If you sell physical products, warehousing and shipping costs can make or break your business. But most companies treat order fulfillment like an afterthought, running headlong towards a future in which they won’t be able to compete with the marketplace giants. In this new book, Adapt or Die, Jeremy Bodenhamer, paints a compelling picture of waste and lost profits, including case studies in which one wrong move and something as simple as packaging can send a company into the red.
Fortunately, there’s a better way, by embracing end to end automation, companies can ensure that every item sold is shipped quickly and efficiently in the smallest possible package, through the best price carrier, restoring critical savings to your bottom line. And you don’t have to be Amazon to do it.
Drew Appelbaum: Hey listeners, my name is Drew Appelbaum and I’m excited to be here today with Jeremy Bodenhamer, author of Adapt or Die: Your Survival Guide to Modern Warehouse Automation. Jeremy, thank you for joining, welcome to the Author Hour podcast.
Jeremy Bodenhamer: Thanks, Drew.
Drew Appelbaum: Let’s kick this off. Can you give us a rundown of your professional background?
Jeremy Bodenhamer: In the book, I tell the story of one of my advisors who referred to me as a ‘no one from nowhere.’ But I’ll give you a little more detail. I started my first business when I was 12 and then kind of rode that through college. When I graduated, I had the entrepreneurial bug and I saw this little pack and ship store that was hiring. I got a job there and when I was in college, I worked at a little executive services firm in Montecito, California, which is kind of a wealthy area. I did a little FedEx, UPS type thing, nothing crazy.
After I graduated, I saw a pack and ship store, think of it as a UPS store, for sale in Santa Barbara, and the thing had fallen out of escrow with five consecutive buyers. I had done similar work in college and thought I could make something of it, so I bought it and ended up growing it to be one of the top-performing stores of its kind. After I was there for a couple of years, my phone was ringing off the hook with customers asking me one question, “What is the shipping cost?”
I realized as ecommerce was picking up more and more steam, not only was that the future but shippers had no idea what their true cost was. They were living in a world of quotes and as you know, a quote is not firm and if your bill is different than you estimate when you price your products, you’re the one that’s eating that difference.
I decided to start a software company. I sold that business and started a software company to solve that problem, I raised some venture capital, and here we are today. Today ShipHawk is a modern transportation management system that works with ERP connected companies to automate their shipping and fulfillment processes.
The Five API’s of the Apocalypse
Drew Appelbaum: Now, was there something that inspired you lately, did you have an ‘aha’ moment? Why was now the time to write your book?
Jeremy Bodenhamer: Yeah, I’m one that believes that small and mid-sized companies feed families and build communities and are imperative to our way of life in this country. The wealth divide has never been greater, it’s getting wider and not narrower, and what I see is that these giant companies are gobbling up all of the smaller ones, running them out of business, one way or another.
In the book, I call these companies the five API’s of the apocalypse. The ones that you’re probably most familiar with are Amazon and Walmart, but JD.com and Alibaba are right behind them, as is Shopify. Although, I talk in the book about how Shopify I think is a friend to the independent merchant. But as more and more business moves online, it’s moving to these giants, and the independents I believe need the tools to be able to compete with a company that’s putting almost a quarter of a billion dollars into each new fully automated warehouse.
You know, a little mom and pop shipper, even a mid-sized company, can’t touch that. How are they supposed to meet the same delivery standards and customer communication expectations, product diversity, et cetera? The truth is if we don’t do it now, those companies aren’t going to exist in the future.
Drew Appelbaum: Who is this book for? Do you already have to have a company that is experiencing warehouse and shipping issues, or is this someone for every entrepreneur that can potentially run into these problems?
Jeremy Bodenhamer: Yeah, I’m not sure that the issues are really the focus because many companies don’t yet see the threat. If Amazon hasn’t set their focus on you quite yet if they don’t have private labeled products that are similar to yours, if you’re not selling on the marketplace at all, it might not be as evident that that threat exists.
