Ep. #1015 - Evaluating Your Supply Chain
In today’s episode of Startup Hustle, it’s time to dig in and start truly evaluating your supply chain. Andrew Morgans opens the podcast with Zack Leonard‘s insight. Our guest is the co-founder and chief product officer of Gembah. He talks about the qualities of good suppliers and how to establish a great relationship with them.
Covered In This Episode
We’re taking notes from e-commerce pros today! Let’s all learn from the wisdom of Andrew and Zach as they discuss the ins and outs of evaluating your supply chain.
Together with them, you will know where to begin your supply chain evaluation. And take advantage of their insights on choosing your suppliers wisely and managing your working relationships. Most importantly, learn how important it is to source second and third-tier options for your suppliers.
Are you ready to learn all these things and enjoy an awesome conversation? Listen to this Startup Hustle episode now!
- Zack Leonard talks about his journey (02:52)
- On working with big banks (03:48)
- How Instacart works and Zack’s role in building it (05:45)
- Creating a solution in your local community (09:42)
- Customer loyalty and delivery services (11:52)
- Zack’s experience in sales during his honeymoon (13:33)
- Where does your value proposition lie? (15:50)
- How can you evaluate where to get your supplies? (17:01)
- Top priority to succeed in e-commerce (19:49)
- About sourcing from different countries (24:30)
- Where to begin when evaluating your supply chain (25:57)
- Building a relationship with your factory or supplier (27:32)
- Partnering with people who want to grow and learn (32:13)
- Negotiating with your suppliers (34:33)
- Getting started on the evaluation process with Gembah (38:56)
- The best thing to do when you’re in production (45:15)
- How to get in touch with Gembah (48:30)
To enhance the brand, the next best relationship you need to understand is your factory relationship.– Zack Leonard
When you do business with someone, you are feeding their family. That’s almost how they think. It’s how we should all think.– Andrew Morgans
The one thing you can’t do [is that] you can’t run out of inventory. If your product is selling, always have a plan A and plan B for factories like it’s going to happen. Especially if your product [is] a hot one, you have to make sure you can fill the demand.– Zack Leonard
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Andrew Morgans 00:01
What’s up, Hustlers? Welcome back. This is Andrew Morgans, founder of Marknology, here as today’s host of Startup Hustle, covering all things e-commerce, startups, and Amazon. You name it. Today, we’re going to be talking about evaluating your supply chain. Something that’s super, super important. The pandemic just made it even that much more important as everything got harder. With longer lead times, it becomes important, then it’s even more important now. But before we jump into that, I want to give a shout-out to today’s sponsor. Today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult. Full Scale can help you build a software team quickly and affordably. And has the platform to help you manage that team. Visit FullScale.io to learn more. Today’s founder is based in Austin, and we’re going to be talking about the supply chain. Marknology is actually a partner with Gembah. You know, when it comes to sourcing supply chains, it is not an easy task. You know, people talk about getting on Alibaba and ordering your products. It doesn’t go like that. It’s not the real world. So we’re going to be getting into just kind of like, you know, maybe you have a supply chain already in place. Or maybe you’re thinking about getting one going. What are the things to really think about? Is your supply chain great? Should you be thinking about alternate options? You know, all of that stuff. So without further ado, Zack, welcome to the show.
Zack Leonard 01:22
Thanks for having me. Happy to be here.
Andrew Morgans 01:25
Yeah, super excited to have you. I think this is a very relevant topic. Not just to, you know, Amazon sellers, but to e-commerce and brands everywhere even. I own a real estate company, property management, and Airbnb. And so many of those projects, I’ve been affected by supply chain as well, you know. It’s affecting every industry at some level, you know. Talk to me, but before we jump in, I guess, just like our topic, and like, how do you evaluate a supply chain? I like to get to know the guests and really understand, like, you know, how you got to this point. And, you know, a little bit more about you. So tell me about things like, you know, college, early days. Like, did you know you were going to be an entrepreneur? Do you go to school for business? Like where do you really start?
Zack Leonard 02:13
Sure, yeah, I went to the University of Texas. So I’ve been in Austin for quite some time. A finance major should definitely not go down the route of knowing that I was gonna own my own business to start my own business when I got it. You know, I went consulting right out of school in Chicago for KPMG. So it was that one of the, you know, we’re firms that do credit risk consulting, and you know, I learned a lot there.
Andrew Morgans 02:43
A lot of learning, learn that you hated it.
Zack Leonard 02:45
I didn’t hate it. I think it was just it just wasn’t for me. But it was a good experience, learn how to organize chaos, I think like you’re kind of thrown into some situations where you know you’re talking with top-level execs, and I went to, you know, one of the largest mortgage originators and in the country and then worked at Amex you know, on gigs you know, those two places so awesome.
Andrew Morgans 03:08
What are Amex gigs? What does that mean?
Zack Leonard 03:11
Amex American Express, like I went on, I went to different stuff I called gigs like jobs whatever I was actually taught around the country to work for to work at Amex.
Andrew Morgans 03:23
I worked at MasterCard just so I worked in networking and security with my degree, so that was a cool thing on the finance side. But what does that mean? We dig into that a little bit. What would you do for a max?
Zack Leonard 03:37
Yeah, so maybe clients, well, we did well. They were the client we would actually meet with their entire credit risk operation and evaluate we evaluated their rewards program and try to make sure that everything was, you know, compliance and you know, followed all the regulations and rules that and assign value to the points you know, internally and how they would manage what they would have to hold in there you know, securities and stuff maintain that point system. So it was pretty cool. And then, after doing that, I got more into the startup world and worked for a company called Instacart. I was one of the first, I think 30 people there, you know, when I was there like they were just the light went there they were just finalizing their series B, so I was ordering series A, and you know, ran the Texas markets from you know, launch all the way to doing over a million dollars a week in gross merchandise value GMV or to partnering with whole foods and Costco and heb locally and set up you know, profitability models for them and helped you know, create some scale on the profitability side for different.
