From Growth to Grit: How High-Growth Brands Can Avoid Fulfillment Burnout

[00:00:00] Aaron Alpeter: In terms of building a moat, I think it really comes down to maintaining the trust of your brands. There’s only one reason why anyone leaves the fulfillment center, and that’s because there’s a breach of trust and it’s a breach of trust in terms of performance, in terms of team or honesty, maybe there’s a lot of transition.
It could be in terms of, “Hey, we don’t trust that we’re getting a fair market rate for our volume or our capability.” And so, the single most important thing you can do to build a moat is really around this client relationship, client ownership, and making sure that, there’s a strong, healthy two-way relationship with trust.
[00:00:35] Glenn Gooding: Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I’m Glenn Gooding. In each episode, we dive into insights, best practices, and strategies to help you navigate this complex and costly market.
[00:00:50] Welcome back to Parcel Perspectives. I’m your host, Glenn Gooding. Today’s topic is one we see all too often: brands that scale quickly, but forget to scale their operations.
[00:01:02] I’ve got a very special guest today. He’s a friend as well as someone professionally I think very highly of, Aaron Alpeter. He is founder of Slotted, CEO at izba Consulting, as well as Chairman at Sourcify. One could say he does just a little bit in the supply chain space.
[00:01:24] Today, we’re going to talk about the real risks of fulfillment burnout and how to avoid them before it costs your customer trust and margin. Aaron, welcome.
[00:01:35] Aaron Alpeter: Glenn, thanks for having me. I’ve been really looking forward to this.
[00:01:37] Glenn Gooding: Yeah, me as well. Always a pleasure to be on with you. Well, why don’t we start at the beginning? I’d love your perspective, Aaron, on kind of growth curve and balancing that with a reality check. When does fast growth, hyper-growth begin to do more damage than good with regard to operational teams and infrastructure? What have you seen out there? I know you touch a lot of businesses.
[00:02:08] Aaron Alpeter: Yeah, I think it’s helpful to look at growth in four stages, and so it is what – we’ve got these four acts of a play if you look at: Stage 0 is when you’re just starting out, and this is when you’re trying to de-risk the idea, right? “I’ve made this thing. Do people wanna buy it?”
Okay, then, Phase 1 is when you’re actually going out, trying to sell, trying to get things going. You’re setting up your supply chain for the first time. Stage 2 is that hypergrowth stage you talk about where you’re actually scaling, you’re hopefully becoming more profitable, and then Stage 3 is the exit where you’re preparing the business on that end.
[00:02:40] I think that where most people run into problems is when they jump right into hypergrowth and they make those expectations that, “You know what? I really believe in this idea. It’s a billion dollar idea. Let me go out and build a supply chain that can manage a billion dollars for the business, but they haven’t cracked their first million yet. And so, I think it’s possible to overbuild and to sell yourselves with all this operational complexity that you don’t need.
[00:03:03] At the end of the spectrum is when you just fall into hypergrowth. And it’s a really fun opportunity. Honestly, it gets stressful. But it’s actually the best part about working with startups is when you have this constant tension between marketing trying to break the supply chain and supply chain, not letting you break them, and I think it comes down to understanding what you can and can’t do, and the business being able to give a pause or a breath in terms of what we’re going to tackle right now, what we’re going to muddle through, and what we’re going to weight on.
[00:03:37] Glenn Gooding: Great. So, you mentioned on the first side – you mentioned overbuilding, right?
[00:03:43] Aaron Alpeter: Absolutely.
[00:03:43] Glenn Gooding: What does that kind of look like? There’s some obvious downsides, but could you illustrate for the listener some telltale signs of that or what the real things to look for are, the cautionary tale with that maybe is?
[00:03:59] Aaron Alpeter: Sure. So, I’ll give you two examples: one from a fulfillment center itself and another one from a brand. From a 3PL, I remember having a 3PL that I used in one of my companies. They were a fantastic team, [I] really enjoyed them, and I remember being very impressed by all the mechanization they had in the factory or in the fulfillment center.
[00:04:17] They had automated sorting robots. They had pick to light, they had really fancy dashboards, and things like that. And so, we ended up working with them, but they couldn’t ship on time and they couldn’t keep the inventory straight and it ended up that all of the really expensive gizmos and gadgets that they were using couldn’t help support what we need because our use case was slightly different than what was there.
[00:04:40] And so, you know the situation where this 3PL had all of this fixed cost that they were trying to sweat the assets with that didn’t resonate. It was just there and they went back to more of a manual pick and pack on table sort of environment.
[00:04:57] On the brand side, I see this a lot of times with inventory. And so, there’s so many awesome ideas and awesome companies that have gone out of business, not because the idea was bad, but because they ran out of cash. And usually, the place they spend most of the cash is in inventory and they do it too quickly. And so thinking through and understanding that like, maybe going out of stock temporarily isn’t the worst thing ever.
