0:00:04.1 West McDonald: Hey everybody, West McDonald here and I want to thank you for tuning into another episode of TigerTube. If you can’t see us and you’re listening to us, that means you’re tuning on a Tigerpaw Radio. So thank you very much for joining in. If you’re on our blog, make sure you subscribe. If you’re watching us on YouTube, make sure you subscribe there as well or in our podcast channel. And I’m very excited today. This is a topic that is extremely important in our industry right now. Every time I have a conversation with a dealer or other partner, the one thing that comes up all the time is supply chain. And fortunate today to have an expert in the industry that I’ve known for a lot of years in supply chain and logistics. And Barney Kister, thank you very much for joining us.
0:01:07.0 Barney Kister: Glad to be here, West. I don’t know that I’m going to call myself an expert in supply chain, although I did consult with the experts that work with inside our organization. So I reached out to our senior vice president of product management, Monty White. His right arm in inventory control, Jack. And then Tim Graham, who’s our global logistics manager. And so got some input from them about the most current things that they’re experiencing and then just to make sure that I didn’t state anything that wasn’t true.
0:01:45.9 West McDonald: Well, that’s the wonderful thing about, you know, DM Supplies Network is that, you know, the team that you have and the experience that you have in delivery for goods for a channel is exceptional. So I’m glad to hear that and look forward to hearing what some of that input was. And maybe that’s, you know, kind of a good start, right? So one of the things that I’ve been speaking with people about are kind of the shutdowns and lockdowns that have been happening in places that are developing the things that we use and sell. In particular, one that came up last week was a shutdown in China due to the COVID lockdown. And you know, just curious, that’s one disruptor of the supply chain, certainly right now, but what do you see as the most challenging right now for our space?
0:02:31.1 Barney Kister: Globalizing the market didn’t happen overnight. This setting up the existing supply chain took many, many, many years. And there was a lot of multiple areas of manufacturing for, you know, for printers, for copiers, for supplies, you know, that used to be the day people want to know, well, do you have Chinese HP cartridges or do you have the ones made in the US or do you have the ones made in Japan or back and forth and around. And so that was all part of that setup, which took many, many years. And then eventually when they got to a point of it being its most efficient aspect, you know, you start eliminating some duplications and over expenses. You know, COVID comes along, turns this thing on its head. And we were already having some problems, I think, you know, globally as it was, toss in a couple of wars, especially in regions that are involved with a lot of transportation of a lot of products. And it doesn’t matter what product it is. If there’s a disruption in grain coming out of the Ukraine, that has an impact on all products across the board because those ships that are being used for those things are now being diverted and changed.
0:03:42.2 Barney Kister: And there’s movement. There was a freighter that was going to bring something from one place and now it can’t go to that one place. And so they’ve got goods on board that they don’t know what to do with. And you see all these backlogs occurring and much like we saw with all the boats that were sitting out off of LA earlier this year.
0:04:03.1 West McDonald: Yeah, just astonishing the number of ships. I don’t think there are many ships in the world, let alone the ones that you see sort of backed up in harbors and everything else. And I like what you say there about how the supply chain disruption in one area will have a dramatic effect on all the others as well. My wife is a retailer. She has a retail store and trying to manage sort of supply chain for her, for goods and services that she sells has been an absolute nightmare this year. And again, I guess what do they say it’s the butterfly effect when a butterfly flaps its wings somewhere overseas that it has an impact over here and you can really feel that. Absolutely incredible. These issues obviously aren’t going away anytime soon. I know that one person I was speaking with a few days ago said that some of the impacts that happened from the latest shutdown in Shanghai aren’t going to be felt for another few weeks or into the summer. What kinds of things should dealers be thinking about to help their customers in these challenging times? Because it doesn’t sound to me like that these issues are going away anytime soon.
0:05:11.0 Barney Kister: Dealers especially if they’re aligned with a particular brand. So if I’m a HP focused or a Sharp focused reseller, it’s critically important to start discussing with your manufacturers and your reps with them on what product offerings are most healthy, what parts of the product line are in stock so that you don’t go out and sell this great solution that unfortunately you can’t deliver. I mean, case in point for us, we had a deal that we worked with on supplying a hospital with thermal printers. The order was placed last year in June. It was delivered last week. Now, you might say, boy, I bet that customer is really upset. They were their expectations were worked with and discussed throughout the entire process. Now, there were there were some missed dates during that process, but it is something that actually does occur and occurs on a regular basis. And so you have to sit down as a reseller and plan out and say, you know, this might not be the best printer, best copier for this solution for this engagement, but I have an alternative product that comes close and maybe it’s in stock and supply. So, you know, and on top of that, you know, we’ve always told people don’t stock any supplies, just let us take care of it and ship it to you.
