3PL and the Future of Logistics Partnerships

John McClymont [00:00:00]:

You’re gonna see three PLs that are going to really have to adapt their strategies and understand like what is their foundational product. What are those transactional type products that, you know, have maybe more of a steady base. What are the ones that are very susceptible to trends which are the ones that are only going to be used as in and out or drop type items. And you know, that’s really going to shift how you work.

John McClymont [00:00:25]:

Right.

John McClymont [00:00:25]:

You know, today it’s easy to say send us your product. We onboard everything through big pos, we load it to the wms and to the oms and then we eventually kind of trickle it through and do all of our pick pack. Yeah, but I mean I might want to get you something on a Friday that I need shipping, you know, Monday, Tuesday, Wednesday, the next week, and after that I don’t want to see it again essentially, you know, and that’s a very different operating model than, you know, traditional warehousing, traditional 3 PL relationships.

Glenn Gooding [00:00:57]:

Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I’m Glenn Gooding and each episode we dive into insights, best practices and strategies to help you navigate this complex, costly market. Join me as we explore ways to strengthen your long term partnerships with your chosen carriers and stay competitively aligned.

Glenn Gooding [00:01:24]:

Hello everyone. Thanks for joining me for another edition of Parcel Perspectives. I’m Glenn Gooding with iGrive Logistics. I’d like you all to help me welcome John McClimate. John has navigated through an impressive career starting from supervising day to day logistics operations in the food industry to today where he consults on optimizing supply chains and logistics, applying a sharp data driven approach to solve complex challenges in the industry. It is truly a pleasure John, to have you with us today and to share your insights on how third party logistics can providers and adapt to a rapidly evolving market and the demands of a fragmented market. Welcome to the show.

John McClymont [00:02:06]:

Thank you for having me and sending the invitation. You guys have been great and getting to know each other and working on this together has just been a ton of fun. So looking forward to a great conversation.

Glenn Gooding [00:02:15]:

Great. John, I didn’t do you justice on your background. Do you mind sharing a little bit about your background?

John McClymont [00:02:20]:

No, I think you did. I shared that. No, I’m joking. For sure you hit the right points. I mean, look, I did start sort of as a day to day supervisor and worked my way up to a national director type position managing daily activity in the food industry with a heavy focus on logistics. It was a very vertically integrated company so lots of Supply chain kind of connectedness as you move through that. But I always love the actual getting stuff done part. So I’m a logistics and an operator through and through.

John McClymont [00:02:49]:

After my time in the food industry, I spent some time in the cash in transit industry playing with armored cars and boxes of money.

Glenn Gooding [00:02:56]:

And I should have known you that, by the way. I should have known you then.

John McClymont [00:02:59]:

We could have been a little different. But that was also very fun. One thing that I will share is that the business behind food is just as wild as the business behind money. And these days, for the last 18 months or so, I’ve been doing independent fractional and consulting work like you mentioned. So thank you for highlighting that. Whether it’s in the B2B space or direct to consumer space and E commerce related things, just helping people build out new capabilities, you know, generating better quality of revenue and of course, cost containment, that’s always so important when we’re in these physical domains.

Glenn Gooding [00:03:30]:

Great, thank you. What do you think about diving in? So when you and I had a chance to connect, one thing that came through very strongly is you feel very firm on the fact that we’re dealing with a very fragmented market today in the 3 PL space. Right. Could you kind of start by describing what you see in this fragmented market of 3 PL and logistics?

John McClymont [00:03:50]:

Yeah. So, you know, logistics these days is super interesting. Right. Everybody has some understanding of it and people have different levels of connectedness to it. I would say that the industry probably has also gone what I call the shopify effect, which I think has been very positive. But it’s kind of really brought a lot of connectivity and things like that into the market. But it’s also made things maybe a little bit harder for sometimes for people to understand what’s really going on. And what I mean by that and how it ties into the concept of a fragmented market is just that some people are full service providers, some are platforms, some have their own assets, some do a lot of contracting out a lot will do a blend of all kinds of different things.

John McClymont [00:04:28]:

So it makes it really challenging for a brand or even, you know, a smaller sort of startup with one or two products trying to get their product to market and really understand what’s the best strategy to be able to do that, while also trying to navigate a traditional landscape with a lot of legacy and sort of tradition built into how things were done. With a very rapidly changing world when it comes to consumer goods especially.

Glenn Gooding [00:04:56]:

Right. What do you see as the main factors kind of contributing to this fragmentation in the space?

John McClymont [00:05:02]:

Well, I Think that there’s a few things, you know, on the provider side or on the, let’s call it like the operation side itself.

John McClymont [00:05:08]:

Right.

John McClymont [00:05:09]:

Volume in E commerce has exploded.

John McClymont [00:05:12]:

Right.

