Conquer Supply Chain Disruptions
Diversify suppliers. Diversification sounds easy, but finding an alternative supplier or manufacturer can be difficult depending on the product. An alternative outside of China for clothing or kitchen utensils is comparatively straightforward. India, Peru, Bangladesh, Ecuador, and Turkey, as examples, have options.
But if a merchant imports digital equipment, the choices beyond China (e.g., South Korea, Japan) will probably cost 50 percent more. However, diversification can have unintended benefits, such as shorter shipping times, lower customs duties, and much more economical yield and replacement costs.
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Diversifying providers is similar to new-product sourcing with one exception: the merchant already has suppliers and will typically select a different region to decrease risk. Beyond geography, critical factors for selecting providers are price, quality, and lead time. Huge merchants have volume requirements.
Resources for different providers include Amazon Business, Alibaba, and country-specific sites, such as IndiaMart. I addressed supplier options several years ago, in”20 Leading Global B2B Exchanges.”
Advisors can help, too, by analyzing a merchant’s needs and building a list of possible choices.
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Partner with diversified manufacturers and vendors. Covid-19 is damaging China-based producers and vendors. Many are now planning to diversify outside of China themselves. Some have done this because of the rising labour costs in China and also the proximity to raw materials, thus launching centers in India, Vietnam, and Cambodia, among other countries
For merchants, using a diversified provider reduces the risk (and the effort ) while shifting the responsibility of price, quality, and support to one business. Check with existing manufacturers and distributors as to if they have diversified operations.
. . .with a diversified provider reduces the risk (and the effort ) while shifting the responsibility of price, quality, and support to one business.
Use tiered providers. Many larger merchants have tiers of suppliers. This differs from diversifying entirely, in that tier 2 and tier 3 options typically concentrate on a tactical replacement.
Say, for example, the product-packing unit for a tier 1 supplier stopped working. That could trigger a merchant to consult with a nearby tier two supplier to use its packaging unit. Tiered providers should typically work on short notice. Thus a merchant can not select tiered suppliers that need an elongated lead-time.
Substitute solutions. Another option for beating supply chain disruption is to launch new products. Start by assessing clients’ buy history and then choosing complementary or similar goods. By means of example, a merchant selling female clothes could sell purses.
Hold extra stock. Merchants usually avoid buying too much inventory. However a”just-in-time” strategy does not work when providers can’t ship the goods. Even smaller merchants could benefit from investing in excess stock (and warehouse space) to meet demand.
Iraq War Veteran Fails, then Succeeds, with Men’s Underwear Brand
That notion was a special type of men’s underwear. The first edition, in 2010, failed. He rebounded. Fast forward to 2020, together with his company, Sheath Underwear, is on track to record $2.6 million in annual sales.
I recently talked with him about the idea, yells, and, ultimately, success. What follows is our entire audio conversation and a transcript, that’s been edited for length and clarity.
Eric Bandholz: Tell us about yourself and your company.
Robert Patton: Thank you. I’m the CEO of Sheath Underwear. We began in 2010. Sheath Underwear differs from most male underwear brands as it is a pouch on the inside to isolate the man area and keep it off your inner thighs. I came up with the idea while serving in the military in Iraq in 2008. Since 2013 we’ve been doubling annually.
Bandholz: Cool. I want to touch on what changed in 2013 to quicken the enterprise. Is Sheath bootstrapped or backed by venture capital?
Patton: Bootstrapped. But we did use Kickstarter. That’s where the 2013 part comes into play. We did a first product launch in 2010. That did not go well. It set us back quite a ways because I had spent all my savings on the very first generation. I could not sell the product, and it set us back three years.
But during those three years, I got out of the Army. I got a divorce and went to work for a tailor who helped me produce the version better than the first edition. And as luck would have it, Kickstarter became a website, and we decided to give that a go in 2013. So I put up half — $5,000 — towards another production run with the hopes that we would have a successful Kickstarter raise.
Fortunately, we did have a successful Kickstarter. I was intending to sell my car if the Kickstarter process wasn’t profitable.
Bandholz: Let’s talk about those early days as you’re working on the version. Was this a side project? Are you currently working elsewhere?
Patton: I thought of this idea while in the Army in Iraq. When I returned, I bought a sewing machine and started prototyping immediately. I had been in the Army then.
I made samples for my friends, getting comments. Everyone was intrigued.
But I was in the Army, doing well. I meant to serve 20 years. But I’d already been on two deployments to Iraq and was scheduled to get a thirdparty. I had a family. I didn’t want to spend half of my time in Iraq.
So I took the chance and got out. I used my GI Bill to help pay for college. I was working at that tailor, too. It got me from 2011 to 2013.
I had that run in 2010. I had been working in the tailor, reconstructing all of them. I then sold them for a reduced price, getting more opinions.
That’s where the mindset of not quitting comes to play. I had tattooed the brand on my spine!
I had read the book “Think and Grow Rich” by Napoleon Hill. I followed the steps of the book. Whenever you quit, it’s over.
Bandholz: You’ve got this side project. You’re losing money. It’s placing a strain on your marriage. What was the strategy to go to Kickstarter?
Patton: We are very bootstrap. I didn’t have any money.
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Rather, I got rear-ended by a taxi in Austin on December 31, 2012. I received an insurance check for $5,000. This was the down payment I referred to earlier.
We were wanting to boost the bare minimum on Kickstarter, just enough to pay for the production. We had been searching about $8,000, and we ended up getting about $13,000.
Bandholz: So you moved ahead with that production run.
Patton: Exactly. We used all of the backer’s money to buy in bulk so that we can satisfy all the orders have another 1,000 pairs to advertise. We sold out relatively quickly.
Bandholz: Let’s talk a little about how you have been able to grow from 2013 till now.
Patton: We’ve doubled annually except last year once we climbed by 30 percent. Here’s why. In 2018 we chased our shipping and fulfillment since our home was too small. We outsourced to a fulfillment services. We spent approximately $20,000 a month with this company. They took advantage of us. We have since changed satisfaction providers.
But, we ended up doing $1.3 million last year, regardless of those challenges. We had done $960,000 in 2018. We’re expecting for $2.6 million this year.
We’re focusing on our infrastructure, which makes certain our processes are smooth and compact so that we can reach $10 million. And reassess again.
Bandholz: Let’s discuss your advertising strategy. Influencers are a fantastic vehicle for you.
Patton: We go after individuals that have been on Joe Rogan’s show or comparable. We aim UFC fighters or MMA fighters. I like that stuff. So it’s fun for me to pay, for example, Donald Cerrone [a fighter]. He is one of our significant influencers. He’s in the UFC, has the most struggles, most wins, most head kick knockouts. It’s an honor to be able to work together with him. And he happens to have a enormous following. It cascades from there. It didn’t start with him. It began with less-prominent fighters.
Bandholz: How can our readers find your products and connect to you?