pan out for me and so made a couple shifts. But I fell in love with e-commerce at a company called Fresh Directed, new York City. They're an online-only grocery store and I sat on the meat desk and when you think about trying to sell meat to someone like you're probably pretty picky about your bananas, how you're smarbling on your steak, and so food just always has had this appeal to me. So at Smithfield, that's what I was doing, was I kind of came in, found my own way. I was the first e-commerce employee at a $15 billion company. They didn't even have one. You were the first the first yeah, yeah.
Jared: 1:52
There were some people like it was their side gig but no one was actually established to it.
Zech: 1:54
What year was this? Again, 20. Yeah, right, that's the funny part, it was 2017, 2018. So, like, how was the recent, very recent? Yeah, and you know I was, but in that world Walmartcom, krogercom it's a different world. It wasn't Amazon. I ultimately ended up leaving because I fell in love with e-commerce. I was like I need to go deep into this and this isn't the type of company ready to innovate there. And food is just behind. Right, food is going to be the last frontier. You know, walmart's just starting to figure that out. I wanted to be in and I wanted to go deep, and so that's how I moved to Pattern right, that's how I kind of dug in there.
Jared: 2:27
Did you?
Zech: 2:27
know Dave. I interviewed with Dave, right, and that's kind of I met him when I came in, flew in, but no, I got introduced through an old coworker who knew someone.
Jared: 2:37
It's one of those old stories, right? Yeah, the way you get it, yeah.
Zech: 2:39
So anyway, I joined the team. I actually joined it as an associate brand manager. I was just trying to work my way in.
Jared: 2:48
For people who don't understand what is Pattern. What do they do now? How big are they now? And when you first came on? What were they? Who were they?
Zech: 2:56
So Pattern is an e-commerce accelerator and today they're oh my gosh I don't know the most recent numbers, I know the year I left they did a billion. They kind of posted that out in the world. I think they've grown significantly since then. I think they're still doing really, really well. When I joined, it was 220 million, and so I got to kind of watch it. Four or five X while I was there, which talk about just a privilege, right Like to see a company grow through that life cycle. It was intense. And so when I got there, I was you cycle, Um, it was intense, Uh, and so when I got there, I was, you know, kind of on the ground floor. I just was like I need to make my path here, I need to get in. I was 24, 20, just about to turn 25.
Jared: 3:30
And no, I didn't know you were that young.
Zech: 3:33
Yeah, in about five months I accidentally said yes to running all of the operations. Um, there's just some things that happened. It was just like right place, right time and I was like, okay, here we go, we're going to figure this out. I'm sure I definitely owe apologies to a few people out there that had to work for me.
Zech: 3:51
But anyway, so over the course of that time, yeah, we had a team of gosh, then like 300, a couple of warehouses. It grew, it grew, it grew. And then, you know, they smartly brought someone else in over me. That was like, hey, I've done this before, we should do this together.
Jared: 4:04
So Pattern was part of the. This is my understanding of Pattern. They were part of the accelerator versus aggregator wave, so similar to Thrasio or Unibrands. There's no monolith. It's like either you help a brand accelerate by taking on their Amazon operations or you buy them in aggregated one route. So the pattern was notoriously like a.
Zech: 4:27
They believed in acceleration totally yeah, and they, they did a lot of work to be intentional about that name, right, they actually helped define that category. Um, they worked with a couple of those um kind of uh, research survey firms and said, hey, how do we build a category here that doesn't exist yet and how do we define it? Because you know, they've been around for a while, right, I think they're coming up on 10 years, and so when they started that no one was really doing it. Most people were white labeling it, right, or trying to figure out how to do Amazon. They kind of fell into.
Zech: 4:58
You know, it was vitamin and supplements supplements to start, and they just found this niche where they're like hey, I can actually help these brands through compliance work. It's kind of where they started and in that space there's so much fraud from supplements, from knockoff sellers. But anyway, they just transformed into this company and I think what you said is really important, like aggregator versus accelerator, right, I think operations people will appreciate this. Accelerators are just like trying to, or, sorry, aggregators are just like like, hey, let's just put a bunch of companies together. It's a portfolio that wall street can now bet on and, as we've seen, that's failed miserably for quite a few large companies, right. I think there's some still figuring it out and I think there's some strategies people still need to tinker with. But accelerators are like no, we're going to operate like I've.
Jared: 5:38
I have an opinion on that, by the way, we'll we'll save that conversation for the, for the, the software.
Zech: 5:42
Okay.
Jared: 5:43
Or the end of the software, the end of the podcast yeah. Let's dive in a little bit to Pattern. Yeah, so you eventually worked your way to VP of Operations. Yeah, what are some things that you learned on how Pattern approached the acceleration of these brands or the operation of these?
