Video Transcript
Dan Van Meer (00:04): All right. Hello. Welcome to episode two of Palletside Chat. I'm Dan, and I'm joined today again by my co-host Alex from ONE23 Fulfillment and Black Wolf Nation. We're pumped to be back here. Our streak is now at two episodes. We're excited to continue extending that onward and onward. If this is your first time joining us, I just want to encourage you to take a few minutes and check out episode one. There's a lot of good info on kind of the background and journey that led to this podcast starting. We're super pumped to be doing this, and over the next couple weeks and months, we're really excited to have some guests on to share their experiences as well. But I just want to clarify that we're tapping in to Alex, who is the co-host as a guest for these first few episodes because he’s got a ton of great experience. (00:50): Like we talked about in episode one, he's built an awesome brand, which is growing fast, and he's also built an amazing high touch 3PL facility that's growing really fast as well. And so I want to make sure that we kind of extract a lot of his learnings and share those with you today and over the next couple weeks as well. So in terms of today's episode, we're excited to be talking about what it takes to prep a 3PL for peak season. There's tons of great content and conversations out there about what it looks like for brands to get ready for peak season, but not much about 3PL. (01:20): So we want to touch on that today for sure. Life of a 3PL during peak is kind of like doing a speed run on your favorite video game in hard mode. There's a ton of stuff going on. There's really no room for error. And I know that Alex is navigating peak really well. And I mean, we're kind of in the thick of it right now realistically, but I'm sure you also have some lessons learned, some horror stories that might come out as we unpack things today. So we're heading into peak this year with surcharges that are earlier. They're running longer. (01:53): We're in an environment that makes hiring difficult, we're in an economy that there's sense of uncertainty. Nobody really knows what peak's going to look like. We don't know what consumer spending habits are going to look like. And so there's a lot of things that we can't control. So today what we really want to do is focus on the things that we can control. So we're going to take a few minutes. We're going to talk about what it takes to prep your 3PL from an operation standpoint for peak, prep your team for peak, run a great operation, run a great team during peak. And then we're also going to save a bit of time to talk about managing those escalations and angry customers that are going to, they're going to come at you. Realistically, the odds of running a smooth pain-free peak season for an operation that's at scale is pretty low. So we're going to talk about the real stuff today for sure. Sorry Alex, I kind of rambled there, but pumped that you're here. Looking forward to tapping into your experience today. Alex Lewkowict (02:45): You're good Dan. I actually have a question for you. So as someone who's not in the warehouse, can you feel peak in the air like we can? Dan Van Meer (02:56): For sure, yeah, yeah. Alex Lewkowict (02:57): It's this looming force that's hanging over the warehouse. We can feel it. Dan Van Meer (03:02): Yeah. No, we at ShipHero, we're feeling that for sure. It's interesting, right? There's a lot of prep from a product perspective, from a staffing perspective, and looming is the right word. I think the other thing that's interesting is we really, I don't think fully appreciate the fact that we're kind of in it now. I know that the spending hasn't happened yet. The purchases and the volumes haven't picked up yet, but I feel like we're in peak. So it's a thing. Alex Lewkowict (03:30): Yeah. So- Dan Van Meer (03:31): That's awesome. Alex Lewkowict (03:32): I think it'd be helpful to give kind of a rundown of what does peak mean? Everyone says peak, peak, peak. What is peak? It's the Super Bowl of logistics. Why? Because think about it this way, the entire year, the whole ... We're in a business of seconds. So we invest huge amounts of money to save a couple of seconds per package because the volume's so high. A second per package across 10 warehouses across hundreds of thousands of packages a week makes massive financial differences. So talk about things like label printers that peel the backing off so that you save that second, having tape machines that cut the tape for you at the right size. Those few things we spend the whole year optimizing, but then peak happens and essentially the reason peak happens is holiday shopping. Christmas has become a commercial holiday. Everyone gives gifts, everyone does their biggest sale of the year. (04:42): And traditionally, it started on Black Friday with retail because that's when retailers would go into the black, they had all that inventory, all that square footage they were paying for the whole year, and they just do so much sales after Thanksgiving ahead of the holidays that they would