Andrew Morgans 04:47
Can I get nosy? Can I get nosy? I just like, you know, I want to understand this because this is really eye-opening to me, I think to our listeners too, like, so you’re in finance. You’re working on risk analysis, risk assessment, and evaluating programs. Like, okay, I want to get into the startup you’re working with, Instacart. I know of Instacart. I don’t know if everybody else does, but as a busy person, I like getting my groceries for sure. But, like, so you’re building out Texas, like, were you more in, like, a sales role? Or were you like, you know, helping the sales guys build pitch decks, or like, you know, in running that kind of stuff, like, what does that mean? Exactly?
Zack Leonard 05:19
No, I was like a city called a city or the general manager of a city. So basically, what it started out was like, you go into a city if you’re going to launch it, and you help basically go in like, it was kind of what they call like Ninja shopping, which is you would go into a store, this is like, when we first did, you would scan every single barcode that they had for like, the top 10,000 skews that they had at any store on my pricing. And then we hired people to do that. But, like, that’s how we create the catalog. And then you basically are in charge of making sure that you had, you know, your, your, your shoppers scheduled and ready to go based on supply and demand. So like your peak times usually are like the first three hours in the morning, and then the afternoons, and then as you get like later on, like Sundays, and Mondays and Tuesdays are generally your busiest days, because it’s like when everyone is refilling their groceries and refrigerators for that, and it’s the week goes on, it got like kind of slower and slower and slower than it picked back up like Saturday, then your peak was Sunday and Monday. So you’d have to onboard hundreds of shoppers every single week, and you had to create something that was more like creating the deck and doing all that kind of stuff. And then you’d have to train them, get them to use the app, onboard them into the system, get them into the stores, train them how to, you know, actually go and shop the store?
Andrew Morgans 06:42
Did that slow down? Just a second? Okay, so let’s just say so your background is like, you know, I’m trying to understand the background, how that jumps into a job like that because it sounds really intense. Like, the stores were already on board, let’s say so, grocery stores. Did you need the grocery stores to be on board, technically? So that’s the part that’s interesting.
Zack Leonard 07:01
Like when I started, no grocery store was like, on board, like they weren’t, they weren’t contractually on board, we were just kind of like Uber-style, just like go in there and make them on board. And then as it evolved, like, my role became like fostering the partnerships with the local stores and getting them to, you know, like being a business development team that was more headquarters that would like to sign the agreement. And then once the agreement was in place, the operations team would then go, like, make everything work. So they would get the catalogs sent to our catalog operations people every single day. And they would upload and re-update the catalog for, you know, the store every single day. And then they kind of centralized all the management of, like, you know, the logistics and everything in San Francisco, and I helped build a product that would understand how to forecast supply and demand across all the regions that they operated in and do the lesson because that’s like, it’s like the progression of how the product and other company evolved. So it became like a well-oiled product and machine. Yeah, engineering problem, as opposed to an ops problem. But when I started, it was made way more like, alright, like, we’re growing like, on the ground, yeah, we’re growing like crazy, your job is to make sure that you can facilitate as many orders as you possibly can, as we grow like this. So it was wild, absolutely wild. I think about Postmates.
Andrew Morgans 08:17
And, like, UberEATS, and, you know, they’re all rolling up together now. But I think about, like, you know, during the pandemic, there were so many restaurants, let’s say, that just had horrible websites, like, you know, horrible delivery takeout, they wouldn’t have existed, they didn’t have websites, you know, if it had taken them a couple of months to get a website that’s functioning as you know, it’s now online, now they have to be able to run Google ads or get themselves like ranked. So many more would have gone under, you know, but honestly, like, the post mates and UberEATS of the world, etc. Essentially took those into created small businesses and made them irrelevant to continue to, like, now you have a delivery service that you didn’t have. And, you know, now you see like some of at least where I’m at in the Kansas City of HyVee, and Price Chopper and they have like, you know, you can shop online and but they’re like smaller chains, so you can shop online or show up and they’ll put it in your cart. But I feel like the Instacart of the world leaders. You know that now some websites are starting to get their own website or to do it like that, but definitely pioneering it early. You guys were literally hiring 100 Plus, like, that was the demand, and the cities, like you know, that you were launching in were like your signups on the app.
Zack Leonard 09:33
Yep. And you know, I guess by the end of it, we were getting you to know like I said, a million bucks a week in value coming out of that out of the Texas markets. You know, you’re so you’re running San Antonio, Dallas, Austin, Houston all at the same time from one place, right. So it’s like, yeah, so you know, you have to hire people in those individual places, get them to help with the onboarding of the thing. Get those shoppers. And, again, you’re competing back then against, you know, Uber Postmates, where it’s like, how many Craigslist ads? Can you take it out at one time? And how can you position yourself to be more, you know, profitable for your bottom line to the average shopper or the average driver? Right?
Andrew Morgans 10:19
So like, it was a, it was just, it was a wild man, like, pick us over them, right?
Zack Leonard 10:23
Come work, you know, on Instacart gay economy because we’ll pay you, you know, X dollars. And then the next day you see Ubers? Like, yeah, we’ll pay you $1 More, and then we go back, and we’re gonna pay you one, you know, I mean, it’s just like a, it was a, it was a rat race to try and get as many people on as possible, because, you know, they, they would try and make money wherever they can. So they would, you know, turn on Uber and go, you know, drive for them. And then they turn on Instacart and go work for us. And it was, so you didn’t have people who were working. There are some people who would work with a, you know, consistent schedule, but then you had the people that would fill in the gaps on the schedule to make sure that you could facilitate the demand at any given time.