Zech: 6:00
Yeah, I think they just took extreme ownership in a good way, right. Like the model is interesting where they purchased the inventory, so Pattern's not just pass-through. They're like we're going to buy the inventory. That means we're co-invested. If this doesn't sell, we're just as much out as you are, and so that's really interesting.
Jared: 6:16
And the brands, they make a margin. It's like a wholesaler.
Zech: 6:20
It's a wholesaler agreement.
Jared: 6:20
They buy it, the brand makes the margin and then pattern, it's up to them to make their money.
Zech: 6:24
They resell it, and that's where the tech comes in right and of course you can go watch videos of Dave, who's much more brilliant at explaining that stuff than I am. But yeah, so from an operations perspective, we were bringing inventory into a single warehouse of multiple types. I would say that's one of the biggest challenges I had to face during my time there was. We started with supplements who are super small, super efficient, super cost effective. Right, this is 60 bucks and I can you know I can make a good profit on it. Now I want to ship shoes, and I want to ship dog toys, and I want to ship cell phone accessories and and get into outdoor gear, and all of a sudden, your skew for you know um variables become massive, and so how do you build a singular warehouse, or or a singular process somewhat, to handle all of these different types of products? That was probably the biggest challenge, I would say, and probably something they're still working through because they continue to add more and more companies into their umbrella.
Jared: 7:14
So Zech is sitting there, 24 years old, vp of operations, maybe 25. Yeah, and, like you said, the beginning a lot easier to handle. You're running this warehouse, you're selling. I imagine what's happening is you're just receiving a lot of inventory, you're running your own reports and your own data. You're replenishing these Amazon stores, like the FBA. You're doing some FBM as well. When did it feel like things were breaking on the warehouse? When did it turn into like oh yeah, this is cool, we can just stay on top of it Pretty? Wouldn't it turn into like oh yeah, this is cool, we just stay on top of it. Pretty manual process. Who cares?
Zech: 7:48
When did it start catching on fire, covid? Yeah, yeah, that's when the world ended for us In a great way, in the best possible way. We just exploded. We were e-commerce. The whole industry took a massive balloon and at the same time I think the year before that or two years before that they had just started investing in this diversification, and so you had all these new types of products coming in at incredibly large quantities all of a sudden, overnight.
Jared: 8:11
Because existing brands big brands.
Zech: 8:13
Yes, big brands. And then you had Amazon who was trying to figure out how to navigate this. They didn't have warehouse space. They put in inventory limits. Literally we had a pile in the warehouse that was. We created the shipment, it's ready to go, but Amazon hasn't built the process for us to integrate with them yet to fix that shipment so we can send it, because it was over the inventory limit. Before we sent it there was like 150,000 units just sitting like in the side and we had to work through that. And it took some of that custom tech right, like changing the way the software and the WMS integrated with the Amazon in order to fix some of those problems.
Jared: 8:45
So what did you have to pivot on the custom tech side? First off, what were you doing at the beginning that was working? What, what tech were you doing? What was the process for, like, removal orders and or for transfers to Amazon? And then, what, what tech did you build as a result of the issues?
Zech: 8:59
you're running into. So my time at pattern was always homegrowngrown um. There was never a time in which the wms was purchased off the shelf. The first version of it, which they don't even use anymore, was called amazon. It was just like this interesting integration or interface that was both like the front end for brands, like as far as sales data, things like that, but also was the operating system, so fulfillment, um for fbm, or sending things to amazon. And then I think at that time, if I I remember correctly, we still interfaced with Amazoncom, right, like it was half there, half in the system, and so the orders would talk to each other on the backend, but you'd still have to initiate the order or send the order, kind of through the Amazon portal, and then it would just bring in some of the details you needed on the pack side into the Amazon world. And so we launched the new system, I believe in end of 2019, like right before COVID, if I remember correctly.
Zech: 9:50
Or maybe it was during the beginning of COVID in 2020. I'm a little blurry on that, but really we did that because we weren't just supplements, right?
Jared: 9:57
So did Pattern have in-house developers who you would interface with?
Zech: 10:01
Yeah, one of the co-founders is, you know, they're still a CTO and Dave is, you know, kind of a data guy and has been in tech his whole life, and so they are very um comfortable and accustomed to building their own tech interesting, yeah, so why I asked you this off camera?
Jared: 10:17
but, um, yeah, why, as somebody in the wms and space e-commerce back in space, yeah, when I hear that, I'm kind of like I'm super interested. Why did you build your own WMS? It's like it's such a massive lift, it's a massive lift. But I think Pattern has a compelling reason. Why, though?