John McClymont [00:05:12]:

You know, typically in the past, warehouses were for big, you know, big retailers, big brands, whether they were servicing their own stores, they were servicing, you know, their own types of distribution channels or large distributors. It’s now really shifted towards a lot more volume going out to everywhere.

John McClymont [00:05:28]:

Right.

John McClymont [00:05:29]:

Hence the omnichannel term that’s put out so often with everyone. So whether it’s going direct to a consumer, whether it’s going to a small store, whether it’s going to a partner store, whether it’s going to another facility, whether it’s being sold at a pop up shop, I mean, there’s lots of different ways to get product there. So from a service provider side, you know, you’ve now had to accommodate different types of product flow, different types of requirements for how, you know, things have to move through the system. Is something going into a store, is it going into Amazon, is it going direct to a consumer? So you’re getting a lot of people picking up different specializations or even focusing on certain key industries, whether it’s fashion, beauty, footwear, for example, these high drivers of volume, all coupled with the fact that to do more of this stuff and to kind of keep up with this trend that’s going with E Commerce, you have to be able to do more transactions per hour. And now having the huge pressure and need in a lot of cases of robotics and automation.

Glenn Gooding [00:06:28]:

So do you see social commerce and micro influencers kind of contributing to this in this segment?

John McClymont [00:06:35]:

I think social commerce as it’s taking hold is becoming more impactful because of the way that, you know, products can move through the system. You know, how you look at, you know, how you see them go through today, but probably more importantly is how they’re going to go through in the future, right?

Glenn Gooding [00:06:52]:

Yeah.

John McClymont [00:06:52]:

You know, as more brands look to connect with consumers directly and more intimately as they look to provide themselves and you know, with certain opportunities and advantages in the market, the type of people they work with, the number of people they work with, the communities and the associations that those influencers have, for example, or maybe not even an influencer, but those different channels, if you really think about it that way, is going to cause a lot of variability in the system.

John McClymont [00:07:18]:

Right.

John McClymont [00:07:19]:

In the sense of how quickly something might come in, how quickly it might sell, how sales may stop all of a sudden, how product may fall off traditional like seasonality, you know, Especially if it was tied to things like weather or holidays, shopping, holidays and things like that. And that seasonality shifts more towards trends and what became popular through video or through social, you know, different types of social media content. It really is going to change how product is handled day to day in all of these types of facilities.

Glenn Gooding [00:07:51]:

How do you manage that efficiently and not force yourself in a position where you’ve bought en masse for a discount and now you’re sitting on potentially obsolete inventory?

John McClymont [00:08:03]:

Yeah, I mean that, that, that’s a, you know, that’s like a big question. It is a big question. I think at the end of the day, you know, people are always going to have to have inventory, right? You’re going to have certain things. I think what’s going to happen is that you’re going to see greater and greater levels of maturity and intentionality when it really comes to understanding, well, what type of products are going to be used in what way and you know, in what capacity.

John McClymont [00:08:27]:

Right.

John McClymont [00:08:27]:

You know, those white T shirts or black T shirts or you know, those sort of staple jeans are always going to have their place where you could probably count on a little bit more of a transactional base. But you know, that same black T shirt with a different graphic on it, all of a sudden that is very tied to a particular moment in society.

John McClymont [00:08:45]:

Right.

John McClymont [00:08:45]:

A cultural event, a particular holiday, you know, some kind of celebration, whatever it could be. And trying to get the right things in the right place to the right people, I think is where it really comes down to. So I think the concept of, you know, buy it or build it and they will come. I’ve bought all of this stuff so consumers will come and buy it from me, I think is probably what’s going to fade away. And you’re going to have to really know what is being used for what type of interaction with your customer base.

Glenn Gooding [00:09:13]:

Seems to me that that type of trend is going to lead a nimble 3 PL into more dynamic kitting and customization to. I think using your example of a blank black T shirt with a different graphic. Right. If you had the graphic capabilities on site, you’re dealing with the same blank stock. But you can really meet demand in a very real time type of scenario, right?

John McClymont [00:09:38]:

Yeah, definitely. Like I, I shared a story about a smaller Canadian brand not that long ago and all of their setup was essentially make to order. I mean, to the point of being able to say, hey, I’m glad you love this particular piece and I’d love to sell it to you, but it only comes in large, so to speak.

John McClymont [00:09:55]:

Right.

John McClymont [00:09:56]:

Like that’s a very different reality than the have, you know, every option in every color and every size for everyone at every time. You know, those are two very different sort of ways to connect and sell with consumers. They each obviously have their own advantages. And you know, I think everyone will safely say that they never want to lose a sale, but there’s also a ton of value on selling your best stuff and selling it really, really well. So you’re right. You’re gonna see three PLs that are gonna really have to adapt their strategies and understand like what is their foundational product. What are those transactional type products that, you know, have maybe more of a steady base. What are the ones that are very susceptible to trends which are the ones that are only gonna be used as in and out or drop type items.