Andrew Morgans 11:00
Sounds like a nightmare. It was. It was fun.
Zack Leonard 11:03
Yeah, obviously if you do that for a long enough time, then you get a little burnt out. But yeah, from there after that, you know, I went to another same day delivery startup in Austin ran strategy. And it was really there, I think I kind of was just like, I you know, I just kind of jumped to do this on my own, do my own thing. And what I saw on the delivery space is that, you know, there wasn’t really a, it felt like there wasn’t like a lot of brand loyalty, right? Like, you’re going to try, you’re gonna try and get the cheapest amount. And I think that still rings true today. Like I don’t, if I’m trying to get like, if I sit on Uber or Lyft at the same time, like, whatever one’s gonna give me they’re the fastest for the cheapest, like, I’m gonna go with that.
Andrew Morgans 11:45
Like, there’s no loyalty that like, I just, I would there be loyalty, like, you know, like, it’s not like, I’m going into the grocery store. And like, they’re nice to me every time. And that’s why I’m going there. Because I’m just like, I like it is clean, and people are polite. They’re playing the music I want here and the vibe. No, you’re just like, on a screen.
Zack Leonard 12:00
Right? So you know, the same thing I think rings true in commercial livery, like people choose their UPS or FedEx, I think based on rates, right, or same day delivery, same, like same notion like they, they just want whatever I can get for the cheapest rate. And so for me, like the value of where I wanted to, you know, kind of look was higher up on the supply chain, which was more on the, you know, manufacturing side, the sourcing side, and I have two co founders, and you know, both of them are, you know, one of them came from he created his own pet products company. And the other one, you know, worked, or was the CEO of a promotional products company. So they had a lot more hands on, like supply chain, prod products, right. And I was kind of like the business ninja guy. And so we kind of started meeting like, once every four weeks, or once a month, and it’s only once every two weeks. And it was like once a week, and just like alright, like, we gotta go for this. And, you know, it’s funny, like, I remember I jumped ship like, right before I got married. And we got our first big order on my honeymoon in Bali. And I was up at one at 1am. And I was like, I really shouldn’t be doing this because of my honeymoon but like, I really should be doing this because you know, why not get that first order. And I was like, That was back when I was like, how do we even work QuickBooks like, I don’t know what the hell I’m doing. So I don’t even know how to facilitate the order, but I’m gonna take it in and we’ll figure it out. But like, you have those kinds of moments, you’re like, yeah, like, I’m onto something like you’re, you’re getting orders getting customers, like, gets exciting, and you know, super exciting. I’m like, do I care about QuickBooks? Like, go hire someone for that? Like, you know, it gets to like those moments of like, okay, like, this is this is fun, this is cool. And then, yeah, from there, you know, we started raising money from investors. And, you know, now here in here today, we have, you know, eight different regions that we operate out of from a manufacturing standpoint, we’ve scaled the company beyond just manufacturing, we do product development and product research and all that good stuff and facilitate it all through a platform and through a network of people. So you know, we go through the development cycle with us, like we match whatever experts and expertise we can from a design and engineering perspective to your product. So if you’re creating shoes, for example, we have Under Armour designers who are done Under Armour shoes that we can match you up with to help you get through the process of creating, you know, your CAD files, your tech packs, all the things you need to go talk to the factory. And then once that’s done, we put that in front of our teams overseas and get competitive bids from eight different regions where it’s applicable from all the factories within our network, which now spans over 2000 factories that we’ve personally vetted to get on our platform we’re going for quality over quantity like we’re the we’re kind of like the anti Alibaba we’re not looking for we’re not looking for a bunch of like, you know, people who pretend to be factories or fly by night Right? Right. sourcing agents or any that stuff like we’re looking for like to get you as close to the factory as you possibly can. So we’re getting you in touch with their factory managers. People are actually doing the production, sending people to the accuracy to make sure that production is going well. And then, you know, working with the customers to try and, you know, get the production schedules good and into the warehouse as fast as possible at the highest quality possible.
Andrew Morgans 15:10
I think it’s, you know, it’s a testament. And there’s a lot of how I built my company was like, what I didn’t want to be because of other things I had done. And it was like, I wanted to set something different. And I think, you know, when your only value add is that you’re the cheapest is sucks. Yeah, if that’s the only thing you’re going for, it’s just like, you know, because your everything is like scarcity, shrinking margins are shrinking, everything’s shrinking. It’s just like scarcity, scarcity, scarcity, versus when you build brand, when you build, like when you go up market, and you’re trying to just like focus on quality, it can be harder, you have to be good at all the other things, right. But it’s more, it’s a completely different mindset, I guess, around the growth of it, and what you’re trying to do and how you feel about it, it’s like, well, we can’t compete there, because we can’t be at this price, or we can’t be at this price, you know. And I think that, you know, that’s why that’s why I’ve partnered with you. And sought you guys out was because you know, I’m at that space, 11 years into what we do, I think my technology turned nine this year, where we’re working with those types of clients, those types of brands that like, aren’t just looking for the cheapest, they want quality, and they want to know that they’re working with good partners. And it’s, you know, you pick the problems that you want, so to speak, I heard that said, it’s like you get to pick the problems you want. And supply chain is like I’m someone that never wanted to go to China source product. Personally, I just like, nothing against it. I just didn’t, I just don’t want to be in China, we’re running through markets picking product, and then like, you know, going into the factories, it’s not something that ever excited me. But yet I build brands with everyone that does that, you know, so I definitely experienced that. Talk to me, just like and then I want to get into kind of like really our topic, which is like, how do you evaluate what you do have? And I know there’s a bunch of different models out there. But you talked about 2000. You know, in E-commerce in the Amazon space, Latin America is a big topic, everyone’s talking about it, you know, for sourcing products or being a pivot away from China as everything gets harder. And the shipping containers get more costly and those kinds of things. Is that something that you guys are paying attention to? Is that something you guys have focused on for a while, like, you know, what, where’s Latin America fit in your, in your plans?