Zech: 10:33
Yeah, well, yes, we had a couple of solutions we were solving for. One of the bigger ones is multiple accounts. We were probably shipping into about 10 to 15 different seller accounts.
Jared: 10:42
So that's, for example, that's the flow of. You have to create an inbound shipment to Amazon. Amazon forced you to break them down into a specific box and different units measure, and you were doing that for like hundreds of accounts or maybe dozens of accounts.
Zech: 10:55
Yeah, yeah, I mean you know hundreds of brands or dozens of brands and then probably like 10 seller accounts. As I evolved my time there, amazon started to open up kind of pathways for Pattern to have multiple selling accounts that Pattern owned and so, anyway, it always just became a competitive edge to have our own WMS. Because of that nuance and also, I would say you know, amazon was just constantly changing, if anyone's been in ops with Amazon over the last couple of years. We have inventory limits. We have none. We have inventory limits, we have none.
Zech: 11:29
They just have gone through a bit of a whiplash, like the rest of the supply chain industry, and so you know having the ability to adapt to those changes quickly rather than waiting on a massive because at the at the point we're making this decision right, you normally would go with like a manhattan, like that's the size you're at. That's the size of warehouse, the volume we're putting through, the amount of money. Like you would go with a massive solution, but how fast is like a manhattan oh, my goodness going to actually adapt to an amazon years.
Jared: 11:47
Yeah, and we needed it in like two days. We had to have in two days, otherwise we're out of stock and then all of a sudden, the you know, the whole thing goes south really interesting, and did you guys ever have that oh shit moment in tech where it's like, okay, maybe is, this is a little bit bigger than we were thinking?
Zech: 12:02
Oh yeah, I mean, at least I did, everybody does that in tech they're like, oh yeah. It's easy. How hard can this be? It's not that bad.
Jared: 12:11
It's like you just have some bins and we just do inbound ship as Amazon. But then it's like, oh crap, so we have this, and we have this and this. Oh and okay. Unit of measure whole world right there.
Zech: 12:21
Yes, I know, yeah, it just is never ending. Yeah, there's definitely times right like it gets hard and you're trying to solve, you know, hard problems like what's the idea of a palette, how do I build that in the system so that we can then start tracking it right, like all the storage bins and containers, and we had some amazing people who who worked on all that. But yeah, not, I don't believe anyone in, you know, to just add-ons that anyone inside of the tech team that was kind of charged with that had ever built a wms. So there wasn't also any of this like historical knowledge, and I don't know if that's true today. Right, I've been gone for a while now, but but there was a lot of we're just going to build this from the ground up right and so, um, very smart people who figured a lot out.
Jared: 13:02
But, yeah, it was definitely challenging that's something that our CTO is very good at, which is we look into everybody who has ever built WMS.
Zech: 13:13
We try to get accounts.
Jared: 13:14
We poke around. His thought process is like nowadays almost everybody has solved this back-end problem in some way Right. And you can learn so much from how dynamics 365 did it, how netsuite did it, how oracle like all these companies it's like you can learn so much and then put on.
Zech: 13:33
You know okay we're on tweaks, or yeah?
Jared: 13:35
yeah, that's. That's really interesting. It's also cool. I find it's very admirable that pattern sticks to their guns on building their own tech no matter how difficult yeah, um, how did you guys handle replenishment for so many different brands? So? In other words like this is running low or like you know sales have spiked. We need to send x amount of units to this. How? How did the software automate that? Or was it mainly through google sheets excel?
Zech: 13:59
excel was our friend and we were perfect. No, I'm just kidding. Um, yeah, no, it was challenging. We had a team inventory managers and their job. We did normally a weekly cadence. Obviously, with Amazon, especially with the limits, like you had to just stay very nimble. And so we had inventory flowing weekly on the order purchase order unless the brand was too small and we had to kind of go to a different cadence. Go to a different cadence. But yeah, we, you know, as I was there we were building the first interfaces to move it into the system so that we could use more data science and more of an intelligence forecasting model.
Zech: 14:33
But the hard thing too is the forecasting model. There are so many inputs in e-commerce that you have to get from so many different places. For example, how do I know? We had a brand who would randomly go on Good Morning America and they wouldn't tell us, and so, as you can imagine, we would sell out and they'd be like, why did you sell out? And I'd be like, well, we sold, I don't know 15 X in three days time and I don't have anything left, right.
