Welcome, e-commerce logistics nation.Thank you for joining today's episode.We're on a mission to share e-commerce logistics insights, trends, successes, and challenges from the leaders and innovators in our space.
The average e-commerce merchant probably uses 12 kind of out-of-the-box solutions at a minimum, and they all have to work and play beautifully together.So that's an expectation just in the market.So end-to-end isn't new.
Welcome Ecom Logistics Nation.Today we're joined by our friend, former colleague, and in my case, boss, Ryan Kelly, Vice President of Commercialization at FedEx.
Ryan leads the enterprise's vision and strategies for e-commerce and digital aspirations.
He plays a critical role in contributing to the development and realization of products, solutions, and experiences, as well as establishing strategic relationships within the broader ecosystem.
He has more than 25 years of experience in the financial and logistics sectors, with extensive experience in leading strategy, sales, marketing, product management, research, and communication teams.
Ryan, we've been looking forward to this for quite some time.Welcome to the show, my friend.
Good morning, and thanks for having me.I'm listening to that intro.I'm like, I am really old.Thank you for making me feel ancient in that intro thing.
But what a phenomenal journey, by the way, Ryan.One of the things I have to call out on this one is when we were thinking about starting the podcast, we were like, what guest would we have on, right?No word of a lie.
The first person we could think of was like, oh, Ryan's a friend.We can bring Ryan on.And now this is happening on episode number 85 or something. Finally, it's here, but you were supposed to be the first.
Thank you.Thank you.It's sad that it took this long.Y'all know how to call me.No, I'm just kidding.That said, getting around, let's be honest, I've worked at two employers, one for 16 years and one for a decade.So it's been an interesting journey.
Exactly. Obviously, we know you really well.As I mentioned, the three of us worked together starting at Genco prior to the FedEx acquisition.
So I thought we would start by having you share with the audience a little bit about your journey, your story, and what led you into the world of logistics.
Absolutely.So I have a really non-traditional background.I was an investment banker for 10 years. So investment banking, capital markets, and then equity research.The nature of that is you're assessing the strategy of a company.
When I had the opportunity to leave financial services, I joined a company called ATC as their head of corporate development. The goal was to go buy other companies, either buy, build, or partner.
And I was there two years into that journey, instead of buying another company.We sold the company to Genco, and I joined them as their head of corporate development and strategy.
And five years later, had the opportunity to sell that company to FedEx. And during that whole kind of thing, I pivoted from just looking at things from a strategy standpoint of an investable opportunity and more so, what is the commercial strategy?
What is the product strategy?What do we aspire to be?I picked up along the way, strategic planning, marketing, communications, ultimately sales, and just evolved into this commercially oriented person, driving the outcomes.I've now been at FedEx,
With all the grandfathered service, I think it's been 16 years with lots of iterations along the way.
Yeah.Right before we jumped on the recording, we spoke about what do you do today?What your title?And I know Dan described it.Maybe if we can spend a few minutes talking about that.
Yes, absolutely.We joke about it.It's a make-believe title.VP of Commercialization at FedEx and Technically in Marketing.That's the way we structure the enterprise.My responsibility at this point is very engaging in the third party.
So whether you're talking about traditional alliances that we have with credit card companies all the way to industry associations or shipping technology providers, anything in that third party space, my team gets to work with.
That's one big piece of my job.The other piece is I have the returns portfolio for FedEx, from the transportation and parcel assets all the way through the technology that enables returns experience.
And then the kind of the third bucket is commercializing our digital solutions.So FedEx has entered the digital market, so focusing on product development, but also fundamental commercialization to how to bring those to market within the enterprise.
So there has been this journey, right?There is the acquisition, shop runner that then evolved into other things.And now we see this, that's the portfolio you're talking about.
Of course, there is the side of the compatible and the alliances and everything that goes along with it.But now FedEx is truly stepping into a more integrated ecosystem.The announcement at NRF, if I'm not mistaken, this year was the FDX announcement.
Now, would that be something that falls within your umbrella?