Zack Leonard 17:16
Yeah, we opened up Latin America a couple of years ago, once the pandemic kitten wanted to, you know, supply chain issues started with all the bottlenecks, and all the, you know, cost increased or containers. So we have, you know, personnel in Mexico, Colombia, in Brazil, and we’re looking into other places like Puerto Rico and Panama and places like that as well. Cool, where, you know, there’s potential for specific products. But yeah, I mean, I mean, this is what we do every day, you know, right now, for example, like, container prices are at like two year lows, right? So if your cost of goods sold for you is probably there and the dollar is the strongest it has been in a long time, the cost of goods sold is probably top of mind for a lot of people. Like the things that people should be thinking about is like, how do you take advantage of that right now? Like, are you talking to your factory and renegotiating rates? Because the dollar is stronger? Probably than you originally negotiated? A year ago? Or two years ago? Or five years ago? Whatever it is, right? Do you have enough supplies for last year’s Chinese New Year? Well, order now because your factory is gonna get bombarded with orders coming up to you know, Christmas and, and, and Thanksgiving, but you know, take advantage of those those low costs, like even if you don’t, even if you have maybe inventory for 90 days, like, what if prices spike again, for containers, and they double again, overnight, like you don’t know what’s gonna happen. So I always say be opportunistic, and try to mitigate as much risk as you can. And right now, the supply chain costs are the least they’ve been in a long time. So take advantage of that.
Andrew Morgans 18:52
Totally, totally. I know for a fact like my, you know, my friends are trying to curate kind of like those manufacturing conferences and things like that in Mexico City, where they’re bringing all the manufacturers together, I think even sponsored some by Alibaba in regards to like sponsoring the events, because they’re trying to just curate, you know, they’re a little bit behind in regards to infrastructure on how to like, at least connect on the Amazon side. That’s the perspective I’m always coming from, like, how these Amazon sellers of these brands interact with, you know, these manufacturers and communicate and everything goes smoothly. Obviously, different countries have their different challenges, even including some of the tax incentives for working in, you know, for sourcing different countries or the tax tariffs and things like that can make a huge difference in the bottom line. And you know, whenever we get hired, some people don’t think about this. They’re just like, Okay, I’m hiring them to be marketers and create content on my listings on Amazon or whatever the case might be, but know at a high level. You know, depending on the arrangement we are thinking about how you’re kidding your products, your packaging, the size of your boxes is eco friendly. Where’s it coming from? All those come down, especially on a marketplace like Amazon, where they do take a large percentage for bringing you that customer cost of goods sold is everything. It’s absolutely everything. And we’ve had some products that have been doable for years, that when shipping containers went for x 5x, all of a sudden, we’re like, wow, these products can’t work for us, like at this rate, you know, you just can’t raise the price that much. It’s just literally at the very top of the priority list when it comes to, you know, being successful in E-commerce is that profitability. Shout out again, I got a couple of questions for you. But shout out again to our sponsor, FullScale.io. Finding expert software developers doesn’t have to be difficult, especially when you visit FullScale.io We can build a software team quickly and affordably. Use the Full Scale platform to find your technical needs. And then see what available developers, testers, and leaders are ready to join your team. Visit FullScale.io to learn more. So thankful for our partners that make this show possible, free and able to promote it and blast it out and give it as much value as we can. So thank you again. FullScale.io. Okay, let’s talk about evaluating a supply chain. Okay, so let’s say someone has been sourcing from a factory in China for two years, you know, this is their go to, you know, they’re comfortable there. But they’re like, Well, maybe prices do need to be negotiated. Maybe I can do better in Mexico than I can in China. Where do you begin? Where do you even begin? If you’re not someone starting from scratch, or something that already exists? What do you like, what should you think about? Where do you begin to evaluate your supply chain?
Zack Leonard 21:29
Yeah, it’s a great question. The way you know, we like to think of it is looking at the product first, like what type of product are you actually making, right, there’s gonna be certain limitations on the product that you have, where it can be sourced, where it can be manufactured, and where the lead times and price are gonna make sense. So for example, electronics, like really challenging to move those types of products out of China, they’re just the best edit in the world without question, they’re gonna have the cheapest, you know, bang for your buck there as far as quality with the price to make those goods. However, like when you get into more of like metals, and cotton, so type of product or furniture, you can start thinking about moving those products outside of China to places like India, Vietnam, and Mexico, right. The other part to think of is like where, where are the natural resources or raw materials coming from as well. So China and India have the luxury that they have so much land and so many people that they have, you know, a lot of Mills, a lot of raw material factories that can get their access to their products, much faster than places like Mexico, Mexico, and Vietnam, for example, like, they import still a ton of their products. So, like glass, like that’s getting imported from China, so you’ve a glass product, you’re still going to probably be sourcing it unless you do it in the United States. But like, unless you are, you can absorb those costs, like you’re probably still going to be sourcing it from, you know, India or China as a result of that. So the first thing you should really think about is, is my product actually, you know, where are the raw materials that we’re gonna get the access to raw materials from, and is my product manufacturable in a place outside of what you’re currently manufacturing?