John McClymont [00:10:44]:

And you know, that’s really going to shift how you work.

John McClymont [00:10:47]:

Right.

John McClymont [00:10:48]:

You know, today it’s easy to say send us your product. We onboard everything through big pos, we load it to the WMS and to the oms, and then we eventually kind of trickle it through and do all of our pick pack. Yeah, but I mean I might want to get you something on a Friday that I need shipping, you know, Monday, Tuesday, Wednesday, the next week, and after that I don’t want to see it again essentially, you know, and that’s a very different operating model than, you know, traditional warehousing, traditional three plus relationships.

Glenn Gooding [00:11:15]:

It certainly is. I’m wondering. It kind of leads me to. I’m going to try to turn this into a two part question for you, John, and break it up all those. As we discuss this fragmentation and these trends, how do you see that affecting supply chain efficiency? And let’s do it from a sourcing perspective first. Sourcing first. How do you see that potentially affecting it sourcing?

John McClymont [00:11:36]:

I think realistically, I think there’s opportunity there. So, you know, I mentioned at the top of the podcast that I came from the food industry. While I was also very fortunate that the company that I was with was a manufacturer as well. So a very vertically integrated organization. So lots of experience towards manufacturing. You know, and manufacturing as most people know it is big batch, high run, big economies of scale. And you know, that’s how we make stuff and that’s how we drop the price. And of course that’s true.

John McClymont [00:12:05]:

Like that is true. And you know, that is going to continue to be there for a bunch of things. On the flip side though, you have the emergence of like Shen, for example. Now these guys are Putting out over a million new SKUs every year now, that’s like unheard of. Yeah, that’s unheard of. Because when you even look at some of the fast fashion leaders like Zara and sorry, Indidex or whatever, like as a larger brand, these guys were, you know, a couple hundred thousand, maybe a little less than that, like in terms of variance, you know what they were. Now a company like H and M might have been 65,000 something in these ranges. So to be in this million plus, and I think it was around 1.3 million kind of variance shows that manufacturing is evolving.

John McClymont [00:12:47]:

Right. And I think that, you know, micromanufacturing smaller batch and being able to get more from similar source materials is only going to continue. So I don’t necessarily think that the manufacturing is going to be the biggest bottleneck. I think dealing with that level of variability though through the system when you’re like, well that box has got, you know, six of this T shirt and one of the other and one has these two sweaters and this one has that, that’s where I see a lot more complexity. I think manufacturing is going to be well positioned especially when you consider how much 3D printing. And I know a lot of people, you know, kind of think, oh 3D printing and they’re thinking, you know, gadgets on your desk. But it really is sort of additive manufacturing when you think about it at its core. And as that continues to improve, that’s going to dramatically shift the way that people can get things made.

John McClymont [00:13:37]:

Right.

John McClymont [00:13:38]:

Even auto store right now with, with their big multi. You’re right, you know, sort of their big grids are making their own robots. Like they’re making the parts.

Glenn Gooding [00:13:46]:

Yeah, very cool. So the second part of this two part question, as you probably are going to intuit, is now we think about the execution of the order and the final mile delivery and ultimately customer satisfaction, the experience. How do you see fragmentation potentially affecting that and what should be considered from your perspective?

John McClymont [00:14:07]:

Yeah, I think the challenge that comes after that then is when you get into sorting and you’re starting to push these different types of products out. One of the, the bigger challenges, I honestly see that a lot of retailers, I think retailers and brands have probably over indexed a little bit is on like that diversification and that rate shopping.

John McClymont [00:14:26]:

Right.

John McClymont [00:14:26]:

You know, that’s been probably all of the rage for the last number of years. And while I think it is important and it has to have a place, I think a lot of people need to streamline it a little bit and focus it with a little bit more intention because you can’t keep just having volume going out with everyone in every direction and try to, you know, really feel that you’re going to get the right type quality and the right type of experience all the way through. Not only that, if you want to be a better partner and get, you know, sort of the best quality, the best consistency and the best pricing, you also have to essentially be important enough to each one of these different sort of links and providers in the chain.

John McClymont [00:15:03]:

Right.

John McClymont [00:15:03]:

Like, you know, the warehouse provider needs you to be big enough, the delivery partner needs you to be big enough, that transportation provider needs you to move enough stuff. So, you know, I think that there’s the right. Right sizing more so than saying, you know, you don’t necessarily have to go solar source and you don’t have to have 200 providers. But what is the right profile and what is the right mix of options for your particular business that’s not going to be the same as someone else’s? And I think that that’s where, you know, the fragmentation today is causing the biggest issue because a lot of people are kind of just plugged into everything and touching on almost everyone very, very easily. And I think it’s creating a lot of noise in the system for a lot of brands.

