EP.148/ PELAGIC
Outsourcing vs. In-house Manufacturing for Your E-commerce Brand with Pelagic Founder John Morgan
John Morgan joins Mariah Parsons on Retention Chronicles. John transitioned to e-commerce by co-founding Seed Health, inspired by the microbiome's potential. He later founded Venice Ventures, an incubator for e-commerce, software, and services. John now leads Pelagic, a supply chain service aimed at brand builders. He discussed the challenges of supply chain management, emphasizing the importance of asking hard questions and avoiding over-bundling. John highlighted the impact of tariffs and AI on procurement, and stressed the need for transparency and sustainability. He also noted that stockouts and recalls can harm customer retention, advocating for proactive quality controls.
EP. 148
JOHN MORGAN
Episode Timestamps
0:00 John's Background and Transition to E-commerce
Mariah Parsons introduces John and asks him to share his background.
John explains his career at SpaceX, which inspired his entrepreneurial spirit and networking in LA.
John discusses hosting micro festivals in Baja California to build relationships among founders.
John met the co-founders of Seed Health at one of these events, leading to his transition to the e-commerce world.
2:08 The Science of the Microbiome and Seed Health
John shares how his interest in the microbiome led him to Seed Health.
He describes the potential of bacteria and how it resonated with him similarly to space exploration.
John explains his entrepreneurial background and desire to create something from nothing.
Seed Health offered him the opportunity to build the entire supply chain from scratch.
4:31 Transition from SpaceX to Seed Health
John details his technical supply chain work at SpaceX, including outsourcing and manufacturing.
He contrasts the technical challenges of fermenting living organisms for Seed Health with his previous work.
Mariah Parsons expresses interest in the differences between industries and supply chains.
John mentions the impact of COVID-19 on in-person gatherings and his decision to leave SpaceX.
6:06 Venture Studio and Pelagic
John discusses the growth of Seed Health and his transition to Venture Studio.
He explains the launch of Venice Ventures and the opportunity to solve problems in consumer product companies.
John highlights the impact of AI on their venture studio and his current role as CEO of Pelagic.
Mariah Parsons asks John to provide an overview of Pelagic for the listeners.
7:36 Introduction to Pelagic and Supply Chain Challenges
John explains the unique problems of manufacturing physical goods and the impact of COVID-19 on supply chains.
He shares his experience tracking the pandemic's effects on Seed Health's supply chain.
John emphasizes the lack of expert resources and solutions for supply chain challenges.
Pelagic aims to provide a white glove service for brand builders with supply chain needs.
9:11 Modernizing Supply Chain Processes
Mariah Parsons and John discuss how brands approach modernizing their supply chain processes.
John highlights the importance of understanding the standard market rates for supply chain costs.
He explains the challenges founders face in finding the right suppliers and the role of middlemen.
John emphasizes the need for founders to ask hard questions and seek objective evaluations.
10:29 In-house vs. Outsourced Manufacturing
John discusses the benefits and challenges of in-house versus outsourced manufacturing.
He shares examples of clients transitioning from in-house to outsourced manufacturing.
John explains the importance of selecting the right partners and managing supply chain costs.
He highlights the need for founders to balance cost savings with maintaining product quality.
26:56 Trends in Procurement and Supply Chain
John discusses the impact of tariffs and the importance of having backup plans.
He highlights the role of AI in improving supply chain efficiency and reducing costs.
John emphasizes the need for founders to stay proactive and adapt to changing market conditions.
He shares Pelagic's approach to integrating sustainability and ethical practices into supply chains.
31:47 Retention and Supply Chain Optimization
John explains how supply chain optimization impacts customer retention.
He discusses the importance of maintaining product availability and avoiding stockouts.
John highlights the risks of recalls and the need for proactive quality controls.
He emphasizes the role of packaging and product quality in customer experience and retention.
38:23 Sustainability and Supply Chain Innovation
John discusses the importance of sustainability and ethical practices in supply chains.
He shares Pelagic's efforts to integrate sustainable solutions and transparency.
John highlights the challenges founders face in balancing cost savings with sustainability.
He emphasizes the potential for innovation in in-sourced manufacturing and sustainable practices.
TRANSCRIPT
This transcript was completed by an automated system, please forgive any grammatical errors.