Yes.What started initially as kind of meeting customer needs, we get customers that say, hey, can you do this?Can you do that?Hey, why did you stop here versus bringing a full solution to the market?
And so it was a natural evolution of some of the things that we'd already built. And then as you started to build some of these products, you started to see that they actually interact with each other.
And that's where we made that pivot into the full platform environment.So FDX is the platform.
Talking about that journey, it's all about the parts of learnings that we have along.We had shared experiences working at Genco developing FedEx fulfillment and the returns technology.
And we looked at, this is what, 2015, 2016 timeframe, a lot of learning that comes out of that.And then as we move along the way, there is experiences that you gained from the merchant standpoint, right?
What does the merchant of today need from an ecosystem standpoint, right?Because it seems like one year in our space currently represents a decade from 30 years ago.That's how rapidly the needs and evolution of technology happens to be.
And what do you, from your perspective, see the future happening to be?
So a couple of thoughts there.There's a lot of great solutions out in the market now.And if they're going to be successful, they have to be very elegantly stitched together with a lot of other solutions.
My guess is the average e-commerce merchant probably uses 12 kind of out-of-the-box solutions at a minimum.And they all have to work and play beautifully together.So that's an expectation just in the market.So end-to-end, isn't new.
But what we were starting to see is some of the solutions that were in market, quite honestly, just did not do justice to the assets that we have, either to the shipping solutions we have or even the data that we have.
An example, there are companies out there that have expected delivery dates for us.However, they don't fully understand all of our signals that we have within our network.And so something as simple as
a package, a label has been generated and hasn't been tendered yet to us, some third-party technologies actually don't understand that it hasn't been received into our network yet.
So they start tracking it as late when we haven't actually received the package because there's a lag between label generation and package induction. Simple things like that.
But a lot of third-party technologies just don't understand some of those fundamentals about the way things operate.And so we ended up having to do consulting and help explain to it.
And then they started asking for better technologies, APIs, webhooks, etc.And so you got into this point, we're going to have to solve it.And so that has pulled us into that market. And as you get into it, you'll learn even more.
What are the things that are going to be necessary, nice to haves?
And the really nice thing from the back of the Genco days to the FedEx days, when I had marketing at Genco, the number of times that I had to, you get asked that question, what's a Genco? Nobody asks, what's a FedEx?Everybody knows what that is.
So you can get straight into what do you have and have that conversation.And also with the relationships, you can get really amazing build partners that say, hey, we're committed.Let's go figure this out together.
And so you actually are able to prototype with some of the best companies in the world.That's a pretty cool canvas to have.
Yeah, when you stop and reflect, it's really freaking cool.
Two things I'll say on that front is one, that thing you said about what's a Genco versus what's a, no one's asking what's FedEx.
When you leave a FedEx and you try to do something in a smaller company, you go through a decompression of like six to eight months of just realizing that you can't just make a phone call and someone will pick up the phone on the other side.
Because being FedEx, you can pretty much call anyone and get a conversation with anyone.And that's what happened to me as just as a part of my journey.I'll tell you on the other side, it's like a realization.
The other side of that, the thing that you just said is like average merchant using about 12 applications.If you look at when e-commerce in general started, right?Like when it started becoming a thing, right?Like 2005, six, seven, you saw.
these companies, some really good giants like GSI, as an example, that came up with solutions that were all packaged, that were all about, hey, we will do your e-commerce, your logistics, your agency, your fraud, your credit card management, your customer service center, your call center, like everything.
And then you started seeing this fragmentation that started happening over that time frame as newer API based ecosystems, startups, and then everything was like, let's get best in breed SaaS solution $25 a month, right?
What I'm seeing is a level of regression, but a regression not to the point. where we go all the way back.But from a logistics side, you might have one solution that all connects together and stitches like a post-click experience.
There is that ecosystem.And then there is the pre-click side, which is more like the agency experience, but you aren't using 17 different things to make it happen.It's actually one or two solutions that can consolidate and make it happen.
Is that your observation as well, that we are not all the way regressing, but we are regressing?