The book is really targeted at executives, specifically ecommerce executives, and it’s not just on the operation side. The IT team, who is tasked with maintaining all of their software connections, the marketing team who is tasked with acquiring customers, and then serving those customers. I talk about the world behind the buy button. Most of the books that are out there talk about the world before the buy button or in front of the buy button. So, how do you acquire the customer? And then it stops.
The world of operations is influencing customer acquisition and servicing more than ever before.
Drew Appelbaum: Now, while you were writing the book, did you learn any lessons along the way, whether it’s research or by getting your thoughts down on paper?
Jeremy Bodenhamer: That’s a great question. You always learn, I learned how hard it is to write a book, how much work it is. I think the biggest lessons I learned that are applicable to the audience are after I had the first draft or two, I circulated it with a bunch of industry contacts, real experts in different areas of the supply chain. The supply chain is so big, even just the world in the warehouse is so big, it dwarfs entire other markets, and there’s no book or manual that could cover everything in the warehouse, it’s just too much. I learned a lot about how diverse that is and how big those needs are and how much impact they have on the bottom line.
In the book, I break it down into packing, shipping, data and analytics, robotics, and operations workers. But things even like HVAC within the warehouse has an enormous impact on what your costs are, especially if you have cold storage or other things like that. There are software products out there to manage that.
I learned that when you put robotics in the warehouse, you don’t just get throughput benefits, robots also don’t take up parking spaces or bathroom stalls or space in the break room, right? There’s a lot to factor in when you’re thinking about building a comprehensive plan for scaling a business.
Drew Appelbaum: Yeah, I’d love to dig into that more. I worked at a startup where we had a lot of warehouse costs including a price per pick cost which ended up being a very expensive line item that really nobody saw coming. What are some of the oversights that business owners are missing when they’re opening a new business that includes warehousing and shipping?
Jeremy Bodenhamer: Yeah, it’s not even when they’re opening a new business. Many of the businesses that need to know this information have been in business for a long time and they are in the process of evolving and adapting to the demands of ecommerce, and kind of piecemeal fulfillment.
I would say that the company you worked for, that had per pick costs monitored, was actually ahead of the game. Over 90% of the prospects that my sales team talks to, do not have internal operational metrics and do not have goals that they are managing by way of those metrics. They don’t know what their pick cost is, they don’t know what their per shipment cost is. Whereas the players that we see who are successful in the space know those costs down to the penny and they factor in any additional costs as a component of that piecemeal cost, whether that’s a per pick, per order, or per shipment, it depends on how they’re looking at it.
The Problem with Instant Gratification
Drew Appelbaum: Now, you begin the book talking a lot about Amazon, and Amazon Prime seems to have created this instant gratification culture. Can you talk to us about how that’s affecting small businesses?
Jeremy Bodenhamer: On one side, we’re kind of at the luxury of having this selfish perspective where we’re like, “We want it now and we should have it now.” And Amazon, they’ve mastered that, they’ve mastered creating that desire within us. These businesses that are not Amazon or not these five API’s–I should explain the API’s more, these API’s of the apocalypse. The reason I call them that is I see a future where these five API’s control all of commerce, every transaction, online or offline, goes through their infrastructure or they own it. That is where I see us going.
Number one, these businesses have to meet the same time standards and expectations as the big guys. Amazon saw that there were capacity issues in the markets, so they went and created their own delivery service partner program where they have these contractors on the street in vans and local warehouses making only Amazon deliveries.
That doesn’t exist elsewhere. You could be quite a decent-sized, mid-sized company and you don’t have that capability, you’re having to leverage big shipping companies or regional shipping companies and trying to manage them to those same delivery expectations, and it extends throughout the entire supply chain.
These big giants own the order from manufacturing, even if that manufacturing is overseas. They’re owning the assets that it’s traveling on, all the way through to the doorstep and more importantly, the data. One thing that I noticed recently if you go back in time and look at some of your Amazon order summary emails, they used to have all the details of your order. I ordered two boxes of Kleenex and three books. Those are gone. My guess is the reason they’re gone is one of their biggest competitors on the data side is Google.