0:06:43.1 Barney Kister: I think probably is it a day where probably not a bad idea to have some extra stock on hand. It’s not the most cost efficient, but it does back you up in moments of emergency.
0:06:56.1 West McDonald: It sounds like you’re saying manage expectations with their customers for these kinds of delays that customers aren’t living under a rock or, you know, when you’re out there, their understanding of these things, as long as they’re prepared for what, you know, what it’s going to look like if there are delays or if there are changes.
0:07:11.0 Barney Kister: And I talked about globalization not happening overnight. They got turned on overnight by COVID. And at the same time, the whole supply chain shifted. So you have a large percentage of the world’s population now working from home as opposed to being in the office, at least part of the time. And in many cases, all the time. And so you have the shift going from a UPS or whoever, you know, FedEx, you know, going to large buildings and making deliveries now they’re going to individual houses, the, the explosion in e-commerce to support selling all goods from home, you know, cause people are saying, well, if I can get my t-shirt here, I get my hat here, I can get everything I want and I can get, you know, locally, I get my groceries delivered. And this has completely changed, you know, all the transportation workers. It takes a lot more people to go to everyone’s home than it goes to go to, you know, a corporate office or a centralized location, or people were to go to the actual brick and mortar store and pick it up. So those shifts have really changed the marketplace and resellers have really got to be careful about the rise in assetorials, which is additional fees that are added on above and beyond the surcharges that get added on to your freight rates.
0:08:35.8 Barney Kister: So those typically used to be in the single digits. They’re now approaching up to 20% and are forecasted to go even higher. So, you know, there’s an extensive amount of increase in freight and shipping costs. You’ve got way more workers in the transportation sector being involved in getting goods to the home as opposed to, you know, centralized locations. And even for us in the supply chain thing from a distribution management standpoint, we used to do very large POs that we could we know that we’ve got 17 tractor trailers coming in. This is the labor load that we need. We place that order now. What used to be a number of containers coming in now is a pallet at a time every day and it’s all mismatched and all over the place. And so our labor expense just to process an order goes up to receive an order to manage the goods. We built our supply replenishment program, not for the NPS stuff, but for managing to our inventory to make sure that we have enough on hand on a principle called distribution resource planning. And in distribution resource planning, I won’t bore you with all the details of that, but the key element in there is lead time.
0:09:55.0 Barney Kister: And it doesn’t matter what the lead time is. It can be one week, it can be eight weeks. It just needs to always be one week or eight weeks. And if that moves around, it creates disruptions in all the algorithms in which we determine how much inventory you need on hand. So we end up being fat in an inventory perspective, which adds cost to the business, but not necessarily of all the right stuff. A lot of dollars in inventory, but maybe not what you’re looking for.
0:10:24.8 West McDonald: Yeah. And I wonder as well, because we have these things in stock, the customers must be getting used to at some level, at least looking at alternatives, right? Saying, well, I did expect that, but I’m okay with getting this. Logistics are obviously a key part of a seamless customer experience. And I’m wondering what kind of things do customers want in that experience and how do you help dealers to make that a reality, especially in these strange days we live in?
0:10:54.8 Barney Kister: It starts right off with setting expectations and you’ll get clients that say, I only want UPS, don’t ship anything. I love UPS and don’t ever use anybody else. Well, UPS, FedEx and all these carriers are putting quotas on all of us that are in distribution and telling us you can only ship so many packages. That’s what you get. And so we had to reach a cutoff and it’s kind of, you have to explain to people, it’s like, I can ship your order out today. If you’re willing to take it by one of these regional carriers, there’s a whole myriad of them springing up. I mentioned, I talked to our manager in logistics. Four years ago, we didn’t have a logistics manager. We had DCs and guys ship stuff. Our vice president who was over the distribution centers would negotiate the freight terms with a handful of people. Now we’ve got a whole team of folks that are constantly working on how do I work with various different truck lines? We work with brokers, we work with all sorts of carriers and a combination of things. And there’s literally a number of areas where it’s a combo thing where a part of it goes by UPS and it gets handed off to the post office for the last mile and a number of moves like that.
0:12:15.2 Barney Kister: And I wouldn’t do it service to sit there and try and explain that in detail because when I talk to those guys, they lose me in a heartbeat.
0:12:23.1 West McDonald: Yeah. And some of the other things that you mentioned there, it really struck me that I’d never really given it much consideration was I guess the human resources that would have to be increased to facilitate this world now of kind of, I’m sure micro shipments is the wrong word, but kind of things on demand. And I do it all the time. I’m guilty as charged. So if I need something, voila, for example, there’s a grocery service that I get. So I do actually get some of the groceries and stuff delivered here to the house. That’s something I started during the COVID pandemic and still do today. So there must be a huge army of people that simply didn’t exist before. Very interesting.
