#360 - Supply Chain Lessons from Building Seed, Liquid IV, and Celsius

21:20Natan Bershtel:to your advantage. That's the part that I think so many brands are just not aware that that's possible. And it has to do with the way that brands are asking questions of their supply chain partners. So if I go to you, Blaine, the manufacturer, and I say, what is your MOQ? What's your minimum order quantity for this product I want to make? I'm actually asking the question the wrong way. Instead, I should say, Blaine, I would like to make this many units. Are you able to quote this for me? So I'm now priming the volume. And if you know for a fact it's well below what you're willing to do, you will share that.

21:55Natan Bershtel:And then I'll follow up with, well, who do you know within your network that I should speak to that you think can help me to get, you know, 3 ,000 units made, whatever the small amount is. And they often will have a partner to refer you to knowing that you'll graduate them at some point and be the right customer for them. And therefore, they were helpful. But if you say, what's your MOQ? And they say 50 ,000 and you need 5 ,000 made. You never really get to meet. So it's all in how you ask the question. And as it relates to time, you could also say, well, what would it take for me to have this made in 10 weeks?

22:30Natan Bershtel:And, you know, after the jokes and the sarcastic comments are made, you really get to the brass tacks, which is, OK, so what needs to happen? And if they say, you need to approve artwork within 48 hours of getting the, okay, great. But you phrase the question that way and a lot of these obstacles start to get removed. And you have to stay relentless that way and say, great. So if this particular type of packaging doesn't pour my product out the right way, then what do I need to do to get it to do so? Instead of just accepting your fate. I think so many brand founders, we see this with 3PL providers where brand founders tell us, my 3PL provider is awful, but what can you do?

23:12Natan Bershtel:And we think to ourselves, we know some wonderful 3PL providers that would love to take care of you, would want to introduce you to them. They just don't know each other, and they've just accepted their fate as, I guess that's how it goes in CPG. And we refuse to accept that because we know there's some excellent providers out there. Right.

23:30John Morgan:I love that. I love that in terms of just like framing the thinking, because like you're saying, when you're thinking about the MOQ, you're almost putting that out into the world because you're assuming that's what the you know, your partner is. That's how they're evaluating the decisions as opposed to just sticking what it is to you need and seeing how to get it done. So I think if there's one actionable piece of advice, like I love that is just like leading with a what it is you're trying to accomplish. See if they can do it. If they can't, who else, you know, that can accomplish it. And if they can, but they're not at that timeline, well, what would it take to get it done in this timeline?

24:05John Morgan:Maybe there's a no, but at least you tried and you've gone down the right path. Exactly.

24:10Natan Bershtel:I mean, most people don't know this, but like the higher level, the restaurant that you go to with a few exceptions, you can ask for something that's not on the menu. They can also say no, but you can ask. Most people don't realize they can ask. You know, some menus will say no substitutions. Okay, certain restaurants want your business and they'll prove their value by saying, yeah, I can make that. And if you go into it with that mindset that you are the customer and you are essentially voting and choosing with your pocketbook by being there and you have choices to be elsewhere, the right restaurant will decide to take care of you.

24:49And there are some exceptions where, you know,

24:53Natan Bershtel:you're trying to get something made and there's only two manufacturers globally. Okay, you have less of a buying power at that point. But in a lot of the categories that we play in, there are multiple choices and those manufacturers know that, that you have choices. So why should you go with them? It's really their account management is better, you know, The way that they treat you and follow up, their lead times are better, their quality of the product that they make and how they check is better, or their price is better. That's really it. And I think that's another actionable thing for a brand founder is to remember you're the customer.

25:30John Morgan:And I think the saying is don't ask, don't get, right? Like if you don't ask for it, you're not going to get it.

25:37Natan Bershtel:Clothed mouths don't get fed.

25:39John Morgan:Exactly. I actually have a funny, funny example of that, which is, again, more more on your like restaurant example. But I have this friend who we went out to dinner and she asked for like the dinner was over and she asked for she said, and we'll have a round of complimentary tequila shots. And we're like a round of complimentary. I was like, that's a bold ask. And and the waiter was like, sure. And it was around a complimentary tequila shots. And I was like, oh, that's that's a bold ask. But I was like, I guess don't ask, don't get right. So it applies to this world as well. Okay, moving forward, I want to talk about, you know, you've seen this happen time and time again with a different brand.