Zech: 14:59
And so you have to get all these inputs from humans, but also from data, and try and find the patterns of hey, I've run this type of a promo in the past, what will it do this time? What should I forecast for that lift, especially around holiday periods? Right, is this product going to perform? Similarly? And also, we had a lot of brands that are in and outs right. Think about apparel or shoes. Right, like this SKU is new this year, how do I tie that to last year's similar version to try and build a forecasting curve? So there was still just a lot of human interaction, because you had so many variables and they were working on it. Right, they were slowly starting to capture and bring it in and bring it in over time with consistent effort. That was going to work.
Zech: 15:40
I just wasn't there long enough to see it, but but, yeah, had an army of thinkers who used Excel to get us by.
Jared: 15:48
That's amazing. Another testimony of how good Excel can be for brands. It's amazing. Walk me through stress. You're a 25-year-old kid now responsible for hundreds of millions of dollars of revenue. Yeah, what was that stress like? Do you have any experiences of brand owners breathing down your neck or questioning whether you're right for the job?
Zech: 16:17
Yeah, I mean I questioned myself if I was right for the job. Right, there's a lot of imposter syndrome, I would say, especially at the beginning. You know, I think the story that best encompasses this would be you know, about September, august or September of 2020. So we get into this crazy year. You've got a lot of inventory flowing. Systems are changing.
Zech: 16:37
One of the metrics we'd gotten wrong I had gotten wrong in our reporting was Amazon had this like FBA transfer right, fba inbound available and then FBA reserved and a part of that reserved. Anyway, there was a portion of it I can't remember what it's called now that was basically lost or they didn't know where it was, but they still kind of had a tally on it. We had that included in our algorithm, meaning we thought that was real inventory, that was purchasable or sellable, and so our in-stock rate was like 99%. We're looking amazing, we're crushing it.
Zech: 17:13
And I remember, clear as day, I was at a baseball game with a friend and I got a phone call from Dave and he's like I think something's wrong. I was like what are you talking about? He goes I can't. I can't figure it out, but like, our in-stock rate looks good, but we, our sales are just declining. What's going on? And you know we start pulling things back and it's like, oh, the wrong number, we've over inflated our supply chain. I spent the next three months living basically every other week or every week at the warehouse we flew. It was an amazing story, like we flew the entire company out for two weeks to help because we had to dig out of what what could have been a massive mess. We really, we really caught it, I would say, in time and it was painful but but it wasn't like too far into the holiday season where we were gone.
Jared: 17:54
Does that make sense? Is it because you know you're just trying to stop any of these asins from going out of stock?
Zech: 18:01
oh yeah because that's massive in amazon and we had, like I remember, like daily report hey, go find these asins and these pallets on the receiving dock.
Zech: 18:09
This was literally doomsday for pattern it was literally it could have been doomsday and it was amazing. The rally, right, it was an incredible rally, like if you were there, you know what it was and it was just a great time. But the stress, like going back to your question, yeah, like I think I'm fired, of course, right, like this is my fault. I let the ball drop. And you know, dave is gracious enough to know that we all make mistakes and his joke was had we made this mistake five years ago, it wouldn't have been a big deal. It just happened to fall on your plate this year, so he was so gracious in that and I appreciate that experience.
Jared: 18:44
Do you remember any chats with Dave like specific ones after you figured that out, anything that sticks out to you?
Zech: 18:51
Yeah, I mean there were a lot of words said like in frustration, not you know, um, and it's all good. Like it turned out to be an amazing learning experience, especially for me, but also for us and how we think about inventory, how important it is. I would say from there, you know, we really started to invest and double down on like hey, we need to really get and level up this inventory side of our business right. Like the company was really focused on compliance, advertising, like all the sexy things that everyone kind of says, and I think that that was really a pivotal moment, at least for me and I think for a lot of the company of hey.
Zech: 19:27
we need to start really looking at and investing in what our operations looks like and of course we were building WMS, like we had some things going, don't get me wrong, but it was more of a hey, none of us exist if we're not in stock. Yes, we can build the prettiest advertising algorithm, we can do all these amazing things, but none of it matters if we don't have a unit to sell.
Jared: 19:47
It's a great advertisement for Luminous there you go. Honestly, literally what you're saying is a long-winded explanation of what our pitch is.
Zech: 19:58
Yeah.
Jared: 20:00
It's stay in stock of your top sellers.
Zech: 20:03
That's it.
Jared: 20:05
I mean that's why inventory matters. That's really interesting. Now, quick question, or pivoting just a little bit you are a founder of your own brand yeah, glitter faced yeah um. What are you bringing your experience and knowledge? What, what specific learnings are you bringing into this brand? How are you now operating it differently than you would have you know seven years ago?