Andrew Morgans 23:17
One thing I saw, like, I feel like it’s a trend, maybe the last five years or so was like, you know, sourced here assembled in the US or like, some marketing play, but also just like, Okay, we’re not gonna get it completely made there. Let’s get the raw materials from that country. And then like, you know, assembly here so that we can kind of control some of those design elements or certain ways of protecting your product, right. I personally grew up in Africa till I was 16. So I lived in Cameroon, Botswana, and then my teenage years in Congo, in Congo is like, you know, the country of Congo is half the United States. If you put it on a map and its size, it’s absolutely massive. And it’s, you know, China’s there in a big, big way. Because it has all of the parts you need for cell phones and electronics and diamonds and everything else. But it made a ton of sense. I actually had this idea that I had to nix because I was looking, you know, is one of those cultural appropriation things if I did it wrong, and I was you know, growing up in Africa, I wanted to create this like a new line of men’s clothing. That was more Western fit, but with like African fabric and then using this, like, this refugee startup in Tampa that like my sister had helped curate, which was seamstresses, okay. So it was like when I was going to source this fabric from Africa, I was gonna have it assembled here with a little bit of a Western flair, our story would tie in because we came from Africa. And so you know, it’s a hybrid idea. In my mind, it made sense. And I actually went down to liking sourcing the raw goods and I learned that almost all of the fabric in Africa comes from sweet eats in some country in Europe, like the fabric, you know, didn’t even exist in Africa. And it just killed my story, you know, behind the product. And I’m just like, This doesn’t even go. But that was kind of like a funny tale of the same thing of knowing where you’re where the product and the raw materials come from. Right? Okay, so step one, Tip one, where’s this? Where’s it coming from? You know, what’s another thing that they can kind of focus on when it comes to evaluating the supply chain they already have?
Zack Leonard 25:26
Yeah, I think the next becomes like, you know, actually doing the diligence on the factory partner. So you’ve identified like, yes, my region can, you know, absorb the product, or the region I want to go to you can absorb the product. And next thing is actually verified, validating the factory is who they say they are. I mean, I’m sure you’ve heard horror stories. I’ve experienced it myself, where, you know, you go over to China, or somewhere, and you go into the factory, and they’re like, they say, they’re all these things. You know, I’ve been in a couple of factories that are like, you know, world renowned in Vietnam. And I’ve been to some factories in Vietnam that like nowhere near what they say they are on paper. Same thing with China. And like, an example I have is, you know, we went to a factory in China, where they, you know, they said, they were Disney certified, they said, they’re Walmart certified, they sent us all the samples. We go there, and there’s nobody in the factory. The machines are, you know, dusty, and full of spider webs and stuff, and they look like they’re from the 1980s. And it’s like, Okay, so where do you guys actually produce the goods, they’re like, Well, this is our office, like, I don’t know, seems a little off. So like, validating that the actual factory is, you know, has the machines that you need to manufacture the product, that they have people working at the product. So going in validating that there’s things that we do, like looking at, you know, legal records to make sure that the factories aren’t doing anything behind, you know, that’s illegal, like stealing money, foster child labor, whatever stuff, you got to make sure that you know that. I mean, the way I, the way I see your relationship with your factory is, it’s like, outside of the outside of the like, as a product company outside of the relationship you have with your customers, because they’re the ones who absorb your product, use your product, give you feedback on your product, help you develop the next iteration of your product, or add new products or catalogs or excuse to enhance the brand. The next best relationship you really need to understand is your factory relationship. They’re the ones who are kind of like your architect, and you’re in your, in your builder of your product, right? Like, I’m not building it as a product owner, my factory is building it. So if you keep that relationship really tight, and treat them with respect and treat them as humans, it will go a long way. And I think a lot of the culture that I’ve seen, have, like this Alibaba world is that like, it’s all about bottom line, it’s all about like, return. And I think as you start to evaluate going outside of China, where that infrastructure doesn’t exist, like there isn’t really ultra differences to it’s different. I mean, you can’t Bulldog your way, like you can on Alibaba. And there’s like another factory that’s ready to go lining up chomping at the bit for your business, like everyone’s trying to get out of China right now. So you can’t just pull a dog your way into it. Like, you actually need to develop the relationships. So when you’re doing that vetting process, it’s not just the factories filling you out to like, it’s not a one way street, like, they want to make sure that you’re a legit business, you’re gonna treat them well, that you’re gonna pay on time. And that you’re gonna promote their factory to like, it’s, it’s a relationship at the end of the day. So when you’re doing the vetting, it’s both ways. And then also, like, just know what you’re going up against. The response time is nowhere near what it is in China, the infrastructure is nowhere near what is in China pretty much anywhere outside of China, you’re going to places like Mexico, like a lot of it’s still contract manufacturing, like they have a lot of goods that they’ve already created before and their appetite to create a brand new product is gonna be a lot lower, if you’re just starting out, if you have a big brand, and you have millions of dollars that you can spend on yells, like they’re much more willing to talk to you. And I mean, this is a great example, one of my one of my design managers went down to Mexico a couple of weeks ago, and she’s walking in the door with Under Armour, Nike in the same factory, it’s like, unless you’re gonna have those types of Pio sizes, like good luck, right? So I think it really, really comes down to like, when I say, the vetting process, it’s the whole idea of like, finding out where your factory is gonna be made, then be being realistic about the expectations of communication, being realistic about the expectations of if their factory is going to be willing to work with you based on the size of what you’re doing. Because most of these places are getting hit up by big brands. The competitive nature has gotten huge and also, you know, people who, who try and Bulldog their way or try to, you know, say like, the best or, you know, have the ego and all that stuff. Like they don’t want to work with you. They want to work with you or, you know, reasonable sound business people who are going to bring a bunch of business to them. And it’s not just about the bottom, it’s not just about the bottom line. I’m for them, because I think everyone’s knocking at their door right now. So, you know, I think all those things that I’m talking about in the vetting process are really the next step, after you’ve identified what regions can actually make your product.