Glenn Gooding [00:15:44]:

Interesting. So if I were to restate what you just said simply for my mind is do you know, multi sourcing sounds great, but if you’re not driving economies of scale, you’re probably leaving dollars on the table. You’re not efficiently aligning. So kind of a rational diversification you stated. And I think another really important piece that you mentioned is that if you were very fragmented in your sourcing, not your sourcing, but your procurement of final mile, not all final mile deliveries provide the same customer experience. And so you could have a fragmented customer experience based off of your drive for the cheapest rate, as an example. Right. So you have to be very, I think, premeditated or contemplative around what is your desired brand experience and align with the right providers that fulfill that.

Glenn Gooding [00:16:36]:

Is that a fair restatement?

John McClymont [00:16:37]:

Yeah, for sure. I think, you know, it’s trying to make sure that you do everything that you can for your business to essentially stack as many of your advantages as you can because it’s extremely competitive. And you know, the solution that is working for even a competitor may not be the right thing for you. And working with people that can help you fine tune that strategy is becoming more and more important every day.

John McClymont [00:17:04]:

Right.

John McClymont [00:17:04]:

And having people that have, you know, the right access, the right understanding of different systems and whatever, and can legitimately say, hey, here’s what makes the most sense for your business and why is extremely valuable. Because plugging into everything to get every rate or every option from everywhere doesn’t necessarily mean you’re better off. Like, you know what I mean? It’s kind of easy to give everything everyone.

Glenn Gooding [00:17:28]:

Yeah, for sure. Do you happen to have a specific example, top of mind, where Maybe a traditional 3PL type of model has struggled to keep up with these changes?

John McClymont [00:17:38]:

You know, I would say at a really like, more macro level, you know, just to not call anybody out because I don’t want anyone, you know what I mean? But I understood.

Glenn Gooding [00:17:46]:

Oh, yeah, yeah, yeah.

 

John McClymont [00:17:46]:

I would say one of the easiest ways to see that people are struggling is the kind of challenge and dichotomy people are having when it comes to emerging brands. Right. Every 3 PL wants to grow. There’s not one 3 PL out there right now that doesn’t want to grow. At the same time, though, a lot of them struggle to potentially onboard smaller customers. Oh, this customer only does X volume. They only do so many orders per week. They will only pay.

John McClymont [00:18:14]:

Why? And of course this makes sense, right? You know, they have their fixed costs and whatever. But that’s the challenge of what’s happening, is that as the world demands, like the consumer base demands people to sell more and to have more variety and to have more innovation so that they can do more discovery and have more choice, it kind of means that everybody’s volume kind of drops because now you’re pushing it out, you know, a lot wider. But nobody really wants to deal. And no one is set up that well to deal with a lot of these smaller brands. But the reality is they’re more of the future than the likelihood that you’re going to lock in a $10 billion a year retailer.

Glenn Gooding [00:18:54]:

Yeah, that’s a good point. So what kind of adaptations do you think a 3PL provider needs to undergo to attract and provide and retain these smaller rising brands and this fragmented market?

John McClymont [00:19:13]:

Well, in terms of attracting, I mean, I think the more that any3PL can do to be a better partner to that brand. And I don’t just mean like the kind of thinking of saying, like, hey, you know, you focus on the sales and we’ll do the shipping, I think that that concept is just, it’s a little bit assumed, you know what I mean? I don’t think anyone’s looking for a 3 PL provider feeling that, you know, they’re going to get at least anything other than that relationship or that support. So it’s kind of like, how do you become a better partner? How do you help them make better informed decisions? How do you help them spot opportunities where they can improve? And that’s probably one of the challenges that most 3 PLs have is am I confident enough in my ability and in this customer that I’m willing to make an operational suggestion that might lower my revenue temporarily to help them grow so that, you know, we then essentially are growing together.

John McClymont [00:20:04]:

Right.

John McClymont [00:20:04]:

And not just have it all one way for one side of the. Of the partnership.

Glenn Gooding [00:20:10]:

I love that. So in essence, you’re saying they have to sit into more of a consultative partnership role, is what you’re saying.

John McClymont [00:20:17]:

Right, exactly. And help them really grow. Because that’s what everybody needs. When they grow, you’re going to grow. But on the short term, they may need some things to help them grow that aren’t the best for your bottom line. If you’re just looking at it by.

Glenn Gooding [00:20:29]:

Managing a report, you know, from my lens, from my perspective, in my years in this industry, it seems that seems to be a massive blind spot on the three PL space.

John McClymont [00:20:38]:

Oh yeah, right.

Glenn Gooding [00:20:39]:

A massive blind spot is. And if I heard you correctly, it’s going a step further as well. It’s in a consultative partnership role. Imagine the power of having marketing expertise in that particular social segment that they’re playing in, or real expertise on how to manage the client experience at the shopping cart level and put as much choice into the consumer’s hands as possible. I would think those are really, would be really valuable and really needed in this space. Right. Oh, which, which goes counter to what the legacy is. You know, you sell, you market and we’ll ship it for you.