I feel like it comes and it goes.There's the quest for end-to-end.There's the quest for simplicity.There's the upsell.There's best of breed.There's headless.There's a lot of different ways to approach it.
And so we do focus on, hey, where do we have the rights when?Where do we have differentiated value?And then also understanding how does it all play into it?Let's be honest, a lot of shippers out there are multi-carrier.
It's the reality, but addresses are something that we know a whole lot about.And so those are some of the things that, that you kind of look at and you say, what are those best of read solutions?Do they happen to all be at a certain place?
And how do we augment our data to make our insights better than anybody else's?
I love that.And, you know, Ryan, I do want to talk about sustainability because it's gotten the spotlight again.But from like a commercial strategy perspective, how are you seeing sustainability be effective from that point of view?
And maybe I know a lot of what you do is on the technical and digital side. But how are you seeing brands, retailers and even FedEx use sustainability as part of their commercial strategy?
Because obviously it's all about what the end customer is valuing and looking for.
This entire episode could be about sustainability because it goes into so many different ways.So about the commercial, the commercial side of it, it's multiple pieces.
One of them is just better understanding the CO2 emissions of the decisions they're making from a shipment standpoint. Some merchants, they just want to do it because it's the right thing to do.
They have their, how they think about their emissions, their scope three emissions, we'll call it, is very important to them.Sometimes it's important to their consumers.Sometimes those are both and they connect the dots between those two.
So that's a piece of it.But then part of it is also basically consulting resources.What should we do in order to be a better steward to the planet, knowing that this is the market that we're in?And so what does that end up looking like?
And there is no one-size-fits-all.When you're as large as we are, you have customers of every profile.And so there will be customers that prefer the most sustainable shipping option possible.
There are merchants that will drive you to, we call it hold-at-location, so alternate delivery where we're already making a delivery stop.So there's a lot of different kind of options out there for how to have a more sustainable supply chain.
But that just looks at the package shipment.You actually have to, y'all know this, you have to actually look at the entire end-to-end.What is the packaging materials that you're using?Sometimes cheap packaging ends up falling apart.
You end up having to have multiple shipments.And so and your quest to do some things to be more sustainable, there's a lot of collateral damage along the way.And so having people really think about that is important.
I recall this one customer and return rates on this one customer were through the roof. They completely were breaking every business case they had because the return rate was so high.
And they were trying to figure out what was driving the return rate.And it turned out, you looked at their policy and nothing jumped out at the policy in the way they were doing it.And so we finally were like, okay, let's have an experience.
And what they had designed was the most efficient outbound shipment you can. And it was a relatively plain brown box.It was a technological product.
And so the most efficient thing was to put that product down first, then all of the instruction manuals and all those kinds of periphery, and then all of the cords.
But what ended up happening is when you open it up, the consumer opens the box and they just see a whole bunch of cords and peripherals.
It was supposed to be a relatively easy self-install.They open the box and they just shut the box.And they're like, nope, this is beyond my capability.I'm just going to return it.That's not what I signed up for.
And so you really have to look end to end and challenge what you're seeing.To me, that's a part of sustainability.Sustainability is about not just CO2 emissions, it's about waste. And how do you drive waste out of your supply chain?
And Ryan, there is also a part and very well said, right?So there is the consultative aspect of look at the end to end picture.But when we start talking about technology, one of the biggest areas.
That choice of shipping that you mentioned, I think that starts becoming a bit of a problem that there is when we are seeing options on the checkout screen, it's actually not showing
right or the adoption around the co2 footprint or i can tell you nine times out of ten if i knew I'm not just going to accept a delayed delivery for no reason.
But if you were to inform me, hey, if you wait two days, your carbon footprint is going to be like half.Guess what I'm going to choose?I will make the right decision.
And it's that optionality not being available and the adoption not being there and also in a multi-carrier format, right?So given FDX, right?Like how is it just a FedEx solution?Sorry.
So you said delayed delivery. I would say if you set the expectation of the shopping cart, it's not delayed, it might just be a longer transit, but you've committed to it.