[00:05:16] Maybe that’s actually a marketing play. Maybe that’s something that I could lean into and say, “Oh wow, we had all this demand. Sorry, we’ve got a wait list. Join the wait list here.” So, I think there’s elements that you can take a look at. Other elements of overbuilding with a brand is hiring too many people.
[00:05:32] So, just because, you’re starting out, do you need a COO, does that COO need a VP and a director and a bunch of other folks? Do they need all of this fancy tech and things like that? Or are they going to be okay with Google Sheets and is that good enough for where they need to be right now?
[00:05:48] And I think that the biggest handicap that people have is not thinking about the growth of their startup in these different stages and what they need and what the success criteria is for that stage.
[00:05:58] Glenn Gooding: Yeah, it makes a lot of sense. So, on the other side, where you stumble into hypergrowth, right? And you’re doing that, outside of the fact that you can’t keep up with your orders, which is an obvious red flag, what are some other red flags that your backend can’t keep up or that you have yourself a problem?
[00:06:21] Aaron Alpeter: Sure. I think the way I would look at it is when you’re in hypergrowth, that inherently means that you are exceeding your forecast, right, by not just five or 10%, but maybe you might be double.
[00:06:33] I remember with some of the companies I was with that we were an overnight success. So, the example was Mirror. I ran the supply chain at Mirror for several years, and we were plotting along, and we were excited when we sold maybe a dozen units a week, and all of a sudden COVID happened and all of a sudden, you couldn’t go to the gym anymore. But people still wanted to work out.
[00:06:51] And so, at this moment, at the exact moment that the world economy was shutting down, borders were being restricted, things were piling overseas. You were seeing that hundreds of units were being sold per day. And so. this is an element, where as a supply chain person, I can’t go to the CEO on the board and say, “Hey guys, actually, time out. We shouldn’t sell as much. This is really difficult for me. Let’s just take a chill pill.”
That’s the wrong answer, right? The reality is that this is the moment. This is why these founders created this business – to take advantage of this moment. And so, as an operator, you have to make sure that you’re giving it your all and you’re making it work.
[00:07:28] And so, what do you do in those situations? It’s important to think about what’s the most important thing and what’s the things that are important, but not the most important thing? And you got to let some burning platforms burn. And so, in this particular case, the most important thing is securing your inventory and then, making sure that you get it to the customer.
[00:07:47] And I think if you frame it like that and you say, “Okay, I need to do whatever I can to make sure the factory does not stop running, and that we have the imports that we need in order to make sure that I have stock to sell.” That’s Objective #1. Objective #2 is actually getting it to the customer.
[00:08:02] Everything else – whether it be cost controls, whether it be throwing manual labor at this, whether it be thinking about returns or things like that – those are really important things, but they’re not the most important burning platform. You let that one burn for a little while.
[00:08:17] Glenn Gooding: So, how does operations, in that example, kind of scale in lockstep with client acquisition out there?
[00:08:28] You say “let a platform burn.” It puts a sweat on my forehead – I’ll tell you that – just thinking about that. But I understand what you’re saying and setting priorities, it makes sense. What does that look like from [a] layman’s terms perspective? How do you scale up in lockstep with that – or corral the cattle back into the barn at some point probably [corral] the troops?
[00:08:55] Aaron Alpeter: Yeah. I’d say letting a platform burn—that is not a recreational activity. That is not a fun thing to do. It is stressful. It is something where there will be sleepless nights, but again, it’s about what is going to have the most immediate impact.
[00:09:09] What’s going to have the most severe impact – I think that’s the framing. When it comes to getting the operations team aligned, there’s a couple of things that you need to do.
The first one is to make sure that your existing team is clear on their assignments, right? Just as if you’re playing a basketball game, you need to know who’s guarding who, and so that’s really the first thing we’ll look at with people is to say, “Okay, we know we have all these problems.” We know we have all these issues. We know that if we had an infinite amount of time, we’d work on all of them. But I need someone to look after inventory. I need someone else to make sure that we’re liaisoning really closely with customer service. I need someone else to make sure that we are working through capacity planning and scenario analysis—and what happens if this country we’re sourcing from is no longer available. And so, that’s the first step.
[00:09:52] Glenn Gooding: That’s a very time-appropriate issue.
[00:09:55] Aaron Alpeter: Yeah. I mean, early COVID, it was like whack-a-mole of, “Okay, yeah, we’re going to source our production out of Indonesia. Nope, can’t do that. All right, we’re going back to China. Nope, can’t do that. All right, we’re going to Mexico.” So it’s a lot of – I earned the gray hairs, I guess would have [to say].