SUMMARY KEYWORDS
supply chain, customer retention, e-commerce, microbiome, SpaceX, Seed Health, Venture Studio, Pelagic, in-house manufacturing, outsource, tariffs, AI procurement, sustainability, quality control, retention strategies
SPEAKERS
John Morgan, Mariah Parsons
Mariah Parsons 00:00
Music. Welcome to retention Chronicles, the retention podcast for E commerce marketers. I'm your host and fellow e commerce marketer, Mariah Parsons, tune in as I chat with E comm founders and operators all about customer retention. Think marketing ops, customer success and customer experience, we cover it all and more. So get ready to get real with retention. Here is our newest episode. Hello everyone, and welcome back to retention Chronicles. John, thank you so much for being here with me today. I am so excited for today's episode. It is going to be a great one. Say hello to our listeners. Give them a background on who you are before we really dive into it, because I know it's going to be a good one.
John Morgan 00:48
Hey, Maria, yeah, thanks for having me on and Hello everybody. I'm John. I've been working in the supply chain and systems world for over a decade, and actually started out my career at SpaceX, before jumping into the world of E commerce. Born and raised Southern California.
Mariah Parsons 01:10
Love it. Love it. Okay, so tell us a little bit about like, why you wanted to get into E commerce. Was it just something you found interested in? Was it like, okay, right place, right time, right opportunity, because it's always, it's always a fun, you know, just a little bit to hear about how you landed in the seat that you're currently sitting
John Morgan 01:29
in. Yeah, while I was at SpaceX, I got very inspired by the the caliber of the people and their entrepreneurial nature overall, just as employees and in that world and in networking more and more in LA, I started meeting more and more founders, and actually started hosting these like micro festivals in in Mexico, in Baja California, just bringing founders together to build relationships in a very authentic way that then fed their their business goals and networks, we call that beyond the wall. And then in doing that, I met one of the two co founders of seed health. And so it wasn't really actually e commerce that pulled me in. It was the science of the microbiome. And so in listening to him and learning about all the insane future potential of bacteria and how they are everywhere, inside and outside of us, that that sounded or resonated with me in a very similar way to space exploration as a like a logical and exciting next career jump and, and, and that's how they pulled me in. Okay,
Mariah Parsons 02:36
okay, so interesting. So our listeners will know this, but I study neuroscience, so my background is not in marketing. I was eventually going to go to med school, and then I was like, not the right decision for me. So found myself in E commerce, just by way of opportunity and interest and so very, very interesting to me. When people, you know, some, some type of science, draws them into something because it is very much still close to home for me. And so then tell us about how you went from meeting the co founders of seed and beyond the wall was the events you were doing. You said, right, yeah. Do you see any of those events? Side note or no, we
John Morgan 03:15
did. We did it for three years, and then COVID kind of shut it down with in person gatherings weren't a thing anymore, but they were very fun, and had a good time doing that. And yeah, I think just culturally I'd had I achieved some like, four year seniority at SpaceX, or had done quite a lot a very short period of time, and wanted to see what I could do as more of a driver of the machine, instead of a cog in a really large machine that SpaceX was at that point. And so, yeah, the founders of seed took a took a big bet on me, and I took, I took one day off between those jobs. And, you know, to their credit, I think the world of microbiome and like, health and helping humans on planet Earth felt a little more engaging and purposeful than than building rockets to escape Earth. So so that, like, kind of drew my heart in a bit more. And also just this, like, ever since college, I'd had an entrepreneurship minor and wanted to really understand, like, how do you create something out of nothing? And they, they really offered that opportunity of, like, Hey, we've we've raised some cash. We don't really have much of a team, and we need to build the whole operation and supply chain from the ground up.
Mariah Parsons 04:32
Yeah. So that's then how you got into the supply chain world really sparks your interest there, I'm assuming, correct.