pass their break even point. So that's Black Friday. But for e-commerce, when you're talking a game of seconds, how do you handle three, four times order volume overnight for hundreds and hundreds of brands that we ship for? So it's almost an impossible challenge because you can't suddenly triple the amount of packing stations you have, add 50 tow carts to your warehouse, train and hire staff. (05:35): If you just do that all overnight, that doesn't work. You need to train them. So then you need to hire them in advance. And now you need to make sure that you don't lose so much money up front that you never make it back during peak and peak's exciting and terrifying for brands and 3PLs because it's an unknown. You have no idea how the sales are going to go, how much volume's going to happen. So you're at your baseline all year, you're optimized, right before peak, everyone stops shopping because they're going to wait for their deals. So now you have warehouse staff sitting around with no orders to fill because the volume's dropped in half. That's precisely at the same time when you need to hire more staff to be able to handle the volume that's about to happen in the following month. So that's just an overview of the challenges, that operational challenges around peak. Dan Van Meer (06:29): Sure. So let's unpack that a bit. I think looking at one of the primary differences between running and a brand versus a 3PL when it comes to peak and product specifically, is the fact that when you're prepping your brand for 3PL, or when you're prepping your brand for peak, sorry, you're kind of in the driver's seat. You can be ordering inventory, you have control over some of those leaders, levers, obviously when you're running a 3PL, you're reliant on your customers making sure that their inventory is there in time. So how do you manage that process? What does that look like? When do you get started? How do you make sure that you're not in a situation where you actually can't support your end customers from an inventory perspective? Alex Lewkowict (07:09): So it starts well before peak. You have to have really tight communication with your clients as a 3PL. From day one with ONE23 Fulfillment being a brand owner, we set out to really give our customers that feeling like they have an in-house operation without the frustrations of people no call, no showing. So we have been talking to our brands for over a month now, even more, about understanding new products launching, when their holiday shipments are arriving, really explaining to them the benefits of getting their inventory into us earlier from an operational perspective, because every brand has their own philosophy. (07:56): Some brands that are more established, they'll order up inventory many, many months in advance. Other brands that are smaller or just didn't raise funding and are cash flow dependent, they have a really fast inventory turn. And if you're trying to do just in time inventory on Black Friday and you send a truckload of inventory and you already have back orders, very, very tough for a 3PL without prior coordination. So we talk and we will continue to be talking weekly to all of our brands about what's upcoming. Dan Van Meer (08:30): Right. So I guess for context, we're recording this podcast today in the last week of October. So you're talking about comms really starting September or earlier in terms of having those conversations. Alex Lewkowict (08:42): Yeah. And people who get their stuff from overseas, they had to put those orders in over the summer, beginning of the summer. So we really emphasize to customers, please do not have goods arriving after mid November. It's just setting everything up for failure. Dan Van Meer (09:00): Sure. I guess there's an interesting call out there just in terms of the maturity of the different brands that you're dealing with. Obviously brands that have done peak before are familiar with these timelines and have experienced what it looks like to be prepared whereas I'm sure you have some brands that it may be their first time doing peak and need a bit of coaching in terms of preparation around this. Alex Lewkowict (09:20): For sure. Dan Van Meer (09:21): So I guess from an inventory perspective, the next question I have is just in terms of managing physical space. And I know you have an interesting story about that piece because obviously you're running a warehouse all year and you have inventory and there's a lot more inventory when peak happens. How do you plan for that? Can you plan for that? How have you handled that situation in the past where you have had a lot of inventory come in? I'm smiling because I've heard the answer to this, but I think it's worth sharing. Alex Lewkowict (09:47): I have learned the lesson the hard way, short answer. Really tough. I'll give the quick story. I feel like people might enjoy it. But let me set the stage. Peak season last year, not our first peak as a brand Black Wolf, but first peak season as a 3PL. So it's not just our volume. At that time, we had right around 60 brands that we were shipping for substantial