DEEPER DIVES #0006 - SaaS Fails Without Infrastructure & Assets

Good Morning,

First, as always, thank you for joining.

There was a lot of good stuff this week.

JIT inventory is back, the Port of Hong Kong is no longer cool, UPS and FedEX blatantly colluding on price increases and Amazon dropping Just Walk Out for Just Walk with Carts.

But I wanted to touch on something else that’s more important. The growing divide between logistics products versus logistics service.

One last thing before we jump in.

Even though my free weighted centroid analysis got snapped up the day I posted, I’m able to support one subscriber of the newsletter if this is something you needed and missed last week. Just for being here.

Here’s what this issue brings:

• Featured Article: ShipHero’s CEO got cheeky with Stord. Here’s my take.
  

• Broader Focus: Are your teams still manually preparing reports each month? This will 10x your returns
  

• From the Community: What Area of eCommerce Are You Watching The Most Right Now?

Stord Got A Lot More Interesting By Doubling Down on Docks and Doors

Aaron Rubin, CEO of ShipHero, made an interesting post a few days ago. He shared his thoughts on Stord’s acquisition of ProPack Logistics.

If this one passed you by, here’s the TLDR:

• Stord acquired ProPack for tens of millions of dollars (they declined to be exact)

• Stord is an end-to-end fulfillment provider that owns some of their own warehouses but also sells their software to others

• ProPack provides fulfillment services for the nutrition and supplement product industry, and has six temperature-controlled warehouses across North America

• The acquisition has one goal, get Stord to profitability by the end of 2024

Some might feel this is a cop out. That rushing to make an acquisition with VC money (Stord raised $120M in May 2022) is a sign that Stord’s model doesn’t work. Maybe that’s the case, I understand why you could feel that way.

I think that they simply got too big too fast riding the wave of the pandemic, were able to hold onto business that expanded with them at the time, and are now struggling with the slow growth everyone is seeing.

Regardless of what side you sit when it comes to Stord and their strategy, it brought back to mind a position I shared in February.

That Logistics SaaS is heading for a supernova.

I love technology. I’m all for new systems and tools.

I completely agree that the logistics industry needed a jolt.

We were comfortable. Very very comfortable with the status quo.

So, there was a place for advancement.

But in my mind, there’s too many new tools.

The problem I see with all of the tech that has emerged is that it’s disproportionate when it comes to growth, attention and quality of execution.

There’s too much talk about systems, and not enough about the things that really matter. Assets and infrastructure.

Product has to move.

eCommerce is fuelled by one thing. Successfully getting a product into a (paying) customer’s hands.

If there aren’t people with warehouses, trucks, and getting packages to those doors - none of the fancy toys matter.

In my opinion, Stord made the right move. They are clearly showing that they are positioning themselves to be involved where the work actually happens. It’s the people with the assets that are going to win the business of retailers going forward.

Software is too easy to replicate.

It’s very quickly becoming a pure commodity. No code and AI based tools are going to make the barriers to entry even lower.

The moat is having the physical assets that allow execution of the fulfillment promise.

When Aaron says that he’s only interested in warehouses to be able to build software - I get it. That strategy made a lot of sense for him and ShipHero over the years. They have a solid position in the market.

Hearing him say that makes me think of Blockbuster though.

There’s a reason that UPS, FedEx, Amazon and USPS have 94% of the parcel market in the US.

It has nothing to do with them having the best software.

They have the end to end assets.

They actually make things move.

Spend Less Time On Reports, And More Time In The Business

I hate canned reports.

Well, actually, I hate canned reports supplied by vendors.

These are the reports, widgets and dashboards that were over-sold through your purchase process.

All of those flashy PowerPoint slides that caught everyone’s attention.

They are never as deep or mature as the sales person wants you to believe.

And that’s ok.

Expecting to get business changing data insights off the shelf is tempting.

We all know how much effort goes into tracking performance. It can feel like an never ending grind.

But no vendor will be able to build a product that can cater to everyone they want to sell to.

So they pre-build the most basic and widely applicable stuff they can. Their goal is to give everyone something.

Always make sure you can access full raw data from the software packages you are buying.

If there's no way to run your own raw reports, get the commitment from the vendor to set you up with a custom report on a specific delivery schedule

BEFORE YOU BUY

When I started in my last corporate role, from day 1, it was clear that manually preparing reports and dashboards wasn’t going to be how we spent our time.

Even though creating and implementing these tools was our job, having one team or only specific people that could make the required updates or preparations was way too much of a business continuity risk.

So I changed that.

If you want to dramatically increase your team’s performance, keep your dashboards and reports high quality and consistent and not leave your team feeling burnt out - ETL is what you need.

ETL (Extract, Transform, Load) software is basically a macro on steroids.

All of those steps that people do to prepare data for reporting are set up and structured in a flow.

Every time your source file(s) is updated, or you add data to your tables, the ETL process will rerun and prepare all of the data again.

Instant report refresh.

A lot of organizations will have this type of data work done server side with SQL, Apache, IBM, SAP, Oracle, etc.

But that usually means the business’ developers (or worse, some high priced contracted firm doing it).

Supply chain and logistics often change too much to always rely on someone else. There’s always a new customer problem. There’s always something else that we have to look at.

Being able to build your own reporting with an ETL process will change your daily flow.

Pretty much any BI tool you use these days should have some sort of ETL capability.

Tableau = Tableau Prep

Qlik = Qlik Compose

Power BI (and Excel btw) = Power Query

Alteryx = Alteryx Designer

Most people will have access to Power BI if your business is a Microsoft shop.

If you are using some other platform, you may have to pay more for the ETL components.

If you are looking to be able to go really deep while also keeping in free, KNIME is absolutely incredible (but there’s a bit of a learning curve).

Here’s how it works:

1. Extract (or connect) data in a set output format (i.e. your columns don’t change)

2. Build your workflow to make step by step changes to your data to be able to get the end results you want

3. Set a regular cadence for refreshing your source data (this can be anything from instantly to daily, weekly or monthly depending on your needs and what your systems are like).

4. Hit refresh….

Same reports. New data. 100% replicated quality.

The time your team invests up front will pay massive ROI when those month end tasks are taken from hours (or days) to minutes.

What Area of eCommerce Are You Watching The Most Right Now?

As boring as this is going to sound, retailer / brand inventory strategies.

Not the huge logos though.

They have enough money to duplicate inventory all over the planet and still be fine.

I’m paying a lot of attention to what smaller brands are doing. The cost pressure coming from Asia is grinding everyone. This has a lot of brands sharpening their pencils and getting ready to compete on price.

But when you have to slash your revenue to keep making sales, it gets hard to support a broader network of activity.

For smaller brands to see continued success, they are going to have to get really comfortable saying “not for me”.

Specific moves and key strategic decisions about what inventory goes where, and how deep those product lines will go.

We will see some big winners are losers as a result of those choices in the next 18 months.

That’s it for this week. Thanks for being here.