[00:10:08] The other part I would say is, after you’ve gotten your team aligned in terms of who’s doing the blocking and tackling, then that’s where you go to the company. You say, “Alright guys, we have a trade-off to make. We can’t do everything we need to do. We are doing the most important things to keep things running.
[00:10:24] If we wanted to solve these other issues, if we wanted to avoid cost concerns or difficulties later on, these are the additional resources that we need. And most cases, when you’re in the sea of the moment, you want to think about not overbuilding as well. And you know the answer is also not to say, “Hey, I need a lot of stuff going on. I need more headcount.” It’s going to take you a couple of months to find that headcount and maybe longer to onboard that person. And by then, the crisis may be over. And so this is where fractional resources like in izba can jump in, can deploy within a matter of hours, in order to put their arms around a big problem, take it off your plate and allow you to scale on other aspects.
[00:11:04] Glenn Gooding: Smart. So, when you’re in that environment and you are scaling fast, what are some of the commonly overlooked things?
[00:11:18] Aaron Alpeter: Yeah, so basically, what are the platforms that people will be letting burn?
[00:11:23] Yeah. I’d say the number one thing is cost control. I think that there’s typically a movement by all parties involved—all levels of the organization—just to say, “Whatever it takes,” right? “Get it taken care of.”
And if you’re not careful, you can end up doing some dumb deals. Like, I would say: never sign a contract in a crisis, right? That’s just a general principle to live by. But when it comes to cost overrun, maybe you’re not filling out the trucks as well as you could have.
[00:11:52] Maybe you’re expediting a lot of things. And I think that in a crisis, you should be willing to spend money—but you need to understand what you’re spending, how much you’re spending, and be accountable to that.
How many people have seen something and said, “You know what? We have this really big problem—it’s going to cost us a hundred thousand dollars. Let’s spend a million dollars to solve the hundred-thousand-dollar problem”?
[00:12:10] Let’s spend a million dollars to solve the a hundred thousand dollars problem.
[00:12:13] Glenn Gooding: Sounds terrible.
[00:12:14] Aaron Alpeter: That’s not a great use of funds or thought process.
[00:12:19] Glenn Gooding: No, for sure. So, when you’re in that war, in that moment, and things are firing off and doing that, Band-Aid fixes – I guess depending on what they are—could be the right antidote for the situation.
[00:12:39] For example, a fractional COO may make a whole lot of sense to violate some things. In your mind, in your experience, where do potentially Band-aid fixes backfire later? What is the watch-out for on that front?
[00:12:56] Aaron Alpeter: Yeah, I think, to some extent – I don’t know if – I think the framework of Band-Aid fix is probably a misleading one, to some extent.
[00:13:07] Because every solution is a good solution in the moment that you implement it, right? I think where most people run into problems—and where something can begin to feel like a Band-Aid—is when you don’t think through the useful life of that decision, right?
If you walk into something and you say, “All right, we understand that throwing people at this problem in order to go through and scrub orders—that is a way that we can optimize for the solution right now, because the most important thing isn’t getting rid of labor. It’s, “Can we solve the problem right now?” That’s the criteria that you had when you’re solving that. Now, if you were to zoom forward and you’re several months down the road and you’re still doing that same thing, I’d say the criteria has shifted, right? And you’re probably going to care a lot more about what your labor resources are doing. And so, you need to make a different decision.
[00:13:57] And so, I think that the element here—of making sure that past decisions don’t become like Band-Aids—is being able to come back to first principles: understand what is it that we’re trying to do here, what’s the success criteria generally look like?
[00:14:12] Has that changed from the success criteria that we had previously? And let’s figure out if we would make a different decision. Every business that I’ve worked on, we thought we had the right decision at the time,
[00:14:23] Glenn Gooding: Except otherwise you wouldn’t have made it.
[00:14:25] Aaron Alpeter: Yeah, exactly. And sometimes, here [are] the trade-offs, but even if you know that trade-off, you made that decision saying, “This is the best option with the data I have right now.”
[00:14:34] Glenn Gooding: Yeah. Yeah. Good to know. So I guess it’s just a question of having the time and the wisdom to go back and look and learn from those mistakes and adjust and adapt, whatever they might be.
[00:14:45] Aaron Alpeter: Yeah. I, think sometimes people can become such a slave to the process or such a slave to the SOP that they forget why they are doing something in the first place.
[00:14:56] I think that’s what you’ve got to account for.
[00:15:00] Glenn Gooding: SOP might be a good segueway for my next topic and question for you, Or maybe not – we’ll find out, but when you’re talking about—particularly in a 3PL environment—and shipping failures and late deliveries, lost packages, “Where’s my order?” type of scenarios, why could those sometimes be viewed more as symptoms of another underlying issue?