Zech: 20:28
yeah, had I never like done this before. Yeah, yeah, I would just say it. For me, one of the biggest ones when we sat down to plan out what will this look like I was cash flow. I think a lot of people forget inventory costs money and it takes a long time to get it. And when you're brand new, you get zero payment terms, you get zero discounts. You are at the end of the totem pole, right? And so how do we prioritize? Making sure that we have the supply chain cash funded well enough to not run out of stock, right? That's like my biggest thing in my brain. So that's one.
Zech: 21:01
Two would then be how do I build a process that's seamless and easy enough to where I know I'm not going to get into this crazy world of oh, it's super hard to fulfill this product. I can't do X, y and Z, or I'm restricted in these areas. How do I keep myself in a category in in Amazon that I know we can keep more control over and not be beholden to the beast? Um, specifically like I don't want to do hazmat, or you know right now, actually, what we're struggling with. We have a, we have a final test. We think we solved it. Uh, you know, we're like brand new. We started in November, right, so we're at the very beginning stages here, um, and it's super fun and it's constant problem solving.
Zech: 21:35
But, um, our product has a heat issue and, as you may know, amazon has this limit where you have to be able to withstand 155 degrees in the summer, right, and so we believe we have the solution, where we're confident in it, but it's been like I don't know eight weeks of just constant. What did we do? We never wanted to go into the category that had a heat issue. We knew how hard that was going to be. Why did we end up here? Um, and so, yeah, those were the things I think I thought about most, uh, in defining, kind of what we wanted to do. Also, skew count. I'm also a big fan of like you don't need a lot of skews, you just need the right ones how many, how many skews do you have?
Zech: 22:12
five nice five and we'll in and out. Right, we'll get rid of some. This doesn't work, we'll get a new one. Will we end at five? No, we'll probably be closer to like 20, I would guess, just because we're a color variant product so we're gonna have a little bit more.
Zech: 22:23
But yeah, I I worked with brands that would do, you know, 100 million in revenue and have 1,200 SKUs. And then I worked with a brand that did $80 million in revenue and had 200 SKUs and I was like I would take $80 million every day of the week, every day of the week.
Jared: 22:36
I've experienced that as well. When I first went into Qualtree that was about a $15 million a year brand. We had 3,000 plus SKUs. 3,000? Yeah. And every single one of those SKUs was passed through a custom manufacturing process. We saw direct consumer custom gifts.
Zech: 23:00
So like laser, die separation engraving diamond tip. So it wasn't really. It was like 3,000 times infinite.
Jared: 23:06
Oh yeah, yeah, it was infinite 3,000 like stocked items, but then you know hundreds of thousands of design skews and variants, so um something I immediately did was just like okay what is I actually selling, and really it was. I would say there was probably like 20 products right made up like 80 of our business. Yeah, it's like cut, cut cut the best went the best Went from like 3,000 down to like 1,000 SKUs.
Zech: 23:33
Yeah.
Jared: 23:34
I'm also a big believer in that.
Zech: 23:36
Yeah, when I worked at Smithfield, we had 30,000 SKUs that I had to try to upload and I was like this is a nightmare, it is, it was a nightmare.
Jared: 23:43
Yeah, unless you're like this platform business or this, like multi-channel titan, and you have to have it's a priority to have product offering, otherwise people won't take you seriously. Like dude, do like two skews, three totally and literally the least amount you can well, don't be afraid to kill them.
Zech: 24:01
I think that's the hardest thing that I found with brands, right, like we. You know I talk about it with some brands and if they would be willing to listen, I'd be like, look like, 90 of your revenue is coming from right here. 80, 20 rules, always safe, but you know it could vary, and yet we're operating all of these skews that, from a warehousing perspective, is super expensive. I have to bring it in. I have to pack a unit of one. I could co-pack that with something else, but like I had to touch that thing by the time I got done, we were making money. We were losing money on every single unit we sold in this subset.
Zech: 24:29
Right, if you just did the math and. But brands, just, and I get it. There's a give and take. Oh there, we think that this could have potential. We just haven't gotten it right yet. I get that, I do. But you also have to be honest with yourself, right? I always used to say, like you should just set a threshold on amazon or whatever your retail channel is, or whatever is ops. If you don't sell as at least this many a week, a month, give yourself whatever within this amount of time.
Jared: 24:54
It's not worth it, it's just not going to work for you. I love it, it's over and you just need to admit that to yourself and move on with like mr wonderful says, take it behind the barn and shoot it.
Zech: 25:01
Yeah like don't get so caught up in your emotions. Let the data do the decision, because you will never be able to convince enough people to buy it. Clearly, yeah.