John McClymont [00:21:17]:

Yeah. You know, and the other thing is the reality is most 3 pls have a book of business. Right. Like they have all kinds of different clients and stuff like that. There’s tons of insights that you can drive without breaching any confidentiality or trust or anything like that. But there’s certain things you start to understand about the types of packages that are going out, people’s buying patterns, the type of. The way things seem to move into certain regions and geographies. None of that needs to be given away in the sense of saying like, hey, this is X, Y, Z brands playbook.

John McClymont [00:21:49]:

Like you would never do that. But if you can kind of like share collaboratively some of the organic observations that happen, that brings another whole benefit of what you can do to your brand. Because if they chose to bring everything in house and they were just doing themselves, they would never have access to that kind of information as an example. So, you know, that type of collaboration and really understanding, hey, I have two clients, I could charge them each a storage position for X amount of pallets. But you know what, maybe I could actually merge these two things. Each of them could be cheaper. Most of the time people will think, well, if, you know, they’re going to expect the storage, like they’re just going to expect these fees, I’m going to get it from them. But the thing is, if you either bankrupt the brand too quickly, if they, if they run out of Runway too fast, like they could have been a unicorn that just tripped getting out of the gate.

John McClymont [00:22:39]:

So, you know, sometimes you have to just be a little bit more mid to long term focused, but always still making sure though that your revenue quality still makes sense and that you’re not just funding someone else’s business by selling at a discount or by buying too much of, you know, what you’re going out there to get.

Glenn Gooding [00:22:58]:

Sounds like a real balancing act, John.

John McClymont [00:23:00]:

Mm. Yeah, revenue pricing is nasty, right? It’s, it’s really, really difficult.

Glenn Gooding [00:23:05]:

Yeah, it is. You know, when we’re talking about all this, and this is almost in today’s world, rhetorical type of question, but I’d love to get your specific thoughts on it. What role or how important is technology in facilitating these adaptations?

John McClymont [00:23:20]:

You know, I think technology is beyond needed, with the caveat of saying that technology will never make a bad operator great, but it will most certainly make a good operator great. Like, you know what I mean? Like it will shift the needle for people that already know how to do the basics. And technology is broad. And you know, one thing that I share with a lot of the three PLs that I work with is that they do need to have a roadmap and a strategy for investments when it comes to automation, robotics, these different things. The reality is they’re becoming too mainstream and everybody essentially that matters, or that’s going to take space in the industry is going to have some type of solution. I’m not saying that you have to be as automated as Amazon, but you also probably don’t want to be still running around with clipboards and running back and forth to the office with order sheets or anything like that.

John McClymont [00:24:13]:

Right.

John McClymont [00:24:13]:

So, you know, you need to have certain systems in place. But more importantly than that, I think that not to overlook the small stuff, right. Whatever automations you can create in your workflows, whatever consistency you can create in your processes within the office. Right. Whether that’s for your internal needs, whether it’s for your customer facing needs, for automated reporting, automatic communication, you know, automatic inventory level reporting, take more ownership of that, give your customers what they need, but don’t do it just by brute forcing it, by throwing more time at it, because that just won’t be sustainable because you end up with all of these costs every time you onboard new customers. And you need something that’s more systemic rather than just time based, for sure.

Glenn Gooding [00:24:58]:

Do you have any specific examples of successful tech integrations and partnerships in kind of this, in this logistics sector that you’d like to talk about or.

John McClymont [00:25:06]:

Honestly, I think the industry overall is becoming so much more aware. I think that more than anything else is to make sure that anyone that you’re interacting with or any tool that you’re looking to buy, whether it’s a SaaS platform, whether it’s something, you know, enterprise or whether for yourself or whatever it is, make sure it’s actually built in a way to communicate. These days, one of the best things about all of the newer technology these days is that it’s all been built on the back of very open APIs, people being able to transact information, whether it’s in real time or, you know, end of day or start of day, whatever it could be. But it’s a very open architecture to make sure that you can transfer information. And I think that that’s probably to your point, like, you know, something that has to be needed, but something that’s already seen.

John McClymont [00:25:48]:

Right?

John McClymont [00:25:49]:

Like the fact that you can plug your Shopify store into so many WMSs, the fact that your WMS can connect to different platforms to set up delivery options, the fact that your OMS is connected all the way back through these things are amazing. And those types of integrations have shown wild amounts of success. It’s created a little bit of complacency and probably some misunderstanding about people feeling that because they have an app for that everything is good. But you always want to make sure that no matter what you’re doing, you have access to that information and that data and whatever you can get to increase the transparency and the visibility of what’s happening.

 

Glenn Gooding [00:26:26]:

Right, I agree. So transparency and visibility, that plays well as a segue to data. I know you’re a data guy. Yeah, I know you are. Right. So here’s a layout for you in your mind, what role does data play in optimizing these innovative solutions? Right.