I’ve seen that oftentimes. Oftentimes that problem isn’t laid upon the carrier. It’s indicative of something else going on. Do you have experience with that?
[00:15:34] Aaron Alpeter: Absolutely. And I think, looking at it from both the warehouse perspective as well as the parcel, you have slightly different answers. I think – starting with warehouse, I have been in more warehouses than I care to count.
[00:15:47] Glenn Gooding: Yeah. You and I both, brother.
[00:15:49] Aaron Alpeter: Yeah. I love them. It’s a fun thing. You think that four walls and racks [are] boring, but I enjoy it. I would say that I have been in very few bad fulfillment centers, but I have seen dozens and dozens of bad fits for fulfillment centers. And so I think a lot of what this comes down to is there being a misalignment between what the brand is, wants, [and] needs, and what the provider is set up to take care of.
[00:16:18] I think that’s probably the biggest thing that comes up too, is a lot of times you’ll find issues where, you know, maybe the responsiveness isn’t quite what it is. And you start to dig in deeper, and you say, “Okay, yeah, we understand that we’re not getting everything out on time, and that it takes two days to respond to emails there.” And that can be very frustrating.
[00:16:33] And that can be very frustrating. And then, you go back and say, “Wait a minute—you chose the provider that was 100% temp labor, that was geared around lowest cost.” And that was the most important thing when you made that decision.
And so, you were willing to make sacrifices—that, “Hey, when things don’t get out, they don’t get out”—because we are 20 to 30% below where the market is from a fulfillment point of view.
[00:16:53] And so, you made the decision that having as low cost as possible is the most important thing for your business. And kind of—you’re upset by these other things, right?
So, I think that’s like a good example of making sure that you have the right fit.
[00:17:14] Glenn Gooding: Classic example of “you get what you pay for,” right?
[00:17:17] Aaron Alpeter: It’s always true. And sometimes you end up paying for things that you don’t need. We probably can go on the other end of the spectrum—people who have super fancy dashboards and tech, and everybody’s there to answer a phone call at all hours of the day.
[00:17:33] And that’s, like, phenomenal customer service. But you’re like, “Actually guys, I just need you to take some labels and put ’em on a box and ship ’em out.” And my customer’s pretty cool if it takes, you know, three days to get out. You can pay for those things and not need them.
[00:17:48] Glenn Gooding: For sure. So, it’s aligning—if I hear you right—it’s understanding what you’re buying and making sure that aligns with your desired brand experience. Is that fair?
[00:18:00] Aaron Alpeter: That’s absolutely right. And I would add there that a good responsibility, too, is to think about what your brand needs at that particular moment. And just like we talked about Band-Aid decisions a few moments ago—making sure that the thesis behind why you chose your fulfillment center is still the accurate thesis for today.
[00:18:22] Glenn Gooding: Yeah, good point. So, you’d mentioned earlier about two different answers. I’m wondering—could we explore the kind of the link, from your perspective, between upstream planning and final mile delivery?
[00:18:35] Aaron Alpeter: Sure. I think that most decisions—or most difficulties—in fulfillment or supply chain start and end with planning, right? If you have a really good idea of what you’re doing, what you’re not doing, what you’re able to do, [and] what the success criteria looks like, you tend to avoid a lot of the issues that you could have later on.
[00:18:58] Now, let’s just assume you’re good at planning, and let’s think about things that can pop up at the delivery stage. There could be a strike, right? Either in the warehouse or with parcel. There could be a weather event. There could be a pandemic. There could be massive volume spikes—not from you, but from other people in that facility.
[00:19:19] And so, I think part of this is understanding: all right, what sorts of things are popping up that are outside of your control, and establishing what the reaction should be.
A really good example I will give you is: when it comes to fulfillment centers, a lot of providers have SLAs—and almost all have SLAs today—and it’ll be, “Hey, if you give us your forecast, we’ll make sure that 98% is shipped out same day.”
[00:19:43] What happens when there is another provider, another brand, – maybe much bigger than yours – who is off on their forecasting, and they’re 10x what they should be?
There are two ways that a fulfillment center can approach it. They can say, “Hey, this other brand is really important. They’re really big for us. Put all the labor on there—let’s take care of it. Aaron’s brand can be at 60% SLA for a few days, ’cause we really gotta get all these orders out, ’cause there’s the most dollar value there.”
[00:20:01] The other option would be to look at this and say, “You know what? We made a commitment to Aaron—even though he’s a small brand. Let’s make sure we’re good with our commitment, and then we’ll marshal our resources to help the other brand that didn’t plan well.”
I think the way that you answer that question tells you everything about a fulfillment partner—and really what you’re looking for in those instances.