Jared: 25:11
Yeah, I think there's, within your experience of working with brand owners and marketer for a bunch of different brands, there's a broader commentary or dialogue that goes on at smaller brands with the warehouse manager or ops manager and the marketer. Yeah, you know, the warehouse manager, ops manager and the marketer yeah, what, uh? What would? What do you wish? What are some lessons that you've learned and what advice could you give to some of the marketers at at the brand and the communication, the dialogue between marketing and ops?
Zech: 25:44
yeah, well, there was a subscription box. You might know of that we we tried to handle and you know, the brand marketing team was like oh, it would be so great if we could. You know, we have this custom box and then we put down a sheet of tissue paper and then I want a bunch of crinkle paper and I want all these products stacked this way and I want you to fold it nicely and put like a bow on it. And I was like, okay, listen, would you?
Jared: 26:09
like to make money.
Zech: 26:13
And I get it. I was like, okay, listen, would you like to make money? Is the? And? And I get it. I actually have a marketing degree right. I love the concept of building a beautifully designed, easy to use, sophisticated product to a consumer. That's fun, right. At the same time, it has to be practical. It has to be practical, otherwise you'll never actually realize scale right, because someone's going to kill the project at some point. Ops may not kill it, right. I mean, we say a lot, but the CFO will at some point when the costs come to the end. And so when you know, thinking through marketing, it's like how can we achieve?
Jared: 26:41
Labor has 10x'd in the last two months. What happened?
Zech: 26:46
I don't know, but anyway, it's just like how do we kind of meet the middle of building a beautiful product but also making sure it's super practical and that's hard right, like I just think that that's something we need to focus on more. Packaging is actually a big passion of mine. It's kind of nerdy, mostly, because we are still stuck in a retail packaging world where everything is produced for a shelf and that's not where we're headed. Everything is produced for a shelf and that's not where we're headed. And at some point I hope brands are able to kind of wake up and realize that they're going to have to diversify their packaging lines. And I know that adds variation and I'm like the person that loves to kill variation, right. But it's too expensive to ship a product that's this big in like a display thing, that's this big Like it doesn't make sense anymore. And I get like, yes, the shelf, I want consumers to see it, but frankly it's too expensive.
Jared: 27:36
Yeah, it just is. That's a good point. What about marketing events? Kind of back to that. Good Morning America story yeah. What do you wish? How do you wish marketers? How do you wish marketers from other teams would communicate their marketing events?
Zech: 27:51
With data. That's the problem, and I know it's hard, but most times you're like, okay, great, how many are you going to sell? I don't know, or a lot, I'm going to sell a. It's going to be the most amazing deal you've ever seen, and I recognize it's hard. Right, there are a lot of hard things, but we have to make an attempt and we have to strike a balance of making sure that we can have appropriate amounts of inventory and not just over bloating the supply chain, and then at least, at the very least, have a plan right, like, hey, we're going to go 5x your supply chain for you. We believe in it, we're going to back you. The marketing team, we love this.
Zech: 28:37
If it doesn't work, what next? Just have a plan. Maybe it's a secondary promo, Maybe it's some other thing, but just have a plan. Because, yeah, I mean we'd look at the inventory balance sheet, like once a week in a massive meeting, and it'd be like, oh, this brand is, you know, $350,000 overstocked. What happened, Zech? And it's like, well, we decided to run this promo.
Zech: 28:53
It didn't work. And now we're sitting on inventory for the next 20, 25 weeks that we didn't need. And so it's just about. The back end of everyone likes to kind of scurry when the event is over and the ops people are kind of stuck with answering for why we're sitting on something. And I'm not trying to fault anyone who looks at it and is like, oh, it's all ops fault. People were smart enough, but we still had to burden it right. We still had to pay for the storage costs. Our P&L would still have to burden the mistakes and you don't know their mistakes until you do them right but they would have to burden the mistakes. And then there was just no one there helping kind of solve the problem.
Jared: 29:29
Okay, well, on to a more nerdy conversation right now Aggregator versus accelerator. Okay, I try to have this conversation with some of like, with my co-founder and some people that I know and everybody's like. What is that? What's the difference? Yeah, so as somebody who knows the difference. Which model do you think is best, Especially now?
Zech: 29:47
Well.
Jared: 29:47
I think we kind of know now.
Zech: 29:57
I was now. Well, I think we kind of know now. I was like I think the proof is in the pudding. I'm also super biased. Yeah, I think the I have. I have a different opinion, but okay, yeah, I want to hear yours. I like it. Two things I would say one. You know, it all comes to operational execution and I think one of the things that the aggregators has probably gotten wrong is they were betting that they could bring the supply chains more together and get more efficiencies, and they couldn't.
Jared: 30:11
And domestic operations and domestic, which is so expensive.