John Morgan 04:40
I was doing really technical supply chain work at SpaceX already, actually, so like outsourcing and manufacturing the entire like landing legs assembly that that SpaceX uses to catch their rockets for the first time, stuff like that. So it was already like something I was learning quite a lot about, but then to apply it to. How to ferment living organisms and get them all the way to a customer's belly was very different. Problem Set,
Mariah Parsons 05:08
yes, yes, okay, okay, gotcha now I'm all I got it all straight. So that's great. I can't wait to dive into all of it with you and just see, like, the differences across industries, because I think it's something that is, you know, supply chain. I think it is one of those words that a lot of people, unless you're in it, they're like, what even, what factors go into it? How do you even, like, try and see, like, on a global scale, like, what's going to affect the supply chain? And I know it obviously is, has affected e commerce in the past couple years, and COVID and all the just global factors, right? So, like, I know we're going to dive into it, but I want to make sure we also just share with our listeners a little bit about your VC background, just because I think it'll, it'll give some nice context, and then we'll dive into, you know, the supply chain things. So sure,
John Morgan 05:59
yeah. So we grew seed health really fast over about three and a half years, and then I felt like it was a good time and place to backfill my many hats in the organization after a large Series A round of fundraising. So I left seed at the end of 2021 and pretty deep into COVID, had already started forging what we call Venice ventures, which is our our venture studio or incubator in E commerce, services and software solutions, where we just saw a growing opportunity of all of our close friends building more and more consumer product companies and Being very close to those problems and very like first principles about what what problems could be best solved with some degree of manual services, all the way to automated SaaS. And then in the last couple years, we've seen the whole AI boom explode on top of that, which has been a really well timed technological innovation for us. So yeah, so started that, and we've now launched four different companies that are really exciting. And I'm I've chosen to go full time CEO on pelagic, the third of those four companies to keep working on these supply chain problems.
Mariah Parsons 07:20
Okay, great. Perfect segue into telling us more about pologic. So give our listeners the kind of foundation, the boilerplate, so that they have that context going into the, you know, the broader conversations about what you've seen and your expertise. Yeah,
John Morgan 07:34
so everyone here, if they're building a brand or selling a product, like all of that they understand, I hope, is manufactured or made somewhere in the world right to then it's very different than software. You're actually creating physical goods that need to get in the hands of real people. And there's a lot of very unique problems that come with that. And to your point, Raya, that there's a lot of problems that came up or became very apparent during COVID. And so COVID was the first time that supply chain became mainstream. People realized and saw entire sectors of the world shut down in terms of manufacturing capacity or capabilities. Personally, we had tons of new consumers and customers show up wanting subscriptions with seed during that period, and I kind of tracked the entire pandemic affecting every layer of my supply chain as it spread around the world, from China to Europe to tri state area in the US and so it really impacted our ability to keep our subscription customers happy and getting enough probiotics to maintain their health and during a scary time. So I think after, after going through that and realizing there are very few expert resources or any like solutions out there to help me kind of navigate those challenges, pelagic is very much aiming to be that, that white glove, all encompassing Dream service for brand builders that either have no clue what they're trying to do with that word, supply chain, or have very specific tactical problems that are acute for their business that they need solved.
Mariah Parsons 09:12
Yeah, okay, so great. So let's start off the conversation with just generally speaking about and we'll use brands that are, you know, brands just as a whole. So we'll group kind of all brands, whether it's they're just starting out and they, like you said, don't know what the heck they need to be doing about this supply chain, all the way to encompassing brands that are like, I know it. You know, our supply chain is currently, for some reason, it needs to change, or I want to see if I can change it. So for right now, we're just going to lump them together and tell us about, like, how does brand even try and approach modernizing the processes, or the processes around a supply chain, around their supply chain? Because it can be so, like you just said, like, there's so many different elements where it's like, Okay, what's happening? In Europe. How is it going to affect the states? How is it going to affect Asia? All of that depending on, of course, where your manufacturers are.