And that's one of the things we're seeing the most from all of our research and all of our consumer behavior is people are open-minded to almost any transit, as long as they have a clear expectation about what it is when they check out, and then they have good visibility along the journey to make sure that it is delivered consistent with the expectation.
Overwhelmingly, people want free shipping.Internally, we might call that subsidized shipping because there is no such thing as free shipping.And they're willing to do a lot to qualify for subsidized shipping.They will wait longer.
They will go to alternate pickup.They will do a lot of things.They will sign up for a loyalty program.People are willing to opt in whatever is required to get free.They expect free to get faster.
But even some of our stats show that outside of the largest marketplaces in the world, delivery still is in the five to seven day range, which is surprising because as y'all know, it only takes two optimally placed fulfillment centers in the U.S.
to hit 93% of the U.S.population in two days on the ground.But to have something take five to seven days, you got to try real hard to have that kind of a delivery experience. So that was one piece.
To your point about like, hey, if people knew, they might do something different.I liken that to, unfortunately, calories on a menu.Think about that when you open a menu and it has all the calories and you're like, oh yeah, I'm not gonna get that.
The last question, I will hit it.FDX is multi-carrier.So while we obviously know more about the FedEx network than anybody else, there's also a lot known in the general market about a lot of other networks.
Yeah, exactly.Just if you don't need it the same day, don't get a peer-to-peer delivery network to deliver something to you as an example, right?Like you really don't need that thing today.
Yeah, I'd say that actually is one of the things that's a little shocking is peer-to-peer or point-to-point solutions are probably the most unsustainable. option when you actually look at it, the route-based network adds a lot of efficiency into it.
And that's something that consumers just don't think about when they're making their checkout decisions.
And you're seeing just the emergence and the amount of businesses that are out there in that particular business.Of course, that's a reaction to the market accepting that as demand.And again,
businesses should go where the market demand happens to be completely agreed, fully capitalist, right?But on the other side, I got to also say consumer awareness is really critical around that.
We like, yeah, just because you have this option, do you really need this?Because the comparisons not between, is it an 800 calorie sandwich or a 600 calorie sandwich?
Now we are talking about, this is like your daily caloric value right here at 2700 or whatever the number happens to be for a given shipment, right?
Absolutely.The other piece of it is, in the grand scheme of things, the vast majority of e-commerce is driven by some of the largest players.The largest players have multiple fulfillment locations.
The vast majority of e-commerce is actually delivered in a day or two, when you actually look at the bigger players.And so you start to get to, this isn't a decision between the same day and seven days.
you're talking about the difference of 24 hours.And so not having that understanding, I'd say is a big deal.
Obviously, I'm a shipping geek, but the number of packages that I get delivered, and then I don't even bother opening for a day or two is sad.So did I need it as fast as I got it?Probably not. Same thing with returns.
Think about how often you have a return and you drive around with it in your car, like in the trunk, before you ever drop it off.Like, it might take a week.
and then it's too late.Yeah.And then you miss your window and you're stuck with it.You take it to goodwill.
Yep.That is one of the things that, is it true?Is it reality?So like that example of so much of e-commerce, if it's not with the largest players is actually five to seven days.
Another thing you often hear about is the most convenient retail drop-off, like retail tender option is your own mailbox.That sounds really good.Generally speaking, people don't use it because it doesn't fit in their mailbox.
They're not going to leave it outside their house.They're not going to put it next to their mailbox out by the street.And overwhelmingly, consumers want a receipt.All things you don't get if you just put it in your mailbox.
And despite the fact that people think that's the most convenient, customers define quality.Customers define what they value.And overwhelmingly, people take a return to a location where they can give it to somebody and they get a receipt.
That's the most convenient, but that's not what you would assume.
There is another part to this.You spoke about returns and just out of curiosity here on the returns front, there is the percentage of returns, but there is also a lot of abuse in returns, right?
I've been talking about it for a while is the need for some level of industry wide data sharing to try and avoid or. catch abuse or catch fraud, right?
Similar to these financial institutions that they got together and said, hey, we can all compete on selling stuff, right?But let's try and catch the bad actors, right?Is there a part to it?I want to get your opinion on that.