Google, through Gmail, saw what was in all these orders, and whoever knows which customers are ordering what, and can place the ads and drive additional business. These big players want to own that data. These small and mid-sized guys just don’t have ways to compete with that.
Drew Appelbaum: That’s like a mind blown thing that all the stuff is out there, unbelievable. You also talk about some of Amazon’s questionable business practices and including knock off products. What are some of these questionable business practices and how big of a problem is knock-off products coming to the market?
Jeremy Bodenhamer: All the big players do it. I’ve got a buddy that makes electronics cases and chargers and all of these types of accessories. He told me that they basically have a year with each product before all the big players knock off the product and wipe it out. That could be a Best Buy, could be a Target, could be an Amazon, could be a Walmart.
Amazon has gotten caught not only white labeling the products that sell well, but they came out and said they don’t use third-party seller data to determine which products they are going to white label. They got caught with their hand in the cookie jar and it came out that they do actually do that.
They look at those third-party products and then they use that to determine which ones to manufacture in house, where the profit margins are, and they undercut the price of the other product. It sucks for the independent merchant that was selling on that marketplace and relying on that to feed their family.
Drew Appelbaum: Just to dig into the book more, you break down the book into three parts and I’d love to get an overview of them. In part one, you talk about the crisis in retail manufacturing and distribution, and then you discuss ecommerce and warehouse environments as they are today.
Can you set the stage, what’s happening in these environments right now?
Jeremy Bodenhamer: Yeah, part one is setting the scene, it’s the fact that these big players are moving in on everyone’s turf, not some people’s turf, everyone’s turf. Amazon has Alexa speakers in your house, Google has them by way of their Nest speakers, Apple has it by way of Siri. These giant companies are in your house, listening to every word you say.
I was laying on the bed the other night with my son, reading him a story and in our conversation, I said the words, “Hey, Siri,” and my phone instantly beeped and asked me what I would like. They’re always listening. I tell a story in the book of a little girl that ordered a bunch of cookies and dollhouses. Because the local news picked it up, when she played in other homes with Alexa devices, those devices then placed those orders.
Drew Appelbaum: Right, that’s madness.
Jeremy Bodenhamer: They’re always listening. Amazon’s got the ring doorbell now so they can control their path and how to get deliveries inside the home. Walmart is making grocery deliveries into your refrigerator. We’re living in a world where the reach of these companies, and the capital and resources they have, are virtually limitless.
So, part two is then, “How does that apply to the world I am living in, in warehousing and distribution, and fulfillment. How do I take that knowledge and improve my fulfillment operation, my shipping operation, my customer communication, everything behind the buy button so that the customer gets a similar or better experience? And how does that play into those six categories of packing, shipping, warehousing, robotics, data analytics, and operations workers?”
Then in part three, we talk about how you break this down into actual take aways. Things like owning my data, tracking my real shipping costs, and having metrics. Every single operation needs to have operational metrics, not just sales metrics. You can’t just know your pipeline. You can’t just know your conversion rate.
You need to know exactly how you’re running your operation and how many workers it’s taking per shift, how many orders are being processed per worker? What controls do you have? What leverage do you have? Do you need to use the experts that are out there? Bring in professionals to negotiate your tariffs, your contracts with the carriers, and then use software to automate those.
They are so complicated–a FedEx or UPS contract these days is so complicated that it is virtually impossible to manage manually. So, if you have people in your warehouse making decisions about which carrier to use, which box to use, anything about the order, it is costing money, and if you are not monitoring that you don’t know that. So, we take it all the way to those granular steps so that the executives are walking away with a real plan.
Preparing for the Future
Drew Appelbaum: Yeah, if you could tell a business owner right now, “Hey, do this to make sure you’re prepared for the future,” what would you tell them?
Jeremy Bodenhamer: It’s kind of a trick question because I’ve got many pages to answer that question in the book. So, I am just going to tell you what’s to and most important to me, and this is not exhaustive by any means. I would say number one, own your data, monitor your data, and set goals for operations. Number two, treat your warehouse workers with respect.
