Scaling down a business can be just as challenging as growing it. The host shares his tough experience of switching third-party logistics providers after losing a major customer. He faced unexpected costs and subpar service, prompting a move back to Texas for better fulfillment. There are valuable lessons on management and communication throughout this journey. The insights aim to help others navigate the tricky waters of logistics in their own ventures.
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Quick takeaways
The transition to a new 3PL highlighted significant inventory management challenges, particularly the impact of unsellable stock on customer satisfaction.
Choosing a logistics partner closer to manufacturing operations proved essential for improving shipping times and maintaining quality fulfillment standards.
Deep dives
Experiences with Third-Party Logistics (3PL)
The speaker shares insights into the challenges faced with their recent third-party logistics (3PL) partner after a significant drop in revenue. With the loss of a major customer, they faced issues like unsellable inventory and fulfillment problems, realizing their previous 3PL was no longer meeting their simpler needs effectively. While searching for a new partner, they aimed to find one closer to their primary manufacturer to streamline operations and reduce costs. Unfortunately, after moving to a new 3PL, they encountered various problems including increased shipping times and unexpected costs, leading them to reassess their decisions and consider further changes.
Inventory Management Challenges
The transition period highlighted significant inventory management challenges, including a substantial amount of dead stock that needed to be liquidated without compromising quality. The speaker emphasizes the difficulty in dealing with unsellable products and the struggle to maintain a positive customer experience, as they attempted to avoid discounting products through lower-tier retailers. After destroying a considerable amount of unsellable inventory, they were finally able to streamline their operations, reducing warehouse stock significantly. This experience illustrated the complexities of maintaining inventory in a consumer packaged goods (CPG) business, especially when managing fulfillment and customer satisfaction simultaneously.
Lessons Learned from Operational Changes
The speaker reflects on the critical lessons learned from the experience with their 3PL, particularly the importance of overseeing the transition and ensuring standards are upheld. After enduring poor performance, they found a new, more aligned partner back in Texas, allowing for close monitoring of fulfillment practices and a return to efficient operations. The new partnership not only improved shipping times but also enhanced customer satisfaction, reviving the company's reputation significantly. This journey underscored the necessity of adaptability and vigilance in operations, reinforcing the notion that both successes and setbacks in entrepreneurship are temporary and can lead to growth opportunities.
Scaling down a business is less fun than scaling up. The issues might be similar, but the process is different.
In this week's episode, host Eric Bandholz addresses the recent experience of Beardbrand, his company, changing 3PLs — third-party logistics providers.
He describes the need to reduce warehouse and fulfillment costs, having lost a large wholesale customer. He explains why he chose an initial provider, only to encounter higher-than-quoted rates and poor service. He switched again, this time returning to Texas near his manufacturer and his own home base.
As always, Eric transparently shares his lessons — good and bad decisions — in the hopes of helping others.
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****** The mission of Practical Ecommerce is to help online merchants improve their businesses. We do this with expert articles, podcasts, and webinars. We are an independent publishing company founded in 2005 and unaffiliated with any ecommerce platform or provider. https://www.practicalecommerce.com
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