Zech: 30:15
There's so many layers trying to quote-unquote, merge these companies together, and so I think there could be value in, hey, how do we build a stock? And we just honestly, we know they're going to operate independently. We can find some efficiencies in a few areas, but not overstating those. Maybe that could work right, maybe there's a model there that could flourish. And I think you know I got a buddy down the road at one and you know he said their success. Actually, the reason they've kind of made it through the aggregator curve is because they stayed really specific to verticals. So rather than going super wide and trying to get all the different types of products they can think of, Supplement brand and a clothing brand and this right like they said, hey, we're gonna stick with I don't know pet and baby and and two or three categories.
Zech: 30:58
We're gonna go super deep and that way we know when we go buy another pet category. We kind of know how it works, like we already are in the minutiae and we don't have to start from scratch again, and so I think that that could make sense. I think there's some success happening out there in a small ways. Nothing on the big kind of you know what the Thrasio get to billion dollar, billions of dollars, but I think the biggest issue there was that they just thought they could execute all these brands and bring them together and clearly they couldn't right, and I think they have a lot of work to do. Accelerators I think the reason why they have the leg up right now, I think they'll have Right. They are saying to you I know Amazon best.
Jared: 31:39
I don't. We sell your stuff really well on Amazon, that's it.
Zech: 31:42
Done. We ended the story. I didn't say to you I know how to operate your brand, I know how to operate your marketing team, I know how to expand your scores.
Jared: 31:50
I know how to choose a 3PO better. I know it's great tech. That's not my business.
Zech: 31:53
I can provide you some data. If you're interested about market trends, I can provide you some data. I know amazon, but at the end of the day I just crush amazon and that's why pattern has done so well. They knew when to stop and when to not over kind of extend themselves within the brand conversation.
Jared: 32:09
I think that's been really, really smart I I basically agree with everything you said. The only thing that I would say from a technology perspective with luminous is I think, in my opinion, the aggregators overestimated big time.
Jared: 32:24
Yeah, tech fulfillment and purchasing, like those, those three things it's just like, well you know, just like throw them all into one 3pl or like um, or just I will just throw them all, like let's just get one person to manage all the supplier relations, or like we'll just have Like they underestimated that you can't just aggregate operations, that simply.
Jared: 32:48
Technology is very difficult and from my perspective somebody who goes so deep into brand and operations and really streamlining them, it's like 10 brands, 10 different 3pls yeah, maybe three of them did in-house fulfillment yeah, all different pieces of tech. Maybe they maybe have one shared wms, but then the purchasing for this brand is on google sheets and then the supplier relationship was on this one, through this one, and for this company it was it was through a trading company. They didn't go factory directly. That is mind boggling and you have to have true experts and, in my opinion, you have to have a technology that is set up for that, like a technology that can integrate into every single wms, like a true strategy on like no, we can actually own the in-house fulfillment. Here's why. Like, we could aggregate everything into one warehouse. Here's why we can do that. I don't think that was because we actually talked to a couple aggregators and they came to us with their hair on fire.
Jared: 33:48
Like can Luminous solve this technology piece and it's like sure I mean we could. You're gonna have to pay for it and it was exactly. It was a little bit too late, but I could tell as I was talking to them it was like they drastically underestimated the tech piece in the 3PL, yeah, and also the purchasing and replenishment. I mean imagine the amount of distribution points that a purchaser has to replenish. So they're managing factory relationships for 10 different brands, for seven different 3pls. Oh, and, by the way, every single one of those brands they sell to fba, canada fba united states right, so it's mind-boggling like.
Zech: 34:25
And they could also have multiple manufacturers per brand right.
Jared: 34:28
Different manufacturers could do different products or product types nobody asked the question like do we have a piece of tech that can handle that? Yeah, it's kind of like oh, we'll figure it out on excel. Well, yeah, you can. You can do that if. If you have limited scope, kind of like an accelerator, you can do that on excel. But if you, if you're doing that across 10 different companies, no, and hundreds of thousands of skews like that yeah, it's.
Zech: 34:53
I mean, can you imagine how many skews thrasio got or has gotten to? I mean I don't even know, I don't even want to think about the numbers. Yeah, it would stress me out.
Jared: 35:02
Yeah, it's like thinking of, like eternity.
Zech: 35:04
I can't compute that Forever.
Jared: 35:06
Yeah, so I personally think, when a system like Luminous figures out a truly integrated backend platform, yeah. And you know AI is such a buzzword. But such a buzzword ai like actual auto replenishment and auto purchasing in some way, like in a compelling way, not just like yeah, we looked at your data and we drafted a transfer, like a bit more than that yeah but when, when a company like luminous or somebody else can figure out auto replenishment for a wide variety of use cases and can actually integrate into any WMS on the market, no problem.