Yeah, I'd say the vast majority of returns is logical, ethical, etc.So much of our research there, actually, we do help
merchants better understand what their return policy should be, what is industry best practice, what do cohorts, generally speaking, do on returns to help them understand how should they set the return policy.
We also help them understand what are best practices.
Let's be honest, if you go to an apparel website and they don't have normal human models where they give you the measurements and they're like, this person is this and they wear this size, that's where we are at this point.
Companies that don't use good lighting, the number of returns that this was supposed to be red, it looks more brown.Okay, that's your own fault for your website, your lighting, and your descriptions.
Consumer-provided feedback, this shirt runs tight, large, long, etc.Those are unfortunate returns.But then you get into what are the things that you need to do. Yes, there is absolutely returns fraud.
There are a couple of things that you can do with returns fraud is A, you have a lot of merchants now requiring you to be in some type of loyalty program in order to qualify for returns.So they can start to look at lifetime value of a customer.
And one of the best examples of that is I was talking to head of supply chain at a really large retailer that you would all know. And he was talking about their highest grossing consumer.And I want to say it was the Dallas Fort Worth market.
And the amount of money this person spent on clothing was staggering, just absolutely staggering in a year.I was like, oh, wow, that's... I understand why they're your highest grossing customer.And he goes, you know what their net was?Zero.
They essentially rented it all.They returned 100% of what they bought.And until they had data, they didn't know it.They thought this was their best customer.It was actually one of their worst.
Because that customer actually lost the money because I assume 100% of it couldn't be resold as brand new.Plus all the labor that kind of goes into it.And so it gets you back to what is the data? What is the data around?
Plus all the free shipping and free returns on top of that, right?It's got to be a negative margin at this point.
And so you have to get into lifetime value of a consumer.You have to understand fraud.
Let's be honest, there's a lot of trends out there with the just keep it policies, where they're looking at the total cost of returns and reverse logistics and markdown, et cetera, and saying, is it worth it?
My guess is they don't offer those to guests.They offer them to enrolled consumers that they know lifetime value and they know that this is a good customer.They're making those decisions at the individual basis, not at a policy basis.
That's the thesis around like some of the shoprunner activities as well for you, right?Like you, you want that experience to carry for the merchant, but it's like understanding who you are.
If I don't understand, it's much harder as just a general guest.
And there's interesting data as you start to marry data together, an address that might have a whole lot of claims of package not received.Maybe it's some type of forged piracy or something along those lines.
But if you marry that to this consumer returns 13 times, quarter, and maybe you even marry with package profile.This person bought something that weighs five pounds, and the return shipment weighed a pound.
You start to have some signals that something isn't right, but you have to have the data to connect all those pieces to truly know something's not right.
Exactly.Right.This person took five items.Now they are returning just one.Okay.Makes sense.Right.But if they took five items, they are returning all five and now it's only one pound.Be like, wait a second.
Yes.Back to sustainability.Think about the last time you bought five items and you returned one. Did you go find the best box for that one, or did you put that one thing back in the box that fit five?
One thing back in the same box.
Great point.So, inefficient DIMM, chances are, if it's not packaged correctly, it actually has a higher likelihood of falling apart.You wasted the merchant's money sending back something that took up a whole lot more space.
So that merchant might end up having a more less customer friendly return policy because of consumer behavior. All of this fits into it.
It's one of the reasons why we're seeing an uptick and people wanting a package-less, printer-less solution is so they're not using that inappropriate DEM, they're bringing it back.
So that T-shirt's just going into a poly nailer or something along those lines.It's a better DEM for what's going back.
And there is a lot of consolidated return capabilities and whatnot that's also started to happen out in the industry.
But that's a really interesting space as well for where things could go.But they also have their own set of challenges that we are aware of as well.
As I was just listening to you guys, the average listener could probably be like, oh my gosh, how did that giant retailer not realize this number one customer had basically a negative margin impact on the business.
But as I was listening to you guys, every system that comes into play was going through my head, right?There could be a different return platform.There's the WMS, the OMS, the payment solution.