Andrew Morgans 30:11
No, no, super good, I am very helpful. And I just really agree, as someone who grew up abroad, the African culture specifically is like, just all about respect, and, and tribe and family. And like those, those values matter. It’s not just the bottom line, you know, like, when you do business with someone, you are feeding their family, that’s almost how they think it’s how we should all think, really. But like, you know, that’s, that’s top of mind. And I would say, like, I think this is the same in Latin America, like I have toured some factories in Costa Rica, that were just world class, like, beautiful factories, and, you know, they just treat us like kings, like, when we were there visiting, from the tour to the hospitality to like, you know, they care about relationship. And a lot of these cultures are just a lot different than the West in regards to how much they value family and relationships. And while it might be a little bit harder to get in, what I can say is that once you’re in your family, like, you know, as long as you honor that, and so that’s just something that you have to have, like, you know, going and being in person, and, you know, they love to host they love to, like, you know, take care of people. So if you are open to that relationship, you’re gonna do so much better than if you’re just firing off feisty emails, trying to negotiate price or something like that, you know, right. So very great advice. And I think, depending on what country you’re going to, and, you know, all those things, like, I’m sure it’s different in Vietnam than it is in Mexico City than it is in Costa Rica than it is, you know, anywhere else. And I think that’s one of the things that excites me about Latin America is that a lot of them are very hungry to grow. You know, and so, because of that, for e commerce, where a lot of us are smaller, let’s say, than a Nike or an Adidas, you know, coming in there, while you might have expectations of it being slower and having to grow with them and learn, you’re gonna get more willingness to work with you as a smaller brand, that might not be bringing, you know, 100,000 RPO. But for them, it’s exciting.
Zack Leonard 32:09
Right? Right, right.
Andrew Morgans 32:12
I 100% agree. Okay. I like it, you know, I’m still learning a lot of this because I didn’t actually start on the product side in regards to like, I built a brand. And then I just decided to do an agency, which is like, a lot of like, my competition kind of went that route, very successful Amazon sellers or brand builders, and they’re like, Okay, we’re gonna do this for other people. And my path has been on the services side, from the beginning, you know, took care of some personal challenges in my life and family life and things like that. And so it was pushing, instead of investing in product, investing in this in this business and in the team and things like that. And now I’m on the other side, where I’m building brands, and really learning how to source at a, at a higher level. It used to be like, Hey, here’s partner x, here’s partner actors, partner x. Now I’m, I’m actually doing this for my own brands, my own company. So just a different perspective on how Amazon sellers, like, you know, my perspective was sourcing. Let’s talk like, Okay, so you’ve evaluated your manufacturer, you’ve evaluated like, what country you’re getting it from, or maybe your options, like, what options are there out there for me, like in regards to raw materials, because what I know is like, even I talked about China and Africa, China, and Latin America and Mexico, you know, they’re sending a lot of their raw goods to Mexico. For fulfillment centers, they’re buying warehouses, they’re buying storage facilities, they’re buying them all up. You know, they’re taking products from China, getting it a lot closer to us here in the west. So as we pivot to Latin America, we’re actually still buying from China, you know, and they’re figuring that out as well to get a shipping container. So it’s moving, it’s moving fast, in my opinion, in the way that things are going. So someone’s evaluating, okay, so I’m sourcing from the right country. And mind you, in this example, like, they might already have a supplier, right? And they’re just saying, Where else can I go? Or where can I be better? How can I do that? And then they’re like, Okay, I want to visit the factory, because what people need to keep in mind is that, and I’m not saying this for everyone, but in some of these countries, like, they’re going to say yes to whatever you want, and they’re going to figure out how to get it to you whether they’re ready or not. They’re like some of them are hungry. Some of them are, you know, desperate for business and desperate for income, and you just don’t really know who you’re dealing with. I know if my family was hungry, I’d be like, Yeah, I can make these for you. And then I’ll just figure it out, you know, like, so in some of these cases you are, that’s why the factory is important. You got to know who’s on the other side, then, okay, we’re evaluating the factory itself, its quality can actually do what they say they’re gonna do. What comes after that?
Zack Leonard 34:41
Yeah, then it comes down to the negotiation table, right? Then you figure out what the price per unit is and how it scales, you know, if you’re starting to buy a larger volume, and what’s the capacity that they can have at their factory for you. So you kind of get into like the more dollars and cents talk. But then once you get past that, you know, it’s kind of your typical Well, you know, go through the sampling process, make sure that everything’s good to go. And then, you know, start starting getting into, you know, a smaller production run, and then a larger production run and kind of testing out to make sure that, you know, you check all your boxes before you like, Okay, I have a thing that’s working in China and I want to move it completely over to a different country or take some of that production over to another country, like he got to my opinion, the best way to do is kind of slow roll it to make sure that you’re comfortable with all the operations that are going to happen in there. But when you’re doing the price, like that’s when you start evaluating, you know, tariffs and duties and all those types of things coming in, like if you’re going from Mexico, obviously, there’s different trade agreements that are in there, go from places like India, like there’s not as crazy tariffs like there are from China. So yeah, it really just depends on where your end consumer is, and kind of doing that evaluation of, you know, doesn’t make sense from $1 perspective, also, from a lead time perspective, right, like, like I said, with Vietnam as an example, you’re most likely going to have to absorb a larger or longer lead time a because it’s farther away from, from the US if your products are in the US, or selling in the US. It’s further away from you know, physically a boat, it takes longer to get there, but also the raw materials have to come from somewhere like, like India, or China. And so they have to absorb that lead time to get the raw materials into their warehouse or Korea, right? So that’s the whole evaluation process, like is this a backup factory is this my primary factory, is this a good option, if I get into a pinch, are they going to have certain volume requirements that, you know, makes it harder for me to you know, just put everything in there if I don’t trust them yet. So it’s kind of like you’re playing this game. And this numbers game of like, what makes sense from a $1 perspective, from a lead time perspective, from an inventory management perspective. And then ultimately, like the cost of it, getting into your warehouse, logistics, customs, duties, tariffs, all that all that stuff comes into play at the end, the once you understand like, where you’re going to, you know, where you’re going to develop the product, if the factory part is good for you, then you can start really getting into that next level of determining price, lead time, quality, all that good stuff.