Jared: 35:48
Yeah, that's when you could actually have a compelling use case to aggregate brands. Until then, like I, don't think so.
Zech: 35:55
I still think, yes, I still think it would just be such a challenge and you just, yeah, you just would have to have a willingness to really rip apart a few things and pull it back together.
Zech: 36:07
If you want to go down the model of hey, we're going to take six operations team and go down to one. I mean, can you imagine the amount of processes that exist within each segment that you would have to redefine, rip apart? I mean outside? You imagine the amount of processes that exist within each segment that you would have to redefine, rip apart? I mean outside of the technology layers there, yes, but then, like, just like the human capital training process, I agree with your friend how he was saying it.
Jared: 36:29
How do you do that in a compelling way? Well, you start with a vertical that's like predictable.
Zech: 36:34
The problems you run into are predictable. Yes, okay.
Jared: 36:36
We'll do these three companies first in this category. Okay, you run into, are predictable, yes, and you say, okay, we'll do these. These three companies first, yes, in this category. Okay, three more companies in that category, yeah, yeah, yeah, that makes sense. It is exciting, like you know. Maybe one day in five years, um, when luminous has gotten further along with ai, maybe maybe we take a uh, a crack at it there you go we start with like two brands or something there you go.
Zech: 36:56
Well, I think that the big thing about AI too, right, it's just, it is such a buzzword, but it's also, hey, how can AI I say it my current company that I do for my day job like, how can AI augment what you do? Like, maybe not fully replace, but there's a lot of stuff we do that we don't want to do, that is so meticulous that you could totally replace with AI. Yes, right, but I think a lot of times the buzz is like, oh, no human should ever touch any of this, and I'm like that's great, maybe we'll get there. But to start, you know, I just did a talk at work about, like, the future of freight and you know how it's moving digital.
Zech: 37:30
And I use Netflix as an example. Right, like Netflix today, if you just pulled up your screen, right, super cutting edge. Right, they're a production company. They're going to video games, which like throwback to Blockbuster when you could rent a video game, right, but they just have all these like very tech forward savvy company. It started as DVDs in the mail, like they just mailed you a DVD, that's all they did, like it wasn't that crazy tech solution. That's a really good Over 25 years. Yeah, like they stopped mailing you a DVD.
Jared: 37:58
It's like how do we prove this concept at its most basic form, totally?
Zech: 38:04
Yeah, and that's the. Everyone wants to skip that step. You know, everyone wants to be like, oh, we're going to go from zero to hero. I'm like I'm sorry.
Jared: 38:11
And money will solve all. This Money will solve all things. Fundraise $10 million.
Zech: 38:14
Raise $10 million, but it doesn't right. That doesn't actually get us all the way there, and so, anyway, yeah, I just always like to be super cautious. Ai is the future. It's not something we should just like laugh about and say, oh, it'll never happen, right? I think that's also a big error. But it is the future, with humans side by side, and does, at some point, it get so sophisticated that it could replace them. Maybe I'm not in that world, I'm not going to bet on that, I don't know, but at least for today, it's all about augmentation, from my perspective, amazing.
Jared: 38:43
Cool. Well, I think in closing, we're about out of time, but any one funny story in your ops career that sticks out to you, maybe where you were a little bit embarrassed, maybe a little bit with a little bit more levity than the doomsday story pattern.
Zech: 39:01
You don't want doomsday 2.0? Oh, that's so funny. I mean, you know a story that comes to mind. Frankly, I just think the situation is funny, right, like if you could just imagine for a second. You know, I get chosen as a random person sitting in Utah, right? So our warehouse actually was in Kentucky at 25. And the person who leads the warehouse, who actually is there day to day, was probably in his 50s, right? And so you've got this 25-year-old kid who will fly in and be like okay, here's the plan, here's what we're going to do. And it was wrong like 95% of the time, because I didn't know what I was doing. It was wrong like 95% of the time because I didn't know what I was doing. And, of course, like that's the only way to learn, right Is to just attempt and to fail and to start and go and go and go.
Zech: 39:45
But it's just, I just can't help but look back and, as I opened, like feel like I need to apologize to certain individuals, but also just laugh at the situation that I feel very privileged and honored to have been able to do that, um, but also it's just very comical that's true as a kid who just wanted to be a farmer, that's pretty awesome.
Jared: 40:07
Well, thanks for your time today, Zech thanks for having me. That was a fun episode yeah, yeah, hopefully you guys enjoy this one, see ya.
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