26:20John Morgan:You have different perspectives. So I'm going to throw this one on you. I'm going to let you pick the category of a brand. Let's just say you're starting any type of brand. It can be in, you know, the food space. It can be in the gummy space, apparel space. You pick, right? I want you to walk me through what you would do if you were launching this brand today, what you would do as it pertains to like, you know, figuring out and solving for your manufacturing, solving for your, you know, your co-packing or whatever it takes to get it packaged and solving for your fulfillment. And let's use the example of, you know, let's say you're not fulfilling out of your house for the moment just because we'll just assume that, you know, it's more of a scale up.

27:06Natan Bershtel:Brand new brand does not exist yet.

27:08John Morgan:Brand new brand doesn't exist. You want to bring a product into the market. It can it doesn't have to be a completely innovative product. It can be just a different variation that you're putting your spin on. But how do you how do you do it? What's the product? How do you do it? Yeah.

27:22Natan Bershtel:So no matter what, the theme is the same. If you're thinking about the sourcing or the manufacturing or the fulfillment, you have to think like those people. So if I'm thinking about the fulfillment piece of this product that doesn't exist yet, and I think like a fulfillment partner, what's the most important thing for a fulfillment partner? It's three things. Like, what is the thing and how many varieties of it do I have, the SKUs? And then how much space is it going to take up? How long is it going to be here? Am I going to charge you storage for it? And then how many units are you going to move through?

27:54Natan Bershtel:What's the churn rate going to be like? So if it's a brand new product, everybody understands that there's no data on it yet. It's so much easier for us to find a right 3PL partner if there's actual data. Oh, they're moving 30 ,000 orders per month. 3PLs get excited about that number. Oh, it's 100 ,000 orders per month. They get really excited about that. It's a brand new product. Okay, do you have any kind of forecast? And they have to then build that into the contract. So I would keep that in mind on how fast am I planning on moving this product? And that would then determine the type of 3PL partner I would go to.

28:30John Morgan:And maybe let's actually pause there, right? Like, I know we want to do this, but I think 3PL and what you just said is like super important. At what stage do you think makes sense for a brand to go to a 3PL?

28:42Natan Bershtel:Oh, man, if I can do the fulfillment myself, like if my significant other isn't going to kick me out of the house because we have boxes moving in and out, I would try to do that myself first for a number of reasons. One is you're the last to handle the product before it gets to the end consumer. You will then have a greater appreciation for what 3PLs have to do. You will see how your manufacturing partners are sending you the product so you're able to essentially QA and QC their work. and again, I think you're closer to it. I've seen brand founders that do it themselves and add handwritten notes.

29:22Natan Bershtel:They create content around that. So it's great. It's not sustainable beyond a certain size unless we have a couple of clients that have access to space and labor and processes that others don't like through other businesses of theirs. But ideally I would do it myself if I could. I would even say the same on manufacturing if I could.

29:46John Morgan:One thing that you just called out that I think is so important if you're handling it yourself is what you just said about being able to QA and QC the product, right? Like, you know, we were just talking about the example of an olive oil bottle that doesn't pour properly because of the cap. When we were fulfilling directly, right, my wife, when she's fulfilling directly, you know, we've got bottles, we open them up, we're pouring them out, we're doing them all the time. then we assume that everything's going to be good for the next batch. And boom, guess what? All of all doesn't come out of the cap.

30:15John Morgan:And that's something that you would catch when you're physically being able to handle your own product. You see how they should be packed. You understand that experience that the customer is getting. Now, we've I think I believe we transitioned out into a 3PL when we were doing about I think about 50 orders a day. It started to get like kind of like, okay, like this is, you know, time to go. But having that, I think everything you're saying was like spot on in terms of who closest to the customer and the QA and QCing part of that customer experience.

30:46Natan Bershtel:I mean, if we have clients that do a thousand orders a day and do it themselves, but they have a small team, one of them even created a content creating studio within the space because they realized it was right there and it was great. I think there's definitely like a hustle and a respect piece to them doing that. At some point, it gets to be maybe not as manageable. There's also, if the product that I'm selling is, like I'm looking at a tool that's sitting on my desk right here, if it was just that, I'm a little less concerned about what you just referenced. So it really depends on the complexity of your product.

31:26Natan Bershtel:We have clients that there's like a welcome kit that the consumer gets, and then a subscription model where there's a refill kit and they really want to make sure that first impression is right. Or how do you handle returns? Do you do that yourself? Do you have a partner do that? So there's nuance in every single step of the process that then should determine the strategy. We actually work with brands that say, okay, at what point should I outsource it to a 3PL? And then at the opposite end of the scale, should we open up our own operation because they're dealing with tremendous volume and it just makes sense.