Andrew Morgans 37:06
I love it. It sounds like I need experts to work with if you ask me. You know, just the tax tariffs and and, you know, picking a freight forwarder and picking like, right, you know, those kinds of things can be just super daunting. You know, and, and you go and you pick one product and you get another product and the sample process. And, you know, you know, a lot of a lot of the work people I work with too are like, anxious about switching because they’re, you know, they’re like, I don’t want other people to get my product and you know, you just have a lot of factors going on to honestly unless you’ve been doing it for as long as you have it’s like extremely overwhelming. Like I was gonna say, let’s talk like this a wrap up the last five minutes or so talking about what it looks like to engage with Gembah. In regards to like, I know you guys do design and you’ve got you know, you can help them get all of their like drawings together, and you can help them source and pick out where to go from and all those things. But like, let’s say I am a brand. I’ve been doing it myself, and I’m ready to like, Okay, this is something that I want to bring on a partner to help me with like the rest of my products I’m developing, you know, what does that look like for someone getting started?
Zack Leonard 38:18
Sure. You know, the first thing that we like to understand when we work with someone is, you know, what, what’s the endgame here? Like you’re, you know, most people, we want to talk to you if they’re small midsize businesses, like you’re talking with someone on the C suite. Right. And their exit always has to be top of mind. Right? So what are you trying to do to get to that exit that you want to have for five years? Is it? You know, I’m trying to exit very soon. So I’m trying to get my costs down? Or is it that I’m trying to build my brand and get the largest number possible? And then there are different conversations you can have based on that, right? So if you’re just going out for the cost thing, it’s like, okay, I need to reevaluate my products or my supply chain and see if I can get things cheaper, as soon as possible. Whereas if you’re going down the building brand, and building equity and all that, like, let’s talk about how we can get products launched that fit within your product category, and your brand, in a very quick manner. Right. So that’s kind of the two first ways to, you know, think about engaging with us is like, yeah, I love that. We can resource your products every day, like any day of the week, right? Like, that’s not a problem. The problem is like, what’s your endgame? Right? Like, are you trying to, like, get out of China for strategic reasons? Do you have a border or you know, a group of people that you report to that are putting pressure on you to do this, you need to get it done faster? Is your exit tomorrow, or use your exit in like five to 10 years, like that’ll kind of determine the game and flight plan for us to engage with you. And then once you do, like, we start to understand what your products you’re working on. And then we start swarming your, your, your product with the team of experts and designers and engineers, depending on what kind of engagement you have with us, but you’re going on the product, product development route or trying to get you know, products that’s either net new or some slight tweaks to an existing product will We’ll most likely put at least an industrial designer and mechanical engineer on the team that have worked at, you know, either on products or at places where those products have been made before like a good example of Under Armour for shoe like we can we actually have an Under Armour shoe designer on our on our network, network. And then you manage everything through our platform. So we have a platform that has, you know, all those different players kind of coordinated through a flight plan of like, here’s your development plan based on the product you have, here are the players within that in that flight plan. And they’re held accountable for milestones that they need to give you actual collateral and deliverables for. Once you go over to the to the sourcing side, same thing, we start the process pretty early on, either, you know, if you’re doing development first, or you’re not doing development first with us, in the sales process, we kind of taken understand what kind of product or the prospecting process we understand the product will start to go to each region and like say, okay, like can contract, do we have factories within this, within this region that are willing to take on this project, and you know, give you a thumbs up, and then we start putting that same team together on the overseas side, to match you up with the factory and kind of help with the communication and make sure that everything’s kind of moving, moving through that plan of like vetting, then, you know, getting samples and then ultimately into production. And finally, once you go through the production side, you know, we have logistics, and freight brokers and all that stuff that we work with, and partner with that base, you know, wherever you’re doing, the actual production will match you up with and kind of make sure it gets from their warehouse to yours. And from there, you know, it’s up to you to go sell the product and come back and reorder when you can hire me, Marknology.
Andrew Morgans 41:36
So we’ll help you sell it right, here you go. You know, that’s what we do. And that’s why we partner up with people that you know, get the product to the warehouse, and then from there, that’s like, that’s where our job begins. And that’s why they’re so important.
Zack Leonard 42:02
You know, as an Amazon seller, if the product quality, we’re not going to do that, well, you know, supply chain is broken, we’re not going to do that, well, you don’t know how many times I’ve had two successful launches, where we’ve sold out a product and can’t get more and you just can’t do you can’t run out of inventory, if your product selling like always have a plan a plan B for factories, like it’s gonna happen, especially if your products, you know, hot one, you gotta gotta make sure you build them.