brands. We were at 120% capacity when September rolled around completely busting out of the seams. We were still a new company so we couldn't just up and leave. This was at the time when warehousing space had a vacancy rate of 1%, which is virtually nowhere to move. We tried. Zero space. So that's one thing. We're also at the time where supply chain issues and congestion at the port, were still delaying goods. So on a good year, there's a huge influx of inventory ahead of peak. (11:04): But now as they started to clear the backlog in LA, we were just getting an onslaught of containers. I mean, like two, three, four floor loaded containers a day in our warehouse in California. That's literally 12,000 square feet. So what do we do? Stuff started coming and coming and it just never stopped. So we tried to look for another space, couldn't find it. I ended up renting 11 40 foot shipping containers to be brought in and we started storing stuff in the parking lot. And then those filled up and then we started filling the aisles between our racking and every day the guys had to take every pallet outside to the parking lot, work for the day and put it back. (11:58): But then we had so much stuff, they were there till one, two in the morning putting stuff back every day and it hit a breaking point. So I ended up hiring a full-time security company to camp outside our warehouse full time to watch inventory. We had just under 300 pallets in the parking lot, not in the containers. It was unbelievable. Peak week rolls around just before the, couple of days before Thanksgiving. Who decides to show up? Fire Inspector. Surprise annual fire inspection, great timing. He pulled in the front of the building. So he looks, he's looking at the fire extinguishers and I'm like, "Geez, geez, geez." I was sweating. Goes into the warehouse and he's like, "Okay, it looks fine." Goes into the back. He's like, "You guys have a lot of combustible materials along the building in the back." I'm like, "That's one way to call it." (13:10): And as I'm talking to him and he's writing notes, our USPS driver pulls up and he cuts out of his van and he goes to the fire inspector and he says, "Hey, while you're here, they've also been using our USPS rolling bins for FedEx." I'm like, "Really? Is this really happening right now?" And that's when I knew peak was here. But I got to commend OC Fire Inspector, this guy Victor, super nice guy. He said, "Hey, you know what? In Orange County we are business friendly. You seem like a nice smart guy who just got a little in over your head. I'm not going to write you up. I'm not going to shut you down. When can this be cleaned up?" I said, "Honestly, I need till after peak, come back like December 22nd and we'll be good." And he did. And we got it cleaned up because one cool part about peak is you get so much inventory and then so much leaves at the same time. It's this massive wave of goods coming in and going out. So we got it cleaned up. Dan Van Meer (14:26): Sure. I feel like that's like the peakest peak season story I've heard so far. The combination of outside storage plus fire inspector and then the USPS guy piling on was just a cherry on top. Alex Lewkowict (14:40): Believe it or not, there's another element to the story that got- Dan Van Meer (14:42): Come on. Alex Lewkowict (14:43): ... even worse. But I will not ... We'll save that for another time. Dan Van Meer (14:48): We'll do a follow up on peak season horror stories. That sounds good. That sounds- Alex Lewkowict (14:53): It ended with me crying, so people might find that interesting. It was really bad. Dan Van Meer (14:57): Now I'm really intrigued. I haven't heard this story yet, so I'm curious now for sure. What's that looking like for you guys this year? Are you anticipating having to use shipping containers in the parking lot again to manage physical space or? Alex Lewkowict (15:11): No. So we got ahead of it this year. We're good on space. And one thing that we've done this year that we did not do last year is setting the stage early for the shifts that you need to run peak year round. So anybody who ships, whether you're a brand or in the 3PL business, Mondays are brutal. Every brand knows this because you have Friday afternoon and night, Saturday, Sunday, and Monday morning orders to get out in one day. What we saw is that our cost metrics for getting packages out was actually off because we were staffed up to be able to ship out on Monday and then Tuesday maybe a little more. And Wednesday, Thursday, Friday we're kind of lighter and slower. So we switched over to be a seven day a week operation in April and we're going to maintain that forever. It's allowed us pretty much every day of the week is almost identical for us. (16:14): So we can plan staffing better. And what it did is we've found those managers and trusted employees that a Saturday Sunday shift works for them or an evening shift works for them so that when we get into peak, we can make an announcement to our team, "Hey, anyone got family members who want to earn some extra money after their nine to five