0:13:00.9 Barney Kister: Well, we do a lot of third party logistics for all sorts of companies. We actually ship ketchup. So if you, not in Canada, we’re not shipping there, but if in the States you happen to be buying a certain brand of ketchup, it might come out of one of our facilities. And the packaging becomes a whole change in this because the products weren’t designed and built conceived all along this process to be handled in that manner. A lot of other products are. People in the beginning, we’re going to ship these directly to home users so therefore, in the packaging design and how it comes together and how many you put in a case, because when you talk about handling an order for a $10 bottle of ketchup that then costs $30 to get to the end user, it doesn’t make a lot of sense.
0:13:55.6 West McDonald: Yeah, it’s fascinating. And you got me thinking actually, I have a consumer experience on my own. I was actually reading an article on Pringles and when they first invented Pringles, the marketing behind it was really directed towards the grocery store saying, hey, look, you can get a whole bunch more of these on your shelves. Pringles were built for shipping and making sure they take up less space. I’d never really given that in consideration. And you do not want a bottle of ketchup going off in your truck or in your house. And looking towards the future of the world of logistics and fulfillment, what do you think it’s going to look like down the road? What kind of changes and innovations can we kind of look forward to or think about that may be coming?
Barney Kister: I’m not a predictor of the future, but what I will tell you, it’s not going to look like it looks today. People keep saying, well, when do you think it’s going to get back to normal? There is no normal. Because other events are going on that are ever changing. When’s everybody going to go back and work in the office and not work from home anymore?
0:15:00.7 Barney Kister: That isn’t going to happen. Because there’s a lot of reasons why this working remote works for a lot of folks. Now, if I’m in town in St. Louis, we had a Cooper headquarters there. I go to the office. I don’t stay at home, just 10 minute drive. I get my work mindset on, I go to work. And then when the day’s over there, I come home. Could I work from home easily? Yeah, I could. The technology is there. My Internet is way better there than it is out here. But the fact is that’s how I choose to operate. We’ve got a large number of people in our office that do not want to come in. Ever. There’s factors like this work from home thing. There’s factors like all the shipping going to homes. There’s a shift in change in transportation. Fuel costs certainly have a big impact. Does it make sense to ship something from over there to here, wherever over there is and wherever here is? Because the freight expense may get so high that it doesn’t make sense. We’re constantly looking at this shifting of what’s happening in the marketplace. And I don’t know what it settles into.
0:16:16.8 Barney Kister: I don’t think anybody knows what it settles into. But it’ll be different as today. And it’ll definitely be different than it was three years ago.
0:16:23.9 West McDonald: Obviously, people out there are looking for advice and a large portion of the people that watch this program are obviously dealers in our channel. And if you had one piece of advice for them regarding supply chain challenges today and any logistical expertise or whatever that might help, what might that be?
0:16:41.2 West McDonald: I think I already said it earlier. First off, as a reseller, you’ve got to appropriately set expectations. If I think back when I first got in the office products industry years ago, we got into this war of who could do it quicker, sooner, faster. And it literally got down to where some of these stationary wholesalers were doing same day delivery and proud of themselves that if you call me by noon, it’ll be there before the end of the day. And it’s not sustainable. And we see Amazon for a while was trying to go that route and they’ve backed off of that. Walmart.com was doing the same thing geographically out of their stores, but they’re just realizing the labor intensity involved around it just didn’t make sense. That’s not happening anymore. You have to plan. So you have to set expectations. You have to plan your resources as a business. Anybody could become really, really dramatically grow their business if they could get access to an unlimited amount of devices right now and supplies and equipment, but it’s not available. And so you have to build your business around about what you can get and lock in customers and get the customer understand is you can’t just go to the store and buy one because it’s not there.
0:18:05.0 West McDonald: Well, that’s really good advice. And Barney, I cannot thank you enough, both for you coming in to do the interview today and for working with your team to come up with some of the things to help us out as we consider what’s going on with supply chain, logistics and distribution management. So Barney, thank you very much.
Barney Kister: You’re most welcome. Appreciate it.
West McDonald: Yeah. And for all of our viewers and listeners, I want to thank you again for tuning into another episode. We’ve got lots of exciting learning content waiting for you to help you grow your business. So make sure you stick around and check out a few more of those resources. And if you haven’t subscribed yet, make sure to do that now. On behalf of everyone at Tigerpaw Radio and TigerTube, keep learning.