John Morgan 10:08
Yeah, one of my favorite parts of the whole building of pelagic experience is that there are very few companies like us out there. So it is fairly innovative in terms of trying to create a standard health bar for supply chain, right? Like, what is the standard market rate for your three PL distribution costs and services? What is the typical cost for this type of packaging that I want to use and buy like that that stuff is very difficult to find and or does not really exist as a reference point for founders, and I think there are a lot of to your point, like more complicated or nuanced things to evaluate when you're starting to compose or put together the stack of outsourced or In sourced systems that you need to consistently produce your product that you're selling online, right? I think there's a lot of fun discussions we can get into on kind of that make versus buy analysis that I would call in source versus outsourced. But I would say we do work with a lot of companies or venture groups or influencers who come to us with just an idea, they say, Hey, my audience really likes this type of product. I'd love to make it here. It needs to look this way or feel this type of premium like, Where would I start? How would I begin to deconstruct this product as I envision it? And who can you find me to help me make it and move through all the necessary steps to, let's say, make it in a high quality way, ideally, cheaply, for high margin, and, and, and quickly, yeah,
Mariah Parsons 11:52
all the things that people want, right, like high quality, but still able to be profitable. Um, I would love to we can, we can put a earmark in going through INSOURCE and outsource, because I'm I would love, and I know our listeners would really value it, to kind of pick your brain about that. And before we do that, one comment that came to mind for me was, even as consumers are thinking about and brands are thinking about, like, what is my brand presence? What's the brand mission? How is it tying into what products, you know, I'm creating or selling, of like, all like packaging. You gave that example, right? There's so many different things that people can do with packaging. Now, do you have it branded? Do you? Is it unbranded? Because that's cheaper? Do you What materials do you want it to be out of? You know, what tags if you're selling, you know something, if you're selling a product, what tags need to be on that product, what labels, all, all of that, right? And so I it totally makes sense that the degree in which someone would want maybe not the quote, unquote, standard process that one manufacturer would have of like, okay, well, this is just the way we do it for all products, no matter what you know is important to your brand. Of say, you want 100% paper mailer versus poly mailer, you know, all those little details, um, it makes sense that there's just no like, how does a brand? How does someone, or even an influencer, a founder, um, where do they even go to start, it's just
John Morgan 13:21
like, yeah. And everyone wants the most innovative new format, but they're kind of worried of if our consumers even gonna like this, are they gonna take it right? Yeah. I think the other thing that may not be apparent to you, and I think certain founders that have tried this themselves for a while will like, really, it'll really resonate with is, not only is it kind of chaotic and not you're not really sure where to start or like where or who can be most helpful to you, but there are these really, let's say, unfortunate byproducts for how the landscape of the best suppliers in the world and In the nation operate. They don't tend to have sales teams, or they have very under resourced sales teams. If they are really high quality, great to work with manufacturer, and it's because they're delivering and they're doing great work, and they're focused on the manufacturing part of their service, so they just kind of get all the clients they need via these referrals or like teams like us that know they exist, and that's very hard for a founder to like Google search and go find the best in class gummy manufacturer in the US that has capacity and is willing to bet on them and their idea and their small volume to scale, right? So I think on top of that, there's a lot of like, discordance or noise, there's a lot of middle folks that are brokers or trying to convince you to go sign up with certain manufacturers or supply chain partners that are not necessarily good for your business or what you're trying to do, and can be really high risk and really, really expensive to undo, either in the short term. Um, when that manufacturer just like, kicks you out and is not going to work with you anymore because you're too small, or in the long run, when you're trying to grow, and they just de prioritize you and won't run your product fast enough, and your customers lose interest and cancel, right? So I think that the stakes are very high in terms of, like, the pain threshold of selecting and working with the right set of supply chain partners and knowing, knowing what you can and can't ask for, I think, is a big part of, like, the educational process we do, and we are trying to stay as a service, extremely agnostic and extremely focused on what the brand owner needs. So like, there's a lot of these service providers want to give us kickbacks, or give us, like, make us more of their sales team, and it's like, no, no, we're going to kind of agnostically, objectively evaluate what's best for this brand, this product, this company, and present our analysis and results and then try to just enable those founders to make very informed decisions for how they're building their business, their product, their supply chain,
Mariah Parsons 16:05
right? So, yeah, instead of partner, you know, viewing partnerships with the different elements, or different manufacturers or different, you know, different partners on one side, focusing instead on making sure that you're partnering with the brand and being like, okay, agnostically, this is who we're going to recommend based off of what you've told us and based off of what we know. Yeah, yeah, yeah. No, I think that for anyone who's tried to either investigate or is currently investigating, or is in the midst of, you know, changing manufacturers, or, you know, questioning manufacturers, I think they will understand the difference of having third party, kind of, like middlemen, brokers, like you said, versus working directly with factory, seeing, you know, like, are they going to take a gamble on me because I'm starting out, or XYZ reason? So I want to go into and I want to have you tell us a little bit more about the in source versus outsource, because I think it'll be, it'll lend itself really well to this conversation.