during peak." We already have the groundwork for an evening shift and for a weekend shift. So that was our plan this year is have trusted employees who know what they're doing and then infill some of the easier to train tasks into those shifts for peak so that we're not trying to spin up a weekend shift with either new hires or burning out our employees by having them work consistent overtime for a month. So that's the main thing that we've changed this year with staffing. Dan Van Meer (17:08): And what does it look like to keep your team motivated during peak time? You talked about avoiding burnout and there's obviously a scheduling element to it, but I imagine that the pressure's on your team, even just within the confines of the regular shift, it's way more intense than a shift in May or whatever. Alex Lewkowict (17:29): Funny. But whether you have 300 orders in a queue or 5,000, they seem to all get out with the same amount of staff in the same amount of time. So what I've come to see as we've filtered through employees and really have built an amazing team, they're excited for peak. They know how to turn on the tap and get those orders out and year round we run a fun environment. There's music in the warehouse, we're family friendly, so if employees have to take care of their kids or kids' school calls or whatever, we're very accommodating. So we've built that loyalty with our team and we've been talking about peak, we talk about peak all year round. Everybody who works for us knows what's coming. We've banned. We've put a blackout on days off and vacation time or calling out during that month of December. Dan Van Meer (18:25): Right. Alex Lewkowict (18:25): We're right. Dan Van Meer (18:26): No, that's awesome. I think one thing I just want to kind of call out and reiterate that I just heard there was that obviously success in peak has a lot to do with the people that are working on the floor and shipping orders. And what I'm reading between the lines is that the caliber of person that you hire and the environment you create before peak has way more to do with your success during peak than your ability to find temp labor or whatever because as best as possible, especially during the year, you don't rely on temp labor for your warehouse. Your staff are typically full time. Alex Lewkowict (19:02): I've never had a one temp employee. It's all full time. Dan Van Meer (19:08): Which is unheard of, right? In the space for the most part. I know there's a huge reliance on temp labor, which brings its own challenges for sure. Alex Lewkowict (19:16): The way that we do it is we cross train. So we used to be known for our kitting capabilities. Now it's moved to more personalization on demand, which we can talk about another time. But most of the people on our prep team, which is what we call, they do big bulk ships, assemblies, pre-kitting, FBA, they're cross trained to pick and pack. So for kitting projects, we schedule those, we have urgent projects, then we have longer lead time projects and we'll make the schedule such that we can have those people on call to come and pick and pack orders if we're behind. And then instead of just using a temp agency for that, they just go back to our prep area. It's like almost a second operation run independently that we can pull from. Dan Van Meer (20:09): That's great. That's awesome. And I guess, so when you're in the thick of peak from an operations standpoint, are there unique challenges? We've talked a lot about inventory and physical space already. Are there any other operational challenges that are different in the peak window versus the rest of the year? Alex Lewkowict (20:27): Yes. Carrier capacity. Always be nice to your carriers. Really try and get to know the local route managers because you might be used to a truck pulling up more than half empty to do your pickup during peak. They'll pull up full and they'll be staring at 11 pallets of stuff. And so we can't take that. So you have to know who to call to make and also contact them now in advance and say, "Hey, here's going to be our volume. Should we switch to a drop trailer? Should we do a sweep? Should we do a late night pull?" Just come up with the right strategy for that. Make sure you have enough equipment. If you use DHL, make sure you're stocking up on gaylords and pallets and tape and all those things that ... You don't want to be in peak and run out of shipping labels and be cut off. It has happened to us before. Dan Van Meer (21:23): Sure. Yeah, it's a bad time for sure. Yeah, that's awesome. That's great. I mean, we talked about operations, talked about inventory, talked about managing team. Anything else that you would say is kind of part of your peak playbook? Alex Lewkowict (21:39): Yeah, we got to talk about customer service. So with customer service, I see it a very specific way. Your customers need fast answers. Your warehouse cannot always provide them those fast answers because they have a ton of priorities. During peak, they're being hit with 10,000 orders. When you're hit with 10,000 orders, the warehouse's focus is how