3PL Creator:’I’m in the Exceptions Management Business’

Jay Sauceda launched his ecommerce fulfillment company, Sauceda Industries, in 2013 in Austin, Texas. He says packaging and shipping products is straightforward. What’s difficult, he said, is handling unforeseen events.

“The shipping business is, essentially, the exceptions management company,” he told me. “Placing products in a box and sending them out is the simplest aspect of this job. But what happens when a client’s purchase order is off by 15 units so that we can’t fulfill all orders? Or a client’s marketing campaign begins before we have the inventory?”

Sauceda and I recently spoke about his company’s legacy, the complexities of onboarding clients, and how to decide on a third-party satisfaction supplier, among other subjects. Our whole audio conversation is embedded below. The transcript that follows is edited for length and clarity.

Eric Bandholz: Tell us about your organization.

Jay Sauceda: In 2013 I discovered an ecommerce site called Texas Humor. It sells Texas pride stuff, like shirts.

When we were getting off the ground, I reached out to a few satisfaction businesses. Most told me that people were too humble. I combined our Shopify platform to ShipStation, and my wife and I would pack orders and ship them. We did that for about six months.

We’d been at a 500-foot warehouse. I thought,”How do I fill up this thing and keep our employees busy?” So I started asking people I knew who had side companies if they needed gratification help.

Fast forward to 2021, and we’re a third party fulfillment company, Sauceda Industries, in a 126,000 square foot warehouse in Austin. We have got about 50 merchant clients and about 100 employees. We ship a enormous amount of stuff every day. It’s wild.

Bandholz: So you’ve obtained Texas Humor and Sauceda Industries.

Sauceda: Yes. Approximately four years back, the fulfillment company started to grow. It’s now our priority. For the first couple of years, it’d been there to help us cover costs.

Our first significant customer was Howler Brothers, a clothing manufacturer here in Austin. Shortly afterward, around 2017, we landed other clients.

We’ve worked with Howler, William Murray Golf, a bra firm named Pepper, and Tecovas Boots, which is here in Austin.

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Another terrific client is Duck Camp. It’s a bird searching brand that’s just exploded in the last couple of years. They came to us with just an idea. We appreciated their approach and their go-to-market strategy. They are now among our most important customers. A good deal of 3PLs wouldn’t have signed them in that year. We are eager to take a chance on a brand new with no quantity if we know what they’re attempting to do.

Bandholz: after we found Beardbrand in 2013, most 3PLs were not focused on ecommerce.

Sauceda: Right. The process for fulfilling ecommerce orders didn’t exist in a lot of these places. Providers such as ShipBob and ShipMonk, which were launched with ecommerce on mind, ate their lunch. Our company operates in a middle place, involving huge logistics companies, such as XPO Logistics and GEODIS, and the ShipBobs and the ShipMonks.

Specifically, we concentrate on complex fulfillment requirements. Many 3PLs need simplicity. As an Example, Howler Brothers needed a ton of SKUs. We didn’t understand at the time they were any different than other merchants. So we’ve got good at doing the complex.

We’re now a fantastic location to get a company until it hits $40 million, $50 million in annual earnings — possibly bigger with our brand new warehouse.

Our average merchant sells 100 to 300 orders each day. In general we ship between 5,000 and 10,000 packs every day.

The opposite side of this business is the wholesale component, where we ship to physical retailers, such as Target and Walmart.

We take on small companies, but we bill for a couple of onboarding tasks, which can be extensive. More often than not, we’re helping an entrepreneur build a store and enhance it for scale. If we get the impression that the business is not ready to grow, we’re not going to say”no” but, instead,”not right now.”

Bandholz: Everyone bitches about their 3PL. How do you overcome that?

Sauceda: I have got two replies. To start with, the shipping business is, essentially, the exceptions management firm. Placing products in a box and sending them out is the easiest aspect of this job.

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But here is the reality. What happens when a client’s purchase order was off by 15 components to make sure our stock on hand is too short to fulfill orders?

Or, how can we meet a client who just launched a promotion effort, regardless of the fact that the inventory landed on our dock today? If that’s true, the consumer may give us the green light to stock quickly without counting, saying,”It’s all there.” And then we find out that they’re 20 short. What do we do with these 20 orders?

Or what do we do when a customer emails at 4:45 p.m. and absolutely needs something sent out today?

All these are examples of exceptions.

Another piece is that barely any merchants understand satisfaction. They’ve not been through the experience themselves. We rarely hear a client say,”I’ve spent time in a warehouse. I know how much this sucks.”

Bandholz: Let’s talk about the technology. At what point can you automate part of the procedure?

Sauceda: it’s possible to automate the hell out of a warehouse, but you’re never going to replace people. I truly don’t see automation as a zero-sum game. It’s more complementary. We don’t deploy a fantastic deal of automation because just about all of our merchants lack the processes, like using barcodes.

I’ve seen some innovative companies, such as 6 River Systems, which Shopify bought . 6 River uses robots that drive around the warehouse and deliver products to individual workers. As opposed to using pickers like I have who walk the entire ground, 6 River keeps people from the aisle that become experts of the region. They are grabbing the thing from the robots and putting it on a cart, which compels to some other place.

I’m excited by that type of automation. But for now, our primary focus is customer service. Our warehouse management applications is ShipHero. We have got a positive connection with them. We’ve enjoyed a fantastic overall experience with their software. It compels our warehouse.

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Bandholz: Some merchants listening to this are likely contemplating a 3PL. What if they anticipate in terms of service and pricing?

Sauceda: For assistance, the greatest sign is how much listening is the 3PL doing when you start the conversation? Every merchant is exceptional. Beware if a 3PL asserts they could save 30 percent on postage but does not ask about your organization. Be concerned if you aren’t getting questions regarding your new, fulfillment challenges, and onboarding needs.

So far as pricing goes, it changes. If you’re shipping standard consumer products without a personalized packaging, then you could probably find a 3PL who could do this for $1.00 to $1.75 an order.

If you’re sending fewer than 100 orders every day, it is likely going to be closer to $1.75. Getting to the lower end likely requires upwards of 1,000 orders each day. Customized packaging surely adds to the cost.

Bandholz: Is that with a 24-hour turn?

Sauceda: Yes, a 24-hour turn is typical. For most customers with steady buy amount, our service level agreement is that if it comes in now, it’s likely to ship in the end of the day tomorrow. It may ship today.

It will ship today if the order arrives by 2:00 p.m. utilizing state carriers such as FedEx or UPS. That’s mainly because the country pickups are in 3:30 or 4:00. We are in need of time to get it on a truck.

Bandholz: Where can listeners understand about you and Sauceda Industries?

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