So going back to what you were saying, Ryan, about an average of 12, maybe you have to multiply that when you're talking an enterprise level brand or retailer as well.So it's actually a really complicated and you have these
Departments that are siloed a little bit and just looking within their lens and their fiefdom, right?So you could see how this has been happening for so long.So I think the.
The digital solution to bring all those data elements into 1 place to be able to help people have visibility.
Yeah, it's not just best of breed, you know, elegantly stitched together.It actually has to feed itself.
And that's why the platform is so important, where you're actually having all of these solutions, exchanging data to help make better, more insightful decisions about your supply chain, your merchant experience, consumer experience.
It's the digital to logistics divide in most organizations, because if you think about most of the larger organizations, as well as some of the really fast emerging brands, both of them have the same problem.
So if you go with the enterprises, the challenges they created, they had their store supply chain systems, right?Like everything was designed around that.
Next thing we got to do this cute little thing called e-commerce until it's no longer just a cute little thing and a major contributor. So they go, oh, wait, we got to bring in a digital e-commerce team.
That team's made up of people that know how to attract consumers.They know what are the right products.It's more a merchandising exercise, right?Returns became a logistics problem in that new ecosystem.So returns is, okay, so what do I got, right?
Like a system that can give me an RMA somehow so that I know what's coming back to me so that I can process and do something about the payment side of the universe, right?
Same thing is applicable for emerging brands as well because you have, even though you start digitally native, your entire solution is designed around consumer acquisition.
And man, from 2012 until about last year, the party was so good that you could acquire customer acquisition cost was so low. that the cost of logistics was not in anyone's kind of crosshair.
All of a sudden last year, they are like, wait, what's happening here?Why am I paying so much on the logistics side while my customer acquisition cost has skyrocketed?Literally, I just heard this, just a small tidbit.
The most successful strategy right now in the market to acquire new customers for digital is TV ads. because no longer Instagram ads and Facebook and Meta and whatnot, just because of the cookie shutdown, TV ads are the most successful.
So like the cost is starting to increase so much and it's like, everyone's okay, digital and logistics, we got to start talking and really start sharing data.
So how about this to play off that return policy is often number two or number three of what will negatively impact car conversion.It's not surprising. You look at price and then number two or three, you say, can I return this thing?
And so it's a very big decision about a new purchase is your return policy.And so we work with a lot of kind of new and upcoming brands that are selling on multiple marketplaces, social commerce, and they have brands that no one's heard about.
How do you get somebody to take a chance on something that they see on social media?A brand they don't know, you try to find a way to de-risk the transaction.
You de-risk it through a great returns policy backed by a brand that you all know and trust.And so it all comes around and instead of making all these little silo decisions, your returns policy isn't a logistics decision.
It's a marketing investment to de-risk the initial purchase so that you actually grow your consumers.
That's amazing, Ryan.And literally yesterday, so my youngest daughter is going to be a freshman in high school. And she's starting to look for, yeah.Thank you.Four more years ago.And she is looking for her homecoming dress.
It's not for a few months, but she's looking.So she found this dress on a site that social media led her to.She was getting ready to buy it.And my wife was like, well, Hey, just, we don't know about the size or the fit.
Just make sure you can return it.The return policy was. We only give store credit.So my wife was like, we'll see if there's another dress you would like if this one doesn't fit.And there wasn't.
So that company lost a sale only because of the return policy.Yeah.Because you're stuck with it or you're stuck with store credit with a company you've never shopped at before.
Maybe you don't have any other needs or yeah, it's a really big, big thing.
And yet so many people, it's an afterthought.You really don't put your brightest on it.You don't focus onto it until you have a problem.
And if you're strategic at the front end and actually think about consumer experience and what's going to drive car conversion and all those things, you would make a very different decision.
And since our olden days, fortunately, I've been able to work a lot on returns and reverse as logistics space in general.
I think that the next generation of technologies and capabilities are going to be returns personalization from a policy perspective.It's now that I know who it is, I know how to manage this particular user and how I can convert this cart, right?