Andrew Morgans 42:13
And that’s definitely where I was bringing a lot of my questions today, at least that angle for anyone listening was like, you know, I’ve got a product, I’ve got China, I am someone that is, you know, I never want a single point of failure, you know, so as soon as I can, I am like, looking to be like, Okay, does that mean like, I want to get shorts and hats made here. You know, even though I can’t give them everything, but like, you know, keep them on a drip and keep them happy, because I’m sourcing this, and I’ve got one here. So I’m building this relationship, because a relationship takes time to build, you know, it’s not just like, it’s not just a Pio that they’re filling that makes the relationship. It’s like successful POS over two years, and you see consistency that this brand or this agency isn’t going anywhere. And then they’re like, Okay, this is worth our investment. And when next time you need that thing, rush, they’re, they’re there to help because you know, you’ve been solid for two years paying bills. So, you know, how do you get those relationships started? How do I pivot? How do I think about, you know, second and third tier options for sourcing different items? You know, one thing I always thought about was, like, one of the first times I really realized like, sourcing was like, I don’t know, what was that important was like I was like a Nordstrom Rack or like a TJ Maxx or something like that. And I’m not really a brand guy, but I like you know, I care about fashion, it’s less about, it’s less about the brand and more of the fit and like, you know, how it makes me feel and things like that and the brand name. But Nike has always been like, you know, one of those top tier brands that you think about, and I just remember, like, they definitely have different quality of manufacturing in their shirts and apparel, right. And so, like, you know, maybe it’s like the, like, for example, Nike combat, always just amazing, like your Nike combat gear, but there’s like shirts that I would find just for going to the gym or whatever, that’d be like this is kind of boxy. And this, this medium fits like this. And this medium fits like this. And this medium fits like this, somewhere in their supply chain. They may have made some mistakes, or they like, you know, switching factories or doing something where the cuts were a little different. And the materials were a little different. And there was a lack of branding or a loss of a loss of the brand in my opinion, and that I bought some items that weren’t as quality as the others, you know. And so just one important thing. I’m not even someone that’s like this what I do every day, but it was something that I could noticeably feel and as you’re building brands like that consistency, especially when no one knows you’re not Nike, and you can overcome that. And you’re on your second run of products like keeping stuff consistent and things like that being super important.
Zack Leonard 44:41
Yeah, and I think that’s like bringing it home for, you know, maybe some of the listeners here, like, this is probably more real for you. If you’re getting different, you know, even on one production run, if you started to get different quality. You may want to have someone go visit your factory to make sure that they’re the only one producing that right now. Oh, you know, we’ve seen instances where people are going through their agent or broker. They think they’re talking directly to the factory, we’ve evaluated their supply chain, and it finds out that that person is just a salesperson that has a network of factories that they work with. And there’ll be sourcing the product from like four or five different factories, and people get caught people, like, they’ll see an inspection checklist that says, like, yeah, you passed from that factory, but then you’re getting through other factories, and they’re finding out via the reviews on Amazon, or via reviews on Google or via reviews on their website, and like, you’re having quality control issues, and like, the only way you’re willing to get on top of that, as, like you said, having a good relationship with your factory, you know, making sure that you’re building that trust, but also being diligent about it, like you have to have someone going to do QC, having someone like understanding that, that forensic side of you know, where are you actually getting your factory or your raw materials from, and where are you actually having your products produced is the factory, you know, real and all that stuff. So that stuff really does exist. And unfortunately, that’s where a lot of our customers come from. If they had those bad experiences, and they don’t want to, they want to, they want to work with people who are trustworthy, and they want to work with factories who are trustworthy. And that’s part of what we do is to make sure that the factories we work with aren’t doing that kind of stuff.
Andrew Morgans 46:15
It’s crazy to develop an amazing product. Let’s say we have an amazing, you develop the product, you have an amazing launch, you hire a company like ours, we’re launching it, we’re successful, we’re crushing it, and then you get a second, you know, a second round in maybe go straight to Amazon, you started getting reviews that you didn’t get the first round, that absolutely just crushed your product on Amazon, you know, and you’ve now invested, you had an amazing product, you hired, you know, multiple firms to get it done, whatever the case might be, and then to lose, because, you know, you just got too confident in the quality and stop checking it, or they didn’t get the second this round of samples from this one. Right, um, you know, to cut costs, basically. And, you know, you’ve lost everything you’ve built over the last 12 months or whatever. And you just see some of these nightmares. You know, if you’ve been doing this 10 years, you start to just see some of this kind of stuff that’s like, really sad in some ways, but really just came down to, like, not knowing and really understanding, you know, every aspect of your business is why I built and launched a fulfillment center in 2020 was because not in the same way but as a vertically integrated like brand building machine that is large technology there were so many things that could go wrong in the fulfillment center, just from like receiving the goods, prepping them packing them the quality of packaging, like it was something that I just like couldn’t take that risk on for any brands that I’m going to invest my own dollars and build several years building it was something I wanted to control. So I love it, and I think that’s provided a ton of value. Talk to me about where people can find you know, find you find your team gets more information on getting the ball. You know, they connected with what you guys are doing.
Zack Leonard 47:52
Yeah, the easiest way is to go to our website www.Gembah.com. That’s gmbh.com. You know, we feel there’s a ton of content on there about, you know, who we are. There are a ton of case studies on there to, you know, help you get comfortable with what we do. If you want to hit me up specifically, I think the best way is probably on LinkedIn. You know, feel free to give me a shout, send me a message, add me, whatever. And yeah, that’s probably the best two ways to get in touch.
Andrew Morgans 48:23
Thank you so much for sharing your knowledge. Startup Hustle, listeners, thank you for your time and attention. And shout out again to our sponsor for today’s episode. Do you need to hire software engineers, testers, and leaders? Let Full Scale help you. They have the people and a platform to help you build and manage a team of experts. When you visit FullScale.io, all you need to do is answer a few questions. The platform matches you up with a fully vetted, highly experienced team of software engineers, testers, and leaders at Full Scale. They specialize in building long-term teams that work only for you. Learn more when you visit FullScale.io. Zach, thank you so much for your time. Enjoy your trip there with your family, and you know I really appreciate you giving to our community today.
Zack Leonard 49:04
Awesome, man. Happy to be here. And thanks for having me again.
Andrew Morgans 49:08
Yeah, we’ll see you next time, Hustlers.