I live in the Silicon Valley tech world where everything is about who has the nicest office, at least pre-pandemic. Who has the nicest office, and the best lunches, and who has the best comp packages and benefits, all of these things–unlimited vacations, all of these things you give to the employees. But you go into the warehouse and it is a different world. It is, “How can I make one penny off what I am paying every worker?” These people are living below the poverty line in most cases and that’s the type of engagement and work ethic that these businesses are getting.
I firmly believe that if we take better care of the workers, the margins will improve, the throughput will improve, the customer service will improve, and I believe the data backs that up.
Then the last thing I would say, once again in a high-level summary fashion is that the business model needs to change. I have a bunch of case studies in the book where I tell real stories, but there’s a lot of new businesses that have what I call ethical business models.
They don’t just exist to make money–they exist to make the world better. One of our customers and one of the case study profiled businesses in the book is a company called Grove Collaborative out of San Francisco. When Grove Collaborative became a customer of ShipHawk, they were very small. A little tiny office. The most recent fundraise valued the company at well over $1 billion and this is a company that competes head to head with Amazon.
They now have products that have no packaging. They have an internal goal to eliminate all plastics from their supply chain. They are literally working to make the world better by way of their business model and it is working very well.
Another company called Parker Clay, who makes luxury handbags and they do it in Ethiopia and hire women in Ethiopia who can’t get other jobs. They are unemployable and they bring them in. They have a factory there and they own their entire supply chain.
That company has just exploded in popularity. So, it is very difficult for a Walmart or an Amazon or an Alibaba to match that type of commitment to society, and people care about that. So, if you take the nuts and bolts of how to run an operation and you mirror it with goodness and care for the people inside and outside your operation, those are the businesses that are going to really do well in the future.
Drew Appelbaum: What do you see the future of automation looking like?
Jeremy Bodenhamer: That’s a good question. I like talking about that because I talk about automation done right and wrong. Number one, I see what I call neighborhood optimization. The carriers like UPS, every carrier on the planet, they make money by way of density. The more deliveries they can make in the smallest amount of area helps them out, and makes them more money, makes them more efficient. So, Amazon, through their delivery service partner program and through their massive network of Prime customers, is seeking to make stops at every address. The van would drive down your street and just keep stopping. Everyone is looking to optimize the neighborhood. It’s no longer about the warehouse or the region, it’s on a micro-level.
Manufacturing, I think, is going to continue to move closer to the final mile. This might be by way of assembly, it might be a way of 3D printing. But as Amazon pushes for that neighborhood optimization, the only way to keep up with them is going to be to move the product closer and closer to where we predict it will be.
Another example is delivery inside the home. I talked about Ring earlier and about Walmart making deliveries right into the refrigerator. I think that is going to be more and more prevalent. Ikea bought Task Rabbit and is now pairing assembly services along with purchases in many cases.
I think those auxiliary kinds of delivery services that are inside the home are going to become more the norm.
Another one I really am excited about is packaging form factor changes. My family, we’re big Costco shoppers and if you go back five or 10 years and you buy something cool at Costco, some electronics or something, and then you go home and you would fight that clamshell packaging. You were taking knives and scissors and you end up cutting your hand trying to get the thing out.
The packaging was just wasteful and it’s because those things were built for a shelf. They’re built to catch your eye so that you want to buy it, but with shipping, that’s not needed. Groove is doing a very good job of this. You don’t need to build the packaging to be attractive on the shelf, if someone is going to buy it online, and it is going to show up in a brown box. So, that can not only add a lot of efficiencies and reduce costs, but it is also better for the environment and something which you can build your brand model around.
Those are the types of things that I see expanding beyond the big providers.
Drew Appelbaum: That’s really awesome to think about. I do have one question for you that seems extremely geeky, but you talk a little bit about robots and warehouses and that they don’t have parking spots. What does the modern warehouse look like with robots inside?