[00:20:34] Glenn Gooding: Absolutely. You mentioned thesis, you mentioned the decisions that are made at the moment are typically the very best option at the time. When you’re going back and trying to analyze—where does the root cause analysis come in, in your mind, on evaluating this and redefining your growth trajectory and where you want to go?
[00:20:59] Aaron Alpeter: Yeah, I’ll take that in a couple parts. Sure. So my approach to root cause analysis is that it’s the entire job of supply chain, right?
I think that it’s really important that anytime you have a customer complaint, a metric that isn’t quite what you want it to be, just something that doesn’t go the way it was expected, you should treat that as a system failure.
[00:21:22] And what I mean by system failure is you want to take a look at this and say: you’ve created a series of partners, processes, interdependencies that led to a particular outcome. And if you are unhappy with that outcome, then you need to go back and take a look at how do you engineer out those issues so that they become less likely in the future.
And then, you also come up with a rubric for how you’ll address themin the future. So, that’s the first part.
[00:21:44] I think the other part is that you have to constantly be thinking through—as a supply chain operator—what problems you’re likely to have, because those are the fires that you need to be fighting.
[00:22:01] I’ve said for a long time that if you are firefighting today, you probably made a mistake six months ago. And I think there’s a lot of truth in that.
Of course, there are the Black Swan events that just happen and you kind of have to deal with it. But part of your job as a COO or a founder is to anticipate the different outcomes or issues that could be coming through—and then at least have a plan and say, “Okay, if tariffs were to go up to some ridiculous number—I don’t know, 50%—how would we react? What would we do?”
[00:22:31] Glenn Gooding: Is 50% that ridiculous anymore in this world?
[00:22:33] Aaron Alpeter: I was going to say, if 50%, then you get 145%, and you’re like, “Okay, at least I have an idea of what to do.”
[00:22:39] But yeah, 50% might be a deal here in a couple weeks.
[00:22:42] Glenn Gooding: Yeah, you never know. We go back to a brand that is entering the marketplace—they’ve got a great idea, they’ve got a great product. They’re going – Anecdotally, Aaron, what does the decision process look like, or the evaluation process, for a brand to switch from self-fulfillment to outsourced fulfillment?
Sure, kind of a broad, meaty question, I understand, but…
[00:23:11] Aaron Alpeter: I think it’s pretty simple. I think the question is: what headaches do you want to deal with?
And when you are a founder, everything’s on your plate. I was just talking with someone right before this—she’s got a great idea, she’s working on it, it’s just her. She’s got some consultants, and she’s like, “I knew this part of the business really well, but all this other stuff is new—and it’s just me.”
And that’s the reality of being a founder. That’s the reality of being a startup.
[00:23:41] Aaron Alpeter: And so when you get to a point where you’re like, “Hey, I’ve got other problems I need to focus on, and rather than letting this platform burn, maybe I should find someone else who’s going to focus on this so I don’t have to worry about it”—I think that’s the moment where you start to look at, “All right, let’s find somebody else to do this.”
Candidly, when it comes to self-fulfillment or 3PL fulfillment, I think an important metric too is: is there anything unique about your fulfillment? Is there anything that is truly special about what you’re doing that either (1) is going to be very expensive for other people to copy, or (2) you don’t want the market to know how you do it, and so you’re just not going to do it that way.
[00:24:18] Aaron Alpeter: And so I think very rarely are there instances where the act of putting something in a box and putting a label on it is truly proprietary, which is why most people will end up in a 3PL at some point.
And then the lifecycle—as they get big enough—they can move back into a dedicated facility and kind of have those controls that way.
[00:24:40] Glenn Gooding: So, I know that at least one of your companies really helps place brands in the right 3PL, right? I know that’s in your wheelhouse.
For the listeners, what are some of the — a short list of the key questions to ask before signing with a particular 3PL?
[00:24:59] Aaron Alpeter: Yeah, I think that there’s a lot that you need to do to understand and determine fit. And Slotted.com is the company you were referencing?
[00:25:05] Glenn Gooding: Yes.
[00:25:06] Aaron Alpeter: And what we built here was an RFP tool that walks the brand through all the questions that they need to have in order to build the RFP—actually builds the RFP, gets the responses back from the 3PL, and then allows both sides to see and understand what the costs are going to be and to compare back and forth.
[00:25:25] Fit is the most important part when it comes to a fulfillment contract. It’s not the SLAs. It’s not the cost. It is fit. It is, “Do you want to work with this person—yes or no? Do they get what you’re trying to do—yes or no?” And things like that.
In terms of key questions, I would try to [be] really honest about who you are as a brand. If you’re very stable and you know that you don’t fluctuate a whole lot, talk about that. They can build around that.
If you’re like, “Look, I don’t know what’s going on. I need someone who’s going to be able to be in the trenches with me and to go back and forth and iterate,” then that’s an important piece that you want to flesh out.