John McClymont [00:26:50]:

Well, data, you know, funny enough, I am I love data. I always will take more no matter what. Data is a mixed bag though, because there’s a difference between like data that I would say can be useful and drive insights versus information. A lot of people these days have a lot of information, meaning they just record stuff all over the place and they just have it. But real sort of like, you know, using your data is really to drive it to knowledge so that you can actually take action on what has come in. And that’s where I think that, you know, there’s still a lot of maturity that needs to go on. I was doing some work with a few different 3pls and looking at some revenue quality and stuff like that. And from one screen to the other there were inconsistencies.

John McClymont [00:27:36]:

You couldn’t bring the same fields up for the same customer. Like eventually you could join it all back together. So I mean, you could work the problem. It wasn’t unsurmountable, but it was more annoying than it should have been when even some simple disciplines and practices around maybe how you could structure data in certain fields and what’s the taxonomy that you have with your data and how do you have it structured, would tremendously improve their time to action. And those are the types of things that I think are really important with your data. Is that how quickly can it help you decide, you know, A or B, yes or no, or you know, which of these 10 options do I need to go for as accurately and as quickly as possible?

Glenn Gooding [00:28:17]:

Right. Skew rationalization, which I would think would be an offshoot or an outcome of looking at great data. Right. Making good, informed decisions. How does SKU rationalization help in managing these complexities of a fragmented marketing?

John McClymont [00:28:34]:

Well, I mean a few things, right? Like look, if you have inventory in your system, you bought it, and if you haven’t paid for it yet, you owe money on it. So it’s a liability one way or another until it’s sold and you’ve collected money and made your margin on it.

John McClymont [00:28:48]:

Right?

John McClymont [00:28:48]:

So yeah. So with SKU rationalization, the goal is to really make sure that you’re essentially keeping your inventory ideally as tight as possible. And in a way that’s as sellable as possible at your highest margin. Because let’s be real, anyone can sell anything if it’s sold at a crazy value, right. No matter how ugly that shirt is, someone would probably buy it for a dollar and someone most certainly would buy it for 10 cents. So it’s like at some point you can get ridiculous enough that there’s always going to Be a buyer. But if you’re selling that at a loss, on top of all of the time and effort you put into storing it, you’re way, way behind, which puts pressure on everything else to make up for these losses. So cutting down your inventory is better for your revenue and better for your bottom line, but it also helps you be a better partner with your service providers, right? Because then they’re not holding all kinds of stuff all over their space and having that tension around what they need to charge you versus not charge you, whatever.

John McClymont [00:29:47]:

And then more importantly than that is that it also gives you flexibility to understand, like, well, what’s your capacity that you can sell those marketing dollars, those advertising dollars, everything that you can focus with your brand, you can start really being one sort of cohesive organization rather than always worrying about these x amount of SKUs that like, you don’t really know what to do with, and that are just being a drag on the system. So keeping that really lean is important because certain industries, like footwear, for example, and apparel, have wild amounts of variance when you think about every size and every color of essentially the same core product.

Glenn Gooding [00:30:21]:

You’re right. And full disclosure, I am a SKU buster myself, right? So I am an outlier. I’m an outlier in sizes, whether it be shoes, gloves, shirts, you name it. So sometimes, personally, my heart gets a little sad when I think about that because what I hear or what I connect is, oh my goodness, they’re going to sell nothing but mediums and largest, you know, so it is interesting.

John McClymont [00:30:42]:

It is. But, you know, the thing is, there’s a difference between saying, hey, I’m only going to sell mediums and larges versus, hey, if I need to have that size 16 shoe, maybe I’m only going to make it in two of the color formats and not six. Or you consolidate your inventory so that if you have a client base that’s looking for special types of sizes or really outlier sizes, at least you can direct them very cleanly to like, hey, here’s your best avenue. You know what I mean? And it gives yourself the best chance to keep that inventory consolidated and sell it as quickly as possible.

Glenn Gooding [00:31:13]:

Yeah, for sure. And that. You made me feel a little better there, so thanks. So, thinking of the future and the trends, and we’ve talked a bit, and where you see it going into the fragmented, what do you see happening in the 3 PL industry in the next five to 10 years? And in my mind, five to 10 years in today’s world feels like a lifetime demon.

John McClymont [00:31:33]:

Lots of weight 10 for sure. I think that there’s just so much going on with the systems that it’s going to be really, really challenging to try to see hey, here’s a 3 PL of you know, in a decade, you know, on the shorter horizon though I really do think that you know you’re going to have to become a master of understanding the fact that people are going to be looking for fulfillment in a lot of different ways.

John McClymont [00:31:55]:

Right?