32:05Natan Bershtel:In some cases, they even go in on a joint venture with their partners and set up shop where they put their brains together. But when is the signal for that is really the essential question. And the answer is it depends, right? How much capital do you have available? Your quality of life? We work with a lot of founders whose families are growing, right? And then I've got to get these boxes out of here. I have a toddler running around the house, you know, so that that drives the decision, even though fiscally it would make sense if they could still do it themselves.

32:37John Morgan:And I'd also love to hear about your experience with different 3PLs. So I can say we're working with the 3PL at the moment. The experience has been awesome. They've got processes, they can build complex workflows, even to the point where if a customer order, like say, package arrives damaged, they literally have a video of every package that gets packed and they'll send the video and be like, here, we see exactly what happened. And like to me, I'm like, wow, like that's good. That's not even something that I would have set up. I wouldn't even have these processes set up if I'm doing this operation, you know, myself in my house.

33:15Natan Bershtel:Yeah, I think the 3PLs are actually leading in the supply chain on how they've blended tech and tools into their processes. And it's probably because they've had to, because they have, in a sense, one of the hardest jobs. Because if they don't catch it, the end consumer is catching it. We've seen some really interesting vision systems with some of our 3PL partners and ways to ensure that every order that's picked is the correct order. There's some that utilize third parties to audit them, which very few 3PLs do. But again, at the forefront of like tech meet CPG, it's really happening at the 3PL sense and probably happening the least upstream at the sourcing ingredients.

34:02Natan Bershtel:Right. There's not a lot of tech enablement. Some of the manufacturers are there are some interesting uses of systems and connected systems. A real time inventory tracking is a big problem for brands when you're utilizing, you know, multiple nodes. How do I know how much I have because I'm moving lots of orders every single day and I need to order more and that takes time? How do I ensure that I'm not overstock or understock? And so there's a few manufacturers that are creating customer inventory portals that allow the brand at any time to get a real life snapshot of what they have and where it's located.

34:42Natan Bershtel:So I see the 3PLs leading the charge and hopefully other folks in the supply chain following suit because it makes a big deal. We've seen 3PLs that have optimizations based on the weather forecast of where the product is going to. There's one 3PL partner of ours that will do that for products that are maybe temperature sensitive, that depending on the time, they will say, OK, we need to pack this differently and it needs to travel differently in order to ensure the quality. So that's really cool in our minds of how people are utilizing technology that way.

35:14John Morgan:Oh, absolutely. And Natan, let's so let's talk about, you know, let's go back to this brand example. So, again, you're picking whatever type of brand it is you want to be. We just talked through 3PL, which is the fulfillment side of things. But like, let's talk about bringing this product to market. Like, what are some of the considerations that need to be made between manufacturing the product and the packaging and then the 3PL? Right. Because like if you think like even in this example of like the olive oil, you've got the manufacturer who's putting the olive oil in the bottle. Then you've got the, you know, the co-packer who might be, you know, if you're importing your stuff, maybe you do the packing stateside.

35:53John Morgan:Maybe you actually have to deal with importing something across the border, paying a tariff on it differently. There's a lot of different elements that are happening now in the supply chain. And then you've got packaging, which needs to correspond to the form factor of the product that you're selling. Like in the examples that you just mentioned, you said a lot of brands that you work with, they want to do, you know, first number or first they want to design a kit for the first order. And that's going to be different than the refill or whatever. But all of those now have contingencies based on the product and the form factor that's used in the product.

36:25John Morgan:Right. And then all of that. Yeah.

36:27Natan Bershtel:Geography part.

36:29John Morgan:And then ultimately, those are the things that make their way to the 3PL. So when the order comes through, the 3PL assembles everything and sends it out the door. So what looks like a really simple experience, there's actually a lot of contingencies and variables now in this equation. So, you know, your brand, you're setting it up. How are you thinking about things to make sure, A, you're avoiding pitfalls at the manufacturer and packaging level and that you're able to get something set up quickly and out the door?