[00:25:58] Aaron Alpeter: In terms of the actual contract, there [are] a few things that you need to make sure are there.
The first one is: you need to make sure that you have pricing. I have seen some fulfillment contracts come across my desk where they forgot to say, “This is how much we’re going to charge you,” and they had something separate. I’m like—no, that should go in the contract.
The second thing is really around SLAs, right? I insist that every contract include SLAs—and you also include a way to say, “Here’s how we’re going to measure the SLAs, and here’s how we’re going to do disputes,” and things like that.
I also think it’s important to talk about: what are the other commercials of the contract? Is there a minimum? Is there an early-out penalty? Is there something where, oh, perhaps the 3PL gets an automated increase each month or each year and things like that.
And so, I think those are some of the high-level things you need to take care of. Obviously, have an attorney take a look at the indemnity and the insurance and things like that.
[00:26:53] Fulfillment is not hard. It’s complicated. And so, you want to make sure that you’ve got that taken care of.
[00:27:01] Glenn Gooding: Okay. You’ve picked a fulfillment partner, you’ve been with them a while. What’s your recommendation—how often should you reevaluate your current fulfillment provider?
[00:27:12] Aaron Alpeter: Yeah, so I think in general there are three reasons why you renegotiate a contract.
The first one is the contract expires. The second is that there’s a fundamental change in your business—and you go from a hundred orders a day to 10,000 orders a day, or you go from 10,000 orders a day to a hundred orders a day. And then the third is: there’s a fundamental change in the market—tariffs, COVID, things like that—that inherently change things.
[00:27:31] I think the best conversations, the best relationships, are a perpetual negotiation. It’s something where you understand the mechanics of your business, you understand the mechanics of their business, and what is going to be most helpful for both sides.
You don’t have to wait for the contract to expire to say, “Hey guys, I think there’s an opportunity. If I were to do this—maybe make sure that everything was coming in, it was barcoded, it was on the same pallet—would that help you?” “Yes, absolutely.” “Cool. If I did that, could I get a lower receipt fee?” “Absolutely.”
[00:28:05] Glenn Gooding: You’re talking my language now. You’re talking my language now. That’s good. I like it.
[00:28:11] Aaron Alpeter: Absolutely. So, I think that’s just an important piece here: just making sure that every – you want this to be a long-term relationship. And just like you think about with your significant other—your spouse—I don’t know, my wife and I, we negotiate all the time. She wins most arguments, but that’s fine.
But I think being able to talk with your partners on a regular basis and being very open and honest and saying, “Hey, here’s what we need to change on our end.”
[00:28:36] And sometimes you get to a point and say, “Hey man, you’ve grown so much here that you’re about to be 80% of our volume. We’re uncomfortable with that. I think you need to move some of your volume elsewhere.” And I think that’s just a mature conversation to have.
[00:28:51] Glenn Gooding: Don’t see that happening a lot.
[00:28:54] Aaron Alpeter: But it should. It should.
Because for all the 3PLs that are listening—your biggest customers are going to be shopping on a more regular basis. They’re looking. And if they’re 80% of your business, that’s not their problem. That’s your problem – unless you’re perfect, right? Unless you have locations everywhere, unless you have all of the integrations and the parcel carriers that they are desiring, you’re going to be in a situation where they’re going to move some of their volume.
[00:29:11] And again, they may still keep you. But now that 80% volume comes down to 20%. And does that put a substantial strain on your business, to the point where you’re not financially viable or you’re really struggling? And so, they’re going to start to see service go down. They’re going to start to see costs go up and say, “This isn’t worth it anymore. I’m just going to leave entirely.”
That is a death spiral that is very, very real if you don’t have good portfolio management as a 3PL.
[00:29:48] Glenn Gooding: So, what are a couple things that a 3PL could do to build a moat around their offering?
[00:29:56] Aaron Alpeter: Yeah. I think the biggest thing they have to do is—they have to figure out who they are. What is the niche that they’re coming up with? I often joke that every 3PL website looks basically the same.
[00:30:05] They say, “Our customers love us. We ship on time. We give you good value.” It’s—oh, okay, great. Every warehouse says that.
But do you want to work with really big companies? Do you want to work with really small companies? Do you want to work with a particular product category or pick size or weight or dimensions?
There are all these different things that—if you can figure out what it is that’s unique about you—that not only helps you identify the right type of partner, but it also allows you to be better than the market at those particular things.
And that’s one of the things we built in for Slotted on the warehouse side: you actually go through and create your ICP. So you say, “Hey, look, we really want everybody that’s over 10 pounds. That’s where we thrive.” And so you start to get only those leads, and people start to find only those sorts of things.
[00:30:57] But in terms of building a moat, I think it really comes down to maintaining the trust of your brands.