John McClymont [00:31:55]:

It’s direct to consumer, it’s to the store, it might be to a vending, vending machine type thing in a store, it might be to a kiosk, it might be to blockers. So you know, being able to be flexible and agile I think is going to be extremely important. But I also think what you’re going to see more and more is specialization. I think you’re going to see you know, more three pls that say hey, we do X, Y and Z. We don’t do A, B and C but we do X, Y and Z really really well. And they’re going to have then their own unique features, they’re going to have their own unique types of offers and things like that. But it’s going to make it harder for anyone that’s trying to you know, play both sides and stand in the middle and stuff like that because you know it’s like eh, you can do everything but you’re kind of like mediocre at both. Whereas like you know, each of these people is you know, top tier in those specific segments.

John McClymont [00:32:45]:

So I think you’re going to see a lot more specialization. One because robotics and automation does a lot better with that and then two continuous improvement does a lot better when you have a more like for like kind of activity set than if you just have wildly different requirements.

Glenn Gooding [00:33:01]:

Well I couldn’t agree more. So keep it simple, stay narrow, specialized. And you see that happening. How could legacy 3 PL providers today start capitalizing on these future trends? How do they begin to make that course adjustment?

John McClymont [00:33:19]:

I think the sooner they start getting exposed to it the better.

John McClymont [00:33:22]:

Right?

John McClymont [00:33:22]:

Like bringing in some of these new brands, getting exposed to some of these ideas, hearing and really having meetings with these types of new founders, new businesses and whatever. But what they want to do I think is probably the cheapest and easiest way and you’re looking for customers anyway start figuring out how you can work with this base. I think that that’s there for sure. The other thing is too, I think you really need to evaluate if you’re planning on being around for any period of time, what type of systems or automation or like even if it’s for a piece of your facility, even if it’s for a certain line, even if just for certain activities, you need to start looking into that and understanding like, well, what would it cost and is your business driving the right kind of margins for it and how would you essentially pay for that? Because you don’t want to be in that situation where you need a new piece of equipment and your whole business model essentially doesn’t just generate the revenue to ever pay for it because you’re just going to catch yourself in this, like you’re going to be stuck in this cash flowing too where you can’t get out of it because it’s like you’ll never be able to outsell enough to make up that revenue and you won’t be able to sell enough to generate that revenue to pay for these things until you can process more volume.

Glenn Gooding [00:34:30]:

And my experience in the 3pl space is most 3pls are a bit cash constrained. Right.

John McClymont [00:34:36]:

So it’s a very low margin business. Yeah, yeah.

Glenn Gooding [00:34:40]:

Given that, is there any advice that you would give that John McClyment would give three PL providers looking to adapt Thrive moving forward? Anything generic advice is permanent.

John McClymont [00:34:52]:

Yeah.

John McClymont [00:34:53]:

You know, honestly, I always focus on the stuff that takes the longest, like, you know what I mean, that seems intensive. Whether it’s physically intensive, labor intensive, just time. Because the reality is this is that no matter what system you have, okay, everyone has a capacity, right? Like, you know, Amazon’s capacity per hour is going to be different than, you know, Tim’s three PL operation. But the reality is, is that each of them can do so much in an hour and then they all have so many hours in each day that they’re operating. So really focusing on these things where you’re spending a lot of time or you’ve invested a lot of time because those are probably the biggest bottlenecks to your capacity. And then once you kind of understand what’s going on, there is to have a really, really clear view of what your actual capacity is and that’s your capacity with your current level of investment and then what that next level of investment would open up. Because again, you don’t want to invest in an automated line that you think like, oh, I just need to sign up 50 customers and then you find out that your capacity would never let you sign up more than 30 because you’d never be able to pay for it.

Glenn Gooding [00:36:00]:

Great example to a pitfall. Right. Any other pitfalls they should avoid?

John McClymont [00:36:05]:

I think you know, the other big pitfall is people pricing on a prayer that I like to say. And I say that on the sense of believing that I can price someone at a discount and I can price them so low and they’re just going to fall in love with me so much that I can then increase the rates later and make myself whole, and not just whole at the time, but maybe make up for some of what I’ve invested by the discounting. And you know, the most brutal truth that I can put out there for anyone is that it’s kind of like dating. Like if you’ve attracted someone based on the fact that you said, hey, I am a low cost provider, I will be the cheapest rate that you can get. And we, you know, this is what we’ll do for you. That’s what that person signed up for, that’s what they bought you for. You know what I mean? So if you’re not having a legitimate business conversation where you’re saying, hey, we can support you, but we scale or we do something and they buy into that idea, please don’t price on a prayer hoping that they’ll just love you so much that they’ll deal with whatever comes down the road later.

Glenn Gooding [00:37:08]:

Very sage advice. And I think it would go into all different facets of business or personal life on that front, right?

John McClymont [00:37:15]:

Yeah, definitely.

Glenn Gooding [00:37:16]:

Very sage. So your vision for the 3 PL industry, what has you most excited about the future of the 3PL vertical?