John Morgan 17:06
Yeah, I think that's been one of the more surprising and fun parts of our service that's evolved and developed. I wasn't expecting, you know, I've been a very my a lot of my experiences in managing outsourced partners. But I also had a lot of fun seeing how many different unique, amazing manufacturing capabilities there are in the US at SpaceX and beyond and then internationally for seed. So we now have a fair number of our clients that have chosen to invest in owning their own manufacturing processes, or build and operate and run their own distribution warehouses instead of working with that third party logistics provider, three PL services, right? And that is a very good idea at the earliest and at the latest stages, is my general recommendation or advice to everyone. We have definitely seen really innovative or brilliant founders kind of realize that something, some component of their manufacturing, is so critical to their success or their differentiation or their innovation strategy, that they need to have that capability in house to keep iterating on it or to protect it. From a IP perspective like that, I totally buy into. But my general recommendation is, at the earliest stages, you can be doing things out of a garage or out of your house or out of some small piece of real estate on a shipping and distribution and customer generation perspective and management perspective, but then from the 500k in sales to 100 million in sales, you probably need to be fully outsourced on to scale, fast and properly enough with these partners that are oriented towards being very good at a niche or a single key step of that supply chain. And then we have a couple customers, north of 100 million in revenue, that come back to us and say, Hey, we see a lot of opportunity for what we're paying our three PL to actually just go rent our own warehouse, staff, it with a bunch of people, and ship our products in custom on brand, perfect ways that we we want to control now, like, can you help us design that footprint, tell us how many people we need to staff to operate it. Track the cost to actually run that piece of our supply chain and and, you know, help implement from there.
Mariah Parsons 19:32
Yeah, I like that distinction, and I think it'll help people a lot of like, knowing, okay, what size brands are you talking about when you like, when you're saying, okay, in house versus outhouse, and then maybe coming back to right, like, like you said, when you get to that point where you're big enough 100 million, then you're, you know, it might just make sense to bring it back in house. And so, can you give an example, or do you have an example of what type of product like when you're talking about, you know, some of. That you can make in your garage. Are there any like, fun examples that come to mind of, you know, founders, either list them by name or not. But are there any of like, because, right, it's like something that you would maybe see on Shark Tank. Of, like, I started this in my garage, and it grew, and then, you know, you got to the point where you maybe need to go on Shark Tank and get an angel investor. So, yeah, yeah, yeah.
John Morgan 20:21
A bunch actually, like, right now we're finishing up one really awesome project where a very unique, like supplement of these, like that. I call them like chews, because they're not quite gummies, but they have this really nice texture, and they have a very fantastic benefit. And I'll keep it very vague for the client, but we walked around a shared kitchen that they were producing all these in in Harlem in New York, and it was crowded and hot and like they couldn't standardize any processes, but they were just producing enough of this to get it to their customers who were their customers who were loving the effects. And we helped them kind of define all that production work and the formulas and the ingredients and translate it to a whole new dedicated space in Colorado, to have their own staff, to be running their own manufacturing environment, and to be able to ship and scale the way they wanted to. We're going to go visit in like two weeks, and it's going to be great. So that's a really exciting one. And then we're also that's kind of like transitioning and scaling in in house manufacturing. Another great example of that kind of growth curve is we have a really wonderful client who has, like, a children's squeezable sunscreen, and she's been shipping it to all of her customers out of her house for a long time, and is now ready to let someone else do that, and we're helping her find the right outsource, third party logistics provider to do so Okay,
Mariah Parsons 21:56
cool. So this lends itself really nicely into trying to parse out when it is that right time with the example that you just gave of the squeezable sunscreen, someone has been managing their, you know, managing their own logistics, their own fulfillment in house. And how do you all recommend that brands start to then, you know, outsource that supply chain. How do, where do you even look to, you know, like, start to apply the lessons of like, what does a supply chain out, out outsource look like? What does it look like for, you know, the updates that a team has to make internally, or the adjustments that they have to make. Because, as you know, our, good chunk of our listeners are at that stage, or approaching that stage, or will be at that stage soon. So I think it'd be great to hear like, kind of like, breaking down, okay, you're ready, you're at that point. What step do you do? A, B, C, D, yeah,