fast and accurately can we ship those 10,000 orders. What the brand's customer service team and our customer service team in the warehouse focus is, why is this one order stuck in tote or this two, these two orders stuck in pre-ship or this special VIP package needs to go out because a celebrity's 100% going to post about it and it's going to blow up the brand. So I've found when you have a structure of customer service that's client facing that then just relays a task onto the warehouse, that really doesn't work. (22:44): So what we've done this year is we have people in the warehouse on the ops team whose only job is to focus on those couple of orders or that one inventory check or that last minute receiving that comes in from customer service completely independent of our normal operation. So you have two operations going during peak. One crew is working on getting the thousands of orders out, the other crew is making sure clients get fast answers and those few problem orders or those few last minute inbounds are taken care of. I think that's a recipe for success. Dan Van Meer (23:25): For sure. For sure. And so how do you manage those troubled totes? What's the process for that in your warehouse? Alex Lewkowict (23:34): So it depends on what the problem is. We obviously run our warehouse on ShipHero's WMS. So what we'll do is any order that has an issue, we'll use the command to send to hospital. We have a cart that's empty with, I got little hospital flags on Amazon. They'll put those totes in there and then we can see on our hero board how many orders are in hospital. And once the cart's full we swap it out with an empty hospital cart and one of the supervisors or the lead packers goes through the totes. Common problems are miss picks, bad addresses, the order's been canceled after it was picked. Usually that or yeah, usually that or some issue with the carrier method. And then sure if it's a just pick, we'll just fix it. If there's an issue with the address or the shipping method that was chosen, we'll leave it in the hospital and reach out to relay that to customer service to get info from the client. Dan Van Meer (24:41): Sure. Yeah, I mean what I love about that is that one of the keys to running a great operation is to eliminate decision making for your pickers and your packers try to make things easy so that they're executing as opposing to stopping thinking, dealing with problems. That's what makes them pick fast. We talked earlier about nailing your process because even just shaving seconds here and there makes a huge difference. So I love the idea that when problems are identified, it gets out of the workflow quickly and that you have somebody who takes care of solving that problem. Because you're right, it's a handful of exceptions that are going to cause problems. That's what your customers are going to ask about, but it doesn't derail kind of the efficiency of all the stuff that can flow smoothly. So that's amazing. I love that. Alex Lewkowict (25:24): Yeah, because imagine you tell your warehouse manager, "Hey, can you look at this order?" And they take their eye off the ball and all of a sudden we're 200 orders off pace and you're getting 5,000, 10,000 new orders a day. How are you going to catch up? You're already double triple capacity, you'll never catch up. You can't fall behind during peak. Dan Van Meer (25:46): For sure, for sure. So I mean, realistically there's going to be exceptions, there's going to be challenges. What would you say your advice would be to a 3PL operator going through peak for the first time when it comes to, you can't solve every problem quickly, like you said, but how do you manage customer relationships well? What are the keys to trying to keep things healthy under the tension of peak? Alex Lewkowict (26:12): I don't know how eloquently I can say it, but you're the 3PL, you're supposed to be the logistics expert. Brands, is their biggest time of the year. They can make a ton of money or be really disappointed and start to have to look at sizing down their team or be stuck with inventory and have financing issues. It's a very tense time. The brands customers are going to be harassing their customer service. You have to recognize that in advance. You're going to have angry customers who say their package was never delivered. They're going to tell the brand, the brand's going to tell our customer service. It's going to happen. It's inevitable. The brands hired us for a reason. It's because we are the logistics expert. Mistakes that we made last peak, I can credit to trying to appease clients but really doing a disservice. And we take ownership of that because we didn't say, "Hey, you know what, that's not going to work." (27:07): There's no way we can do a kit project of 10,000 units with 30 items per kit, if your product's only arriving November 20th. That's just not going to happen, because we have our a hundred other brands that we have to take care of and all of our prep team is working on pick and pack. Then the brand might say, "Okay, you know what, let me do something else or let's