Like it's a, it's at that intersection of the right thing for the business, right?While also acquiring the customer and the bottom line, right?
I think there's going to be a very big place, specifically apparel footwear, those high return segment, 20, 25, 30% return rate segments, right?Like how do you start
For the longest time, when you manage reverse logistics, so many of your decisions are based on manufacturer-to-brand policies, so what's negotiated up front.Then it went into, what is the product?But I feel like that's where we're stuck now.
You can have different decisions based on the product. But getting to the point where it's not based on just the product, it's based on the consumer.Back to lifetime value, what is the right thing based on that product and that consumer?
And quite honestly, time of the year.Do you have a different policy during peak?Do you have a different policy on seasonal merchandise?Absolutely. So all those things factor into it.
You know what?We could talk about this particular subject for the next hour and the three other things that we need to still talk about for the next hours.Loving this.
Absolutely.So as we start to wrap up, I would say one thing, though, that I really want to focus on is that challenging conventional wisdom.
Whether you're talking about number of fulfillment facilities, a lot of people talk about the largest retailer in the world who has many fulfillment facilities. Way more than you need to enable next day or even same day.
It's about inventory storage where you're fulfilling from so many retailers that we work with.They don't use ship from store in order to speed up delivery.They use it to prevent. multiple packages per order.
So it's all about inventory optimization, not about shortening the transit time.So just like really understanding what's going on and how decisions are made, I feel like there's a decent amount of lazy thought out there.
And so that's what I would really encourage people to really think through.We talk about the double click all the time or the triple click if you really want to get it right.
A lot of things out there when you talk about your business are worthy of the triple click, especially profitability by sales channel.
The number of people who still do not have good kind of grasp of the profitability by sales channel, they just talk about revenue or GMV and they don't even understand, is it a profitable channel?Staggering.
I love the fact that you just dropped that Because we have spent time together on this, right?It's two sides get it to 94% or 93 point something odd percent, right?And then it's the third side only incrementally adds 2%.
And then after that, it's literally the laws of diminishing returns.You never get 200, or if you do, you probably need 35 warehouses to get 200%.And you shouldn't be aiming for that in general, in a two day delivery network.
But the point that you just made about like, Why ship from store?People need to realize like ship from store is inefficient.Like those employees inside those stores with little back rooms aren't the best people doing it, right?
Like best in the sense, like they are designed or they are employed to do one job.You try to make that happen again, larger grocery stores, et cetera.That's a different scenario.
But you walk into a mall brand where already the storeroom is really tiny and you're trying to do that.It is for consolidation, reducing the package. But there is the right way to do that as well.I love the fact you called it the lazy thought, right?
It's not going deep enough, right?And yeah, people should be going really deep enough to be able to understand what's the right thing.
Yeah.Even on that topic, is it less efficient to ship from store if you're just comparing logistics costs or pickpack ship costs?Yes. But if you're looking at, hey, if I don't get more inventory out of this store, I'm going to have a markdown.
This is going to end up on a clearance rack because I over-inventoried the store.You got to look at the whole to really understand the kind of the economic, the financial costs of shit from store.
You also look at, are you doing it in downtime versus you've got to manage this during peak staffing levels.So all of those things factor into it.
The other one that I love to talk about is a lot of small businesses, they only fulfill from one location.They usually fulfill from one of the coasts.So you got awesome delivery, kind of one and two days for, we'll call it half the country.
The other half the country, you're like five plus days.But nobody fulfills from Kansas. you can hit 100% of US population from Kansas in three days.
And so just, you don't see many people pull off that, that go for the, I'm gonna go buy coastal, but so many people never make it to buy coastal.
I think there is also, so on that front, I'll also say this, the primary driving factor for not using Kansas is not the budding hotbed of e-commerce brands in general, right?So your first site is usually,
If you are going to have one, you want to keep it close to you, and you are going to see that density come from those regions where it's actually happening.And that's why we have that observation.