John Morgan 22:55
yeah. So it's a great question. I mean, the place I have to highlight that we start with is just, we have an amazing team, right? So our team is very experienced. They each have either, like, run or or been in like, built, like multi 100,000 square, square foot warehouses, or like being these boots on the ground, or know intimately how three pills are run, or they have been inside and worked on the supply chains in these manufacturing operations, like they have very good foundational experience and background to be able to tell you what to look for, what to worry about, where to start after that, after we kind of find the right fit of team members to work on your problems. We tend to categorize how we approach or service those problems into either like, is it a fix of your supply chain and your product, or is it a fix of your systems and your company? And that's an important delineation, because sometimes you might have the right partner in terms of how you're working with your warehouse, or you might have the right warehouse for what you need. But actually it's like the signals that you're sending the warehouse from your company that's making things really hard or making them very frustrated, or making things very expensive. And so we have to bifurcate those to say, okay, it could be a quick fix to say, let's go find you a three PL that does this, this and this. But actually we also want to go check on how you're working with them and help you fix that piece of your company so that this solution works in the long run. I think one thing I'll just also highlight is like in the ability to change those systems in your company. We found ourselves being pulled in to like the founders would then say, like, Well, how about you? You pelagic. Can you just do it? And we were like, maybe at first, and now about half our clients, we are their, their only supply chain op. Operational team members, as in a fractional way, running and managing and working with their entire network of their suppliers on their behalf.
Mariah Parsons 25:08
Okay, I see so like that white glove experience that you were, you know, you said at the top of the call of really being like, here's the recommendations, but okay, we can also be the ones to
John Morgan 25:17
a lot of were frustrated and or surprised to hear like we would. They were like, oh, like, everyone just tells me what I need to do. They give me, they do the analysis, I pay for all the work, and they give me a solution, but then I have to go implement it, and I'm spread 15 different ways, like I can't, I don't know enough, and I can't go do it. But we really love actually being the implementers of those solutions. Like, we're not going to ever propose something we couldn't go do ourselves on your behalf, which I think is cool way to, like, walk the walk. It's not like, Oh yeah, you should buy $100,000 piece of automated laser guided machinery. Good luck. It's like, okay, hold on. Like, we'll, we'll meet you where you're at and and make sure we're giving you solutions that are going to work.
Mariah Parsons 26:04
Yeah, that's actually, I very much relate to that, because that is how Malomo was founded, and so years ago when, you know, it was a white glove service, and we still do that, but there's obviously also a self a self service. You know, option for those who are like, no, actually, no, I know exactly what I'm doing. I would just want to get in there and do it myself. But, like, I very much relate to that, and I've seen that across founders who are like, I am not the expert, and I'm not shy to admit that I'm not the expert. So like, please help me do this, because I understand it's important. So that really resonates with me. Of just seeing like, Okay, walk the walk. Be the experts in the space of make these recommendations, but then being able to implement it, it really, it goes a long way with founders, as I've seen as well. So I love, love to hear that. I want to, um, so we've been talking obviously about, like, implementation of changes for supply chain, but I want to talk about upcoming trends in procurement as well, because I know it's something that is going to be it's always top of mind, but especially as we're recording right now, we're approaching the holiday season. It's two weeks away, which is crazy, but when everyone else is hearing this episode, it'll be in the new year. It'll be end of January, and so, like, I know everyone who is sitting in that founder or that brand operator seat is going to be like, okay, New Year, what are we doing? What you know? What systems are we operationalizing or optimizing? What you know? What new techs are we onboarding? What new agencies are we onboarding? All of that, right, like the whole whole year in a snapshot. So it's always interesting to hear trends, especially in something that is, I don't want to say fickle, but I'm going to use that like something that is potentially fickle, as supply chains, procurement and just it's impacted by a lot of different factors.