Jeremy Bodenhamer: I mean there is no standard yet. We are still in the early days and it is like the Wild West to a certain degree. One of the biggest problems with robotics is accessing the systems integrators to get everything set up and working with your other systems. Those guys are booked up and usually by the big guys. The big players being the Amazons of the world or the FedEx’s and UPS’s of the world because they use robotics heavily.
I tell the story of a Europe based supermarket and how they have the next generation robotics where the entire fulfillment cycle is handled by a robot, but that is not the norm these days. If somebody is using robots and they are not a big player, it’s usually for something like moving the goods throughout the warehouse, such as replacing a conveyer belt or doing some sort of standardized picking. It is for certain components that are very hard on the human body.
So, if I’ve got workers in my warehouse and I can have them stand at a table all day packing boxes, or I can have them walking 10, 20 miles trying to find items in my warehouse and pull them onto a cart, which one am I going to pick. I am going to put the robot on the hard work and give them more detailed work to the human–something that they’re good at that requires their mind or their fingers, their touch, something like that, which is very difficult for robots to do.
Warehouse Management System
Drew Appelbaum: Now you mentioned that you have resources on your webpage in the book. Can you give us a little highlight of what resources folks can find on your webpage?
Jeremy Bodenhamer: Absolutely, there are additional case studies. I actually have one on the Grove Collaborative plastics campaign and how their effort to remove plastics from their supply chain.
I have direct-to-consumer case studies that are really fascinating that I did not publish in the book. We are working on some workflows that will be on the website very soon. I also have links to partners. So, we know that one of the hardest parts of running an operation is knowing which suppliers to use, which partners to use.
In the age of software that gets even more difficult because there are so many different software providers. So, if I am going looking for a warehouse management system, which one and what’s the difference and how can I trust what they say? So, we have partners on there that we work with on a regular basis. Many of them have offers that are only for our readers and so all of that is available on the website.
There is also a shipping strategy calculator. There is the ability to do a fulfillment review, where someone on our team will get on the phone with you and do a thorough review of your fulfillment workflow, and tell you what’s working and not working. There is a lot of valuable information there, and none of it costs anything.
Drew Appelbaum: That’s really awesome. That is such a bonus to all the readers. I do have one last question, what was the strangest thing you’ve ever been asked to ship back in your early shipping days when you owned your store? Is there anything that just blew your mind?
Jeremy Bodenhamer: I get asked that often enough that there is no excuse I don’t have a single item. I have some crazy stuff, but I will give you three that are just top of mind. One of the stories I tell in the book is of a life-size wooden rocking horse–two grown men could get on this thing. Another one was a life-sized Betty Boop doll, this doll, she was hard plastic. She had to have been six feet tall, just huge.
Then the last one, there was a movie, Swordfish, with Halle Berry and John Travolta. Hugh Jackman was a hacker in that movie and when they had him do his hacking, he was sitting down at this desk with like 15 different monitors on it. I shipped that desk to a collector. So, there are three for you, but there is other stuff that’s just as crazy. People ship some weird things.
Drew Appelbaum: It’s like asking an ER nurse what’s the craziest thing they’ve seen. Jeremy, writing a book, especially like this one that’s going to help owners and executives is no small feat. So, congratulations.
Jeremy Bodenhamer: Thank you.
Drew Appelbaum: If readers could take away only one thing from the book, what would you want it to be?
Jeremy Bodenhamer: Determine and monitor metrics on the operation side of the business and set goals and use those metrics to manage those goals. Just having that insight into what is really going on in the operation in and of itself, could make or break a business these days.
Drew Appelbaum: Jeremy this has been a pleasure. I am excited for people to check out this book. Everyone, the book is called, Adapt or Die, and you can find it on Amazon. Jeremy besides checking out the book, where can people find you?
Jeremy Bodenhamer: At jeremybodenhamer.com, hamer is one M, Bodenhamer.com or at shiphawk.com.
Drew Appelbaum: Awesome Jeremy, thank you for coming on the show today.
Jeremy Bodenhamer: Thank you, Drew.