36:56Natan Bershtel:And I'm purposely skirting around the pick the product exercise that you're asking me to do, because by picking, I'm sort of choosing a lane. And so if I think about the product that you held up a moment ago, that's, you know, an oil in a glass bottle that's heavy. I think about the strategy differently than if I have 10 grams of powder in a single-use packet, because I may be able to move close to a million units on a full 53-footer container of a finished product in that powder format. Whereas for you, maybe if I'm lucky, I can get 15 ,000 units. So now the cost, let's say it costs$5 ,000 to move a full container across the United States, that's way more impactful on your cogs in your bottle example than the powder example.

37:50Natan Bershtel:So you're right. It's those nuances that really matter. And should I make it overseas and bring it in? Again, depends on what the product is. We had a client that was sourcing their corrugate from overseas and there was no reason to do that. There's fantastic options here. And generally, you want to source it within, you know, less than 200 miles of where it's going to get packed, because otherwise the freight doesn't make sense, right? And it's a bit upside down and you have options. So I'm looking at, I have 30 different types of products here across my desk and each of them has their own nuance.

38:29Natan Bershtel:Some are cold chain, some are heavy, some are light, some have a shelf life or barrier issue. Some it's time to customer. That's the most important thing because it's perishable. Yeah. Some it's just strictly a geography play that the brand just wants it to be easy. And yeah, I don't know that I would launch a brand. You know, I would say.

38:56John Morgan:No, no, no. No. But I think one important point that you called out and maybe the right framework to think about it is rather than, you know, starting with it, like start with the little things, right? Like what are the most important things? Like what are the scale you're at? What's your form factor that you're dealing with? And where should you be getting that product from? Because that's something that's even important, right? Is it something because, you know, you can get products overseas that are a lot cheaper, but now you're dealing with tariffs and you're dealing with freight, right? And time, tariffs, freight and time, right?

39:28John Morgan:And, or do you look for sourcing that's a little bit closer to where you're packing. And the crazy part about what we're just talking about is sometimes that equation, it starts to flip, right? Where in the beginning, maybe it's cheaper, but like as you scale, like now these, now these things really matter. And you're like, wait a minute, I actually, why am I sourcing this internationally and paying all these tariffs and this freight when it looked good to just, you know, test a couple units? maybe that equation doesn't look the same, you know, as you begin to scale out.

40:01Natan Bershtel:Well, that's the key that you just hit on, which is you have certain understandings, certain assumptions, but your business should be evolving. It's rare that a consumer business is the same all the time. Forget just seasonality, but just in general, if it was the same all the time, it would be way too easy. And that's just rare. There's very few businesses that say that static. And those that do are either hidden gems or it doesn't last as long. And so it's going to change. And that means you have to be looking at it all the time. And as a brand founder, asking yourself, okay, what assumptions that I've made in the past are not true anymore that I need to revisit?

40:41Natan Bershtel:And you have to lead with curiosity. And some of the most successful brand builders surround themselves with people that they deem to be quote unquote smarter than them, that are going to look at things differently that are going to challenge their assumptions as opposed to just being, you know, yes, people that say, yeah, that sounds right. Get it made overseas and bring it here so we don't have to think about it. And when you start to challenge those assumptions, you find a tremendous amount of cog savings, time savings, quality savings across the board. And it's always going to change. That's the frustrating and the exciting part of doing this.

41:20Natan Bershtel:Now, if you're just in it for a short time, yeah, you can pick a lane and run with it. But a lot of the brand founders we work with, they're playing the long game. And so they want to strategically evaluate it. And when should you do it? You can't do it every day. That's maddening. But you also can't do it once every 10 years. And so it's finding that right balance of when should I revisit my assumptions about my packaging materials versus my manufacturing partner versus my 3PL strategy? Like, when should I move from having just a single 3PL location to two? When does that make sense? And that's where I think our team, because to your earlier point, we get so many shots on goal and so many views are able to speak to that with greater confidence.

42:08John Morgan:One thing that I'd love for you to share was when we were chatting offline, you were telling me a little bit about your theory that, you know, the reason supply chain is so great is because it's so hard. Right. It's not something that everyone can get right. So now it actually if you get it right, it creates an opportunity for you as a brand. And a lot of times it's not just like, oh, copy, paste, whatever someone else is doing. And it works like you as a brand can actually build moat and leverage and scale with building your supply chain the right way.

42:42Natan Bershtel:I mean, I got to work with a brand a long time ago that went to a retailer and the retailer looked at the product and said, I don't know where to place this. There isn't a category for this on the shelf. Well, nowadays, the brand created that. It's a whole section of that store. And knowing the brand founder and the team that they put around them, how they overcame that challenge also was their biggest advantage. They had such a head start on everybody else that they became the category leader in what to some people looked like overnight, but it was really a many year journey of overcoming those challenges when they had something new.