just pick and pack. It might be a little more expensive." Or tell the brand, "Hey, I can try and bring in even more staff but it's going to be a little more expensive." Just work with your brand. Don't agree to stuff that you know can't do or that will put your overall operation in jeopardy. (27:45): Because the 3PL business, it can be a vicious cycle. You miss the SLA one day. Now your customer service team is bombarded, they're bombarding your ops team. Now, your ops team's working on getting specific orders out. Just keep your eye on the ball, check your own queue, make sure every order that should have shipped is shipped. Make sure no orders are being stuck or put at the bottom of the queue for some reason and just focus on getting the mass of orders out and have somebody dedicated to just focus on the couple that have issues. That's the best advice I can give. Dan Van Meer (28:24): No, that's great. That's awesome. That's cool, man. Well, I think there's a lot of good stuff in here today that we talked about. So I want to run it back and just make sure that if we're distilling kind of our last 20 minute conversation down into actionable tips, I want to make sure I got it right. So I'm going to read them off to you, but let me know if I missed anything. Alex Lewkowict (28:42): Sure. Dan Van Meer (28:42): So I mean, here's what I'm hearing that the peak season playbook for 3PLs are. First, nail your processes early, the stuff you do between January and September in terms of making sure you're efficient and working as quickly as possible. It's hugely important. You're not going to be able to work on that stuff during peak. So get it in place and get it in place early. Communicate early with your brands, make sure that product is available. You have the inventory up front and that they understand the importance of that. (29:11): And again, people that have done peak in the past, your brands that have been around for a while get that. But you probably have brands in your portfolio that are new to this and you got to coach them through that. Building a great team is another one of those things that you need to do before peak. I think we could probably do a whole episode on what it looks like to manage teams well because I know you've done a great job with that. So I'll write that down. That'll be something we come back to for sure. And having access to a strong bench of people you can call in to help you get into the hole that peak creates. I love the tip about being nice to your carriers. We underestimate, I think, the importance of good relationships with our vendors and partners. (29:48): And obviously, some of those scenarios we talked about today could be pretty disastrous if you are on unhealthy terms with the people in your carrier world. And then finally, I think the other really important point is just from a process perspective, separating the orders that can be picked, packed, shipped quickly and easily, getting them out the door and when there's an issue as quickly as possible, getting that out of your kind of regular pick pack process and having dedicated people to troubleshooting those things because you not only is that an end customer who won't be happy if their order is delayed, but those are the things that brands are going to be calling you about. (30:27): And when brands are calling you to troubleshoot things, that's taking your team out of the loop and spending cycles with them on solving problems, which means that other orders aren't going it quickly. So pretty actionable stuff there. I love that. And I think the beauty of a 3PL business is that it's complex in some ways, but also there's a simplicity to it, if you're able to execute. I think complexity comes out of dysfunction, bad processes, team that's not working well, issues with communication. And so it kind of sounds like the recipe, ultimately the playbook is lead a great team, build great relationships with customers and vendors and execute well. That's kind of maybe the even shorter version of running a great peak. Is that fair? Alex Lewkowict (31:17): My number one advice, whenever anyone asks me about warehousing or starting a brand, just be a good person. Everything is in the nuance. Operational excellence is achieved by really giving a shit about your customers and about getting orders out on time. If you have high standards, you will deliver no matter what. And I think if I had to give a toast to peak, I would say cheers to pre-kitting, cheers to bulk shipping and cheers to Red Bull because you're going to need a lot of it. Dan Van Meer (31:52): That's awesome there. There's no better closing that I could put together myself. So I'm going to pretty much stop talking now. Thank you Alex, for your time. Thank you for your insights and thank you to all our listeners for joining in today. We'd love your feedback. We'd love to hear from you about topics that you'd like us to cover. So check out our content, our contact details will be in the show notes, so feel free to reach out to Alex or I and we'll look forward to chatting with you soon. Have a good day.