But when you go for the second one, then you go, I'm going to get it on the other side of my universe, right?So I'm an East Coast, I'm going to get the West Coast, right?But yeah, if you are going to build one,
or you need to expand, you're growing out of your garage or your first like 5,000 square feet and you're like, okay, I need a 3PL or self-run site.Maybe you should be looking at Kansas, right?
If your plan isn't to go to, or your customers aren't going to leave you in a three to five day network.That's very good point.
And it goes back to what Ryan was saying about know the whole picture, right?
Because what we hear a lot of times is brands saying, I don't want to absorb the cost of shipping truckloads or pallets of goods to Kansas or Midwest or wherever it might be.
But if you take a look at the whole picture, how much of your outbound is going to Zone 4, 5, 6 and plus?
And the math will usually tell you that it's much more cost effective to get that inventory in an optimal location because the savings on the per package will prove out an ROI.
But it's not taking a look at the whole and just looking at the micro, that people have to just, they gotta do the work.
Right, and don't just look at the savings, think of the investment.If anything taught us over the past five years, supply chain resiliency, it can make or break your business.
Having a two location, maybe one is in-house, maybe one is outsourced to a 3PL on the other coast, we'll call it.
When you think about all the supply chain issues that we have had from a global economic standpoint over the past several years, it's inevitable to check it.You got to get there.You're risking your business if you don't.
We used to refer to ADV, right?The average daily volume.So to that point you just made, what is the average daily volume someone should be at to say, Hey, I need two sites. But like, there is a point at which you say, yes, is it 100 orders a day?
Is it 500 orders a day?When do you think that someone should be making that pivot?
My instinct would be to answer your question, say it's about 100.But it really depends on what you're talking about.Are we talking T-shirts?Are we talking furniture?And where are you getting your goods from?
So if you're talking about inbound Asia into West Coast port, You do some type of cross dock, you do fulfillment out of West Coast and then move the rest of it to the East Coast, like all those kind of things factor into it.
But I would say rule of thumb, yeah, let's go 100.100 orders a day and you should do the analysis to say it doesn't make sense to augment.
And get the right technology to actually do it as well, because that's the other equation, right?Like the moment you get into that, That's the fear that a lot of people have.
And it's, listen, you can take some general rule of thumb as well to start with, right?If you have a lower skew depth and density, right, then you could go, Hey, I'm going to do a 70-30 split, right?
That's data analysis and just dive in because you're going to see the savings.70-30, right?And also 70-30 on the cost side, remember 70% is transportation, 30% is pickpocket operations and the other.
The other thing looking at our stats. Let's just say it's 70-30 based on geography.That isn't the split of what you do.You're going to end up having inventory mismatches.
You're going to end up having orders after a cut time in one facility where you can still make the other one.There's just a lot of nuance where you're going to end up fulfilling national out of both. It's just the inevitability of the supply chain.
Mr. Kelly, you have absolutely delivered.It has been awesome having you on the show.I just want to thank you again for joining us two years late.I might just point out again, just kidding, but yeah, thank you.It's been a lot of fun.
Great conversation. Just to wrap things up, where is the best place for our audience to go and follow you?Is it LinkedIn?Any other social that makes sense for people to look you up?
Yep.Best option is LinkedIn.And as I reminded my wife last night, there are seven Ryan Kellys at FedEx.So it is Ryan P. Kelly on LinkedIn.
Amazing.Amazing.Listen, thank you so much for joining us, Ryan.Thank you.P. Kelly.Thank you.Absolutely.
Ryan, much over to you.Thank you. Hi, I'm Nenad Acharya, CEO and co-founder of FulfillmentIQ.
And I'm here with Dan Call, CRO and partner at FulfillmentIQ.We're the team behind the Ecom Logistics Podcast.Our mission is to provide you with genuine insights from our work alongside logistics leaders to help you improve your supply chain.
In the Ecom Logistics podcast, we share the knowledge and the insights we've gained from working alongside amazing brands, retailers, 3PLs, and VCs, so you can make the most out of your supply chain journey.
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If you think Fulfillment IQ can assist you or if you have an idea related to logistics, just reach out to us on LinkedIn.We're always up for a chat and ready to explore new possibilities together.
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