43:24Natan Bershtel:Those that have come after them and tried to play in that category had some things much easier, Like getting into the retail was easier because the shelf now exists specifically in the location in the store, but they now had to compete with more people. So if it was easy, it would just be the folks with the most amount of money that would win. But we see all the time that these big, big organizations are really slow to make a decision, really slow to turn and to pivot. and the really lean organizations that are unafraid to make a decision and to do so quickly can get leaps and bounds ahead of them and sometimes get acquired by those bigger folks.

44:04Natan Bershtel:That's their growth strategy is to just acquire the innovative brands. So there's plenty of room there, I think, for that.

44:13John Morgan:Yeah, absolutely. And Natan, as we kind of wrap up here, I'd love for you to share any other major tips or pitfalls that you've seen, that you see time and time again, that you just think it's really important for brands or brand builders to be looking out for as they're thinking about their supply chain? What are the things that maybe are obvious to you now, but for that first-time founder, you see it time and time again, where it's like, oh man, this is something you just, you got to avoid.

44:48Natan Bershtel:Be there in person. Just be there in person. If that's your sourcing, your manufacturing, your packaging, your fulfillment, be there in person. There are humans involved in the process. Make the interactions relational rather than transactional. And those are the brands that get it. And those are the ones that then miss it. They miss it because of that aspect. They think it's just a transaction, but there's humans involved. And if the humans care about your brand, they will time and time again rise to the occasion for you and be those great partners that you want to have. So people say that all the time.

45:29Natan Bershtel:Like, we want to have a partner, not just, you know, a business relationship, but show it in your actions and try to understand the world through the different supply chain partners world and through their lens. And ask them, like, what is it like to run a 3PL? Like, what are the headaches? You know, the busy season is coming right now for all of them. They're all prepping for that into Q4 and into the beginning of the new year. What does that mean? And at the end of the day, these relationships are based on emotions and people want to work with people that they like. And that includes their customers.

46:06Natan Bershtel:Again, if we come back to the restaurant example, there's that older couple that always comes in on Wednesday mornings to the diner and the diner goes out of their way to reserve their favorite booth, even though nobody else could have a reservation. It's based on that. And how do you get that type of relationship? They didn't sign a contract to get that booth, but there was something in how they interacted with each other that made everybody look forward to seeing them and they became part of their family. And so how do you do that with your partners? And that's the top part.

46:39John Morgan:Yeah, and I think that one is so spot on because when you're in this space, something's going to go wrong in some part of your supply chain inevitably, pretty frequently actually probably. So these are the people that you're going to need to call on, whether there's a delay in shipment from one and there's a contingency that you're waiting on, you had a scheduled production and one item isn't there, you need to move production up because, you know, some other thing went missing. Like there's going to be something. And I think to your point, being there, having the established relationship with the partners that are involved in every step of your supply chain is going to be really critical when you have to call in that inevitable favor that you're going to have to hate to ask.

47:22John Morgan:And they're going to be like, screw this guy. I don't want to hear from him again versus like, OK, like I get it. This makes sense. Like these guys have been great with us and we're going to step up to the plate and make this happen.

47:32Natan Bershtel:Yeah, exactly. And think of it like a relationship, not like a transaction. And the world becomes a little bit simpler to navigate.

47:42John Morgan:I love that. Still difficult, a little easier. Well, Natan, appreciate you coming on. This was super fun nerding out about everything supply chain. We'll have to have you back to go a little bit deeper. But in the meantime, for anyone who's looking to learn more, connect with you, maybe chat supply chain and ops with you and the Pelagic team. Where can we connect? Where can we find you? Why don't you shout out your socials, your contact info, any of that?

48:10Natan Bershtel:Pelagic.co is the website. If you go on there, there are ways to get a hold of us in there. You can fill out the contact form. We'll get it immediately. And either myself or John will respond. So, yeah, looking forward. We're on LinkedIn as well. I have a strange enough name that I think it's pretty easy to find. And just looking forward to helping people. There's incredible supply chain partners out there. They're just busy doing the work. And we'd love to pair them with great brand builders because that's really what they need for their business.

48:43John Morgan:Love it.

48:44Natan Bershtel:Love it. Thanks so much, Etan. Thank you. Take care. Bye.

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