John Morgan 28:01
Yeah, you have to remember the supply chain work cycle is kind of three to four months ahead of the major sales cycles, right? So we did all of our Black Friday, Cyber Monday planning in like July, August, very proactive with our clients. On that front, you'll also see a lot of the big retailers go make all their buys from the brands they're working with in that August, September timeframe, getting ready for this moment, for those of the founders listening, in January, it might be too late, but the thing we're preparing for now is obviously Chinese New Year. And I think it will be an especially interesting Chinese New Year in many different ways. And I don't we don't need to get ultra political. But I cannot tell you how many different people are reaching out to us about Trump tariff terrors. Yeah, like so everyone is worried about the impact of terror tariffs on their global supply chains, and China's like got the biggest target on its back in terms of those tariffs. I'm sure there will be Tariffs applied on other international trade routes, on companies trying to sell into or do business in the US. But, you know, I think there's, I think one of the fun parts of supply chain is like, there's all these problems that you can control within how you're running things, and then there's a whole other set of problems you can't control that you need to try at least have backup plans or be proactively ready for. And so that wave of tariffs is a very interesting one that will have short and long term impacts. You know, I think one that founders aren't totally thinking of, that should make their considerations even more urgent is the barriers that tariffs create, even if you can hypothetically get around them in some way or reduce. Reduce the impacts of that cost are still going to reduce the total volume of economic transactions between China and the US, so much so that the collective freight costs between those countries are going to be drastically more expensive for everyone. So just because way less units are going to be shipped, you need to be thinking about how and where you're going to be manufacturing or buying things from different places in a just in case way. So that's like my doom and gloom, how things are going to be a little bit different on the procurement world. And then I'd say the one I'm more excited about, or that we are actively tracking is, is this like, very fast moving, sometimes in a scary way, a world of AI, and just that, you know, we're seeing that humans are really important to negotiate and do business with each Other and and do the human parts of interactions. But once you have a supply chain that's set up and the terms and the rails of that engagement are standardized, you should, over time, be able to really do the math that says, here's my demand, here's what I need. Like, dear AI, go execute and like, move the pieces in between to ensure my orders and components and procurement strategy is is humming and working. So, you know, I think we're, we would love to be a team and a service that delivers efficiency on that scale of some AI chat bot that is your procurement agent. I've seen a couple tools in the space that are trying to build their software around the ability to do that, if not already, and and that's something I would be maybe in the same way you're seeing customer service and gentrification, or all these agents being integrated on the CX side of company operations. I think procurements are pretty low hanging fruit entry point for AI in the world of supply chain, yeah.
Mariah Parsons 32:04
So it's, yeah, it's fascinating. So some of that, like, future reading, of like, we don't know what's going to happen, but here's how to try our best to be prepared. Like you said, are there, like, resources that you'd recommend to brands who are like, Okay, I need to get I need to get up to date. I need to get literate on like, what this means, what I should be considering for people who want to go and learn more, because I would love to just dive into this, but I know there's other things that we want to cover on this podcast.
John Morgan 32:33
Yeah, I think, I think both my answers are like, just reach out to us. Yeah, there's not, I don't have some place I can point as a great source of truth. There's a couple very cool like data solutions out there that are semi open source to see what volume of things are moving through what ports. But I, I think that high quality information, and how to put it this way, I'll know a lot more in January what the best way to navigate tariffs if you don't want to change or have to work with the same manufacturer in some part of the world. And then we are already actively working on kind of Canada US based and Mexico based alternatives across the board, on being vetted in high quality alternative suppliers for our clients.
Mariah Parsons 33:25
Yeah, okay, makes sense. That's totally fair. It's hard to give
John Morgan 33:30
a comprehensive approval. We're two weeks in, you know, like this,
Mariah Parsons 33:33
exactly, yep, yep, lot, lot that the future will hold for us, I'm sure. So let's talk about, because obviously I've been talking about a lot of supply chain. It's what we're going to be centralized on. But I would love to hear your take on how it relates to retention, because we've been talking more about ops and the logistical side of things. But I know that this audience always values tying it back. So how do you think you know when you're when you're seeing how brands are once they're optimizing their supply chain and really get it to a place where it's coming and it's working for the brand. How would you best define or share with our audience, like you're sitting in this special seat where you get to obviously be acknowledging and advising these brands? How are they tying, you know, supply chain something that maybe you wouldn't traditionally tie back to customer retention. That's usually, you know, a sales or marketing or just a go to market functions, you know, KPI. How do you see the two being related?