John McClymont [00:37:25]:

I think that it’s an enabler, right? It needs to enable more innovation, it needs to enable more people connecting with other people, right? That’s really what the biggest opportunity of it is, is that it’s that meeting point, that nexus between, you know, where stuff is still just stuff in the system to where it starts becoming stuff that’s going to your customers, right? So really being able to be an incubator, being able to be a supporter, being able to be that enabler to help get more interesting solutions to market that they themselves wouldn’t die. Like, you know, if you think about something as simple as, like American Idol in the past and TikTok now, like one of the craziest things, like my daughter went to see a concert last week for someone that completely blew up on TikTok by all rights and purposes, this person probably never would have been the right fit for the traditional record industry, wouldn’t have been selected, wouldn’t have been that product that you would have seen. But because of these alternative channels and these other opportunities, now you’re being exposed to that talent. You’re being exposed to the, you know, that magic of that artist. It’s the same thing with 3pls. You have the ability to be such an enabler. And I think that that’s really what is exciting for me for the future, when you think about, like, the possibilities that it can support.

Glenn Gooding [00:38:48]:

Awesome. Great discussion today. I’ve really enjoyed it. I really love your vision and your perspective on these things. Could you possibly provide one to three kind of takeaways or action items that listeners could glean from this conversation today and put into practice tomorrow?

John McClymont [00:39:05]:

Yeah, for sure. And thank you. I always love when we chat. You know, first thing is just focus on what’s like really working and selling your best stuff.

John McClymont [00:39:14]:

Right.

John McClymont [00:39:15]:

Stack as many of your gains as you can as quickly as possible. My second one would be don’t be in too much of a rush, right? Kind of get good at what you’re doing, what you need. Expand strategically and in parallel rather than just jumping all around because, you know, some misguided notion of TAM or something like that. You’ll get there. But like, build properly is really important. And then, you know, the third thing is, is that you’re gonna need to trust people like, you know, by leaning on the expertise of other people in other areas, you’re gonna get a great ROI for your business. There’s a lot of noise out there, though, so you have to have a lot of conversations and you have to be curious maybe a little bit longer rather than just maybe falling back to the fact that, oh, everybody’s trying to sell me everything and. And I just.

John McClymont [00:40:04]:

It’ll be easier if I just don’t listen to anyone. You can of course, go it on your. On your own, but the reality is, is that there’s nothing but information and experience out there and take every advantage that you possibly can.

Glenn Gooding [00:40:19]:

Couldn’t agree more. Given that and given that you are a great source of good information that I think a lot of three PLs would love to lean into. How can our listeners learn more about your work or get in touch with you for further insights?

John McClymont [00:40:34]:

Yeah, for sure. So the free stuff like first guys like LinkedIn, I post all the time, right. So that’s my name right there. My profile is like that. So, you know, LinkedIn.com/John McClamon or whatever it is. If you search me up, it’s kind of enough of a unique name that you should be able to find me. I also have my newsletter that I do all the time for people to be able to subscribe. To that’s on Beehive and I actually link to it regularly through LinkedIn.

John McClymont [00:41:02]:

People can find it there. I would give you the link but it’s a weirder link to actually put out there, but happy to share it for the show notes and that’s just content that I put out there for everybody for free and I usually always share like my best stuff in terms of ideas or my takes and stuff like that. I don’t hold anything back for anyone that’s looking for something a little bit deeper. You can go to operationalinnovations ca all one word and that’s my website. You could of course connect with me on LinkedIn. The DMs are always open and then you know directly. If you prefer write on the email. It’s johnperationalinnovations ca.

John McClymont [00:41:36]:

You will notice the ca. I am Canadian so please don’t hold it against me.

Glenn Gooding [00:41:42]:

You’ve got it. Thank you so much. I’ve really enjoyed the time. Yes, thank you listeners. I really appreciate you listening to another episode of Parcel Perspectives. I work really hard. We work hard at iDrive to bring great guests like John and great content and focus for you. By all means.

Glenn Gooding [00:41:59]:

If you enjoy what we’re doing, please subscribe. Don’t be afraid to recommend it to others. Thanks again. Until we talk again. Take care.

Glenn Gooding [00:42:13]:

Thanks for listening to Parcel Perspectives, hosted.

Glenn Gooding [00:42:16]:

By me, Glenn Gooding.

Glenn Gooding [00:42:17]:

I’ve been in the small parcel space for 37 years, starting with a deep and broad background working for one of the major carriers as an operator and industrial engineer, later managing pricing at the highest level for the largest, most complex shippers in the world. Since then, I’ve been a national thought leader and work to help drive strategy for clients from Fortune 50 companies to startup e commerce businesses, helping them more competitively align in this complex and expensive market. If you enjoyed the show, please subscribe and share with friends. Join us next time for more expert advice and strategies to stay ahead of the shipping game.