There’s only one reason why anyone leaves a fulfillment center—and that’s because there’s a breach of trust. And it’s a breach of trust in terms of performance, in terms of team or honesty. Maybe there’s a lot of transition. It could be, “Hey, we don’t trust that we’re getting a fair market rate for our volume or our capability.”
[00:31:16] And so, the single most important thing you do to build a moat is really around this client relationship, client ownership, and making sure that there’s a strong, healthy, two-way relationship with trust.
[00:31:26] Glenn Gooding: Love it. Love it. I think you cut to the core there—with trust, for sure.
Time for maybe a couple war stories from you in your experience. Izba Consulting examples, any examples, any quick stories you could share about the good, the bad, the fixable—what you’ve come across?
[00:31:46] Aaron Alpeter: Yeah. So, I think that we do a lot. For those who aren’t familiar with izba, we’re an end-to-end supply chain consultancy. We do everything when it comes to supply chain.
And really the niche that we’ve uncovered is that we help brands prepare to exit, then we help acquirers integrate those acquisitions. And so, everything from tech stack to network assessments, fractional leadership, those sorts of things.
[00:32:08] Most fulfillment relationships are not beyond salvage, right? In fact, most of the time when we meet a brand who’s talking about maybe needing a new fulfillment center, the first thing we try to do is we try to talk them into staying.
There’s a reason why they chose that provider. This provider knows their business—the good and the bad. There is a certain level of history that’s there. And so if it can be salvaged, we want to work to salvage it, even though it may not be in our best interest as a consultancy.
Things that can be salvaged: poor performance.
We’ve got one brand—I share this all the time—they hired us on, this was 2018 or 2019, and they were just complaining about their fulfillment center. They’re like, “These guys are awful. We’ve got 50–60% SLA compliance.”
Their team was constantly flying from LA to North Carolina, sometimes twice a week, because things weren’t getting resolved. It was really bad. And so, they brought us on and said, “Look, we just got to get out of here. We got to fix it.”
[00:33:01] Aaron Alpeter: We said, “Let’s figure out what the problem is here first. Let’s see if there’s anything that we can do as the brand to make things better. And let’s see what they need to do.”
And what we recognized was that there really wasn’t a clean way of measuring SLAs for this particular provider. It was all emotionally charged. There was no scorecard.
And so, I said, “The first thing we’re going to do is we are going to create a scorecard. I’m going to run it every day. We’re going to build it. We’re going to take the contract and say, ‘Here are the SLAs,’ and I’m going to send it to them every day.”
And we started publishing it. And it said: 65% compliance. This is pretty bad.
We’d have these phone calls—and first we would debate the math. Then we’d debate the data. And then, to this fulfillment center’s credit, they decided, “You know what? We do have a problem here. We need to fix this.”
And so, to their credit, they went through – they changed it. They put new people on the team. They moved them to a different facility on the campus. They made it more dedicated. They built infrastructure around this brand, which was growing and doing well.
[00:34:10] And to their credit, that brand is still at that fulfillment center six years later.
And this was somebody that was dead to rights. They had every reason to leave, to get out of the contract. But because there was this conversation, and we were willing to take a step back and say, “Look, we now recognize we have a problem—here’s what we’re doing to fix it,” we could see the changes in a matter of weeks.
[00:34:25] They went from 65% compliance up to 98–99% in four weeks. Like—it was a dramatic change.
[00:34:32] Glenn Gooding: That’s a win-win.
[00:34:33] Aaron Alpeter: Completely.
completely. So, another anecdotal question, I know—but categorically, what do the highest-performing brands get right from the start? What do you see as the common denominator there?
[00:34:48] Aaron Alpeter: Specifically when it comes to fulfillment and delivering things like that?
Yeah, it’s a good question. I think that they are realistic about who they are, and how attractive their business is—or is not—to a fulfillment center.
[00:35:01] And what I mean by that is if I’m shipping cosmetics, and I’ve got a pretty consistent 2,000–3,000 orders a day, even if I’m not growing quickly, that’s really good volume. It’s high value. It’s low footprint. Every 3PL in the world will trip over themselves to get that kind of deal.
However, if I am a frozen food company that’s shipping 35-pound packages that need to be temperature-controlled, and I’m growing at 100% month over month—that’s not as attractive, right?
[00:35:46] Aaron Alpeter: And so, if you look at this like, “Oh, growth is great. Look at this chart of where I’m going to be down the road,”—you’ve also got to look at where we are right now and what you need to be.
So, I think that’s the first part is being clear. I think the other part is just these cadences of communication: having a robust scorecard where you can keep track of how we’re doing; having a really robust QBR framework where you’re not only talking about their performance and what they’re doing, but you’re updating them on your business and what new products are coming out, what you’re seeing, and giving them a perspective of why they should continue to work with you.
[00:36:21] Again, most people don’t think about this, but fulfillment centers can fire clients. Like, I’ve seen it happen. And so, it is a two-way street, and you’ve got to make sure that both sides are up for renewing the relationship on a regular basis.
[00:36:35] Glenn Gooding: Great advice. Great advice. So Aaron, how does building a better RFP with Slotted prevent scale stage surprises later?
[00:36:47] Aaron Alpeter: I think the core element that we’re trying to do with Slotted is to bring transparency to the RFP process. Slotted is not a matchmaker; it’s not a lead-gen source. There is a way for you to find a fulfillment center and for 3PLs to get leads, but what we’re really trying to do is improve the RFP process itself.
[00:37:03] And so, this transparency comes from a few things.
On the brand side, you integrate with your ERP, your shopping carts, and we’re bringing in actual order history into the tool. That tool is then taking a look at it, slicing it, and showing it in different ways that are going to be easily digestible for a 3PL to look at and quickly understand: “Is this something that I’m interested in—yes or no?”
[00:37:27] The second thing that we do is we take that opportunity, based on the data the 3PL or the brand has provided, and we run that through a filtering mechanism, where only the types of projects that the 3PLs are interested in make it to them.
And so as you’re going through and saying, “Okay, I’ve got my long list and here are my providers,” you actually—it’s called ‘Send for RFI’—we’re going to filter out your long list and tell you which of those providers are already interested in your type of business. And so that’s kind of the second stage.
[00:37:48] The third piece that we’re doing is, as you go through the entire process, there’s messaging, there’s networking built into the app, and we want to promote a conversation. We want to promote collaboration.
This is not meant to be a: “You send me an email. I send you an email. And then, here we go—let me pick the lowest price.”
You’re encouraged to go meet them, to video conference with them through the tool, and things like that.
[00:38:21] Aaron Alpeter: And at the end of the day, when it comes to fit, the brands have this really strong comparison screen where they’re able to say, “Here are all the bids that we had. We normalized all of the rate structures that came in, regardless of if this 3PL does it by cubic meter, and this one does it by pallet positions, and this one does it by percent of revenue.”
We’ve normalized all that based off of the dataset you’ve provided, also assuming what your growth rate’s going to be, and we’re going to be able to show you and the 3PL: here’s what it’s going to cost. And let’s make sure we look at this.
[00:38:52] Aaron Alpeter: We talked about bad examples – there was one brand that we worked with, that we moved into a 3PL, and there was a mismatch in how the 3PL had calculated the charges and how the brand had calculated the charges. And so we get this first invoice, and they’re like, “Hey, this doesn’t match.”
It’s, “Oh, actually, this thing that we meant here, it actually was this.” And we’re like, “We would’ve made a completely different decision had we not been there.”
And so you avoid those sorts of issues because both sides are seeing what the numbers are. Rather than me having my spreadsheet and you having your spreadsheet and not sharing the spreadsheets, we’re sharing the spreadsheet.
So that’s an element there where we try to avoid those surprises.
[00:39:32] Glenn Gooding: Yeah. Good. This has been a great conversation. I’ve really appreciated it. Aaron, as we’re wrapping up here, if you were to encapsulate our conversation into some key takeaways for the listeners, from your seat and what you’ve shared—your wisdom—what would you want the listener to walk away with?
[00:39:52] Aaron Alpeter: I’d say there’d be a few keys.
The first one is that you should look at hyper-scaling and hypergrowth as a season and you should plan and adapt for that season in the same way you would in any other way. Okay? So, that’d be the first one.
The second piece is, really, when it comes to fulfillment and delivery, fit is king. And you’ve got to have the right fit and the right partner.
And sometimes, someone who was the right fit a year ago is not the right fit today, and that’s okay. You just have to be honest about that with you and your partner and kind of move from there.
[00:40:27] Glenn Gooding: Great. How can listeners get ahold of you, Aaron? You’re a busy guy.
[00:40:32] Aaron Alpeter: Yeah, I’m on LinkedIn pretty much all the time, so just Aaron Alpeter.
And if you want to send me an email—aaron@izba.co is the best email.
[00:40:39] Glenn Gooding: Great. Aaron, always a pleasure. Always enjoy our time together. I always learn something. Appreciate it. Thank you so much.
For our listeners, thank you so much for tuning in again. Glenn Gooding, Parcel Perspectives. Please subscribe and like. Forward if you see fit. Thank you so much.
[00:41:03] Until the next podcast. Take care.
[00:41:08] Thanks for listening to Parcel Perspectives hosted by me, Glenn Gooding. 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.
[00:41:27] Since then, I’ve been a national thought leader and worked to help drive strategy for clients from Fortune 50 companies to start off eCommerce 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.