John Morgan 34:33
Yeah, it's a great question. And I, you know, we spent a lot of time thinking about retention when I was at seed, like that. Our hero product you can only buy as a subscription, right? So have quite a lot of knowledge here that the easiest, the opposite of a subscription is a stock out. I think the most obvious, like negative impact to retention, is. Is not having the product in stock that your that your customers want or want want to buy. So that's like, the really, the most obvious one, I think one that is like, really popped up more frequently. I'm curious. I don't know if it's like, then the number is going up or the press is increasing its interest on this is like the idea of recalls, and like the damage that does to a brand, and let's say the lack of proactive quality controls or quality assurance or quality management systems that are in place or embedded in these supply chains. I think a lot of brands sell fast and break things and grow really quickly, and then they kind of they realize their labels are very far from what it is they're actually making, or they actually don't know that that's what's happening, or they haven't diligence their supply chain that's grown very fast in a very short period of time, and haven't put the proper systems in place to maintain or control those things, and then something terrible happens. And, you know, we've, luckily, most of our clients have come to us in a proactive way, but there are some other clients that have come to us that have, like, severely damaged or hurt their customers through, you know, a bad bacteria or poisoning someone or whatever, and that gets that spreads on the internet like wildfire, and can really, really put some significant dampers on your retention goals, or on, like, really scaring your consumer base away, and it's hard to recover from, because you want to be transparent with them on like, this stuff happens, and it did happen, but at the same time, we don't want you to panic that this will happen again, you know?
Mariah Parsons 36:49
Yeah, that totally makes sense. And I think that's something that's very real, a real side of consumerism, right? Is like, the diligence that you have to do, especially if it's something like the example you gave with like, at a like, something that's consumable product, or, like an edible product, that it's like, potentially poisoning someone, right, or giving them a bacteria that you didn't you know. You didn't know because you didn't check the supply chain. And
John Morgan 37:12
that's the extreme level, like I can in a more in, like, more nuanced, smaller ways, if you have a broken box or crappy packaging that just looks terrible like the there's so many more nuanced details of the product itself that customers will pick up on when you ship it to them, that I think all all contribute at like different weights and levels to like that end retention number, right? And so, yeah, seed was totally savage about this in a really awesome way, like we were meticulous about every moment of the customer experience and every layer of the materials, of the components of the packaging and product that it like took to synthesize that finished goods and and product upon arrival. So, yeah, I think, I think retention is like embedded in everything we do honestly, but that's also just like the product. I think you could also argue there's like a there's other supply chain pieces in the customer service level, like returns and like making them feel very cared for, and how that's how the products improve when customers complain stuff like that.
Mariah Parsons 38:27
Yeah, and I imagine too, like sustainability as well. That comes up for a lot of brands these days. Of like, whether it is written into your mission of wanting to be ethical and sustainable, or it's something that your consumers ask you for want, and then you develop and write that into, you know, your your supply chain efforts. I think that's also, would you say? That's also a big part of you know, when you're seeing what customers shop again with the brands that they shop again with, they're just, they're really prioritizing sustainable efforts, and want that as a consumer. Yeah,
John Morgan 39:03
I always try to make sure, you know, we've tried to integrate sustainability into our services in many different ways over the last couple years, and founders tend to be trying to survive. So they're it's a difficult thing for them to prioritize. But we also know that consumers care more and more about layer two and three pieces of what they're consuming and why it is that way, right? And so I actually do see a really exciting future where pelagic could offer or support brands to be more transparent than any of their competitors on exactly how their supply chain works and where the raw components come from, how they've been diligence or evaluated, or why they were selected in terms of a thoughtful ESG Orient. Way. So, yeah, we're trying to integrate more and more accessible, sustainable solutions or offerings into our collective supply chain handbook, but, but it's definitely a really hard thing, because sustainability tends to cost more, and if it's a battle of cost savings and margin to keep the business afloat versus doing right by the planet or or people, it's a, it's a difficult and nuanced decision, for sure,
Mariah Parsons 40:34
yeah, yeah, that makes sense. And it, yeah, it just it, it's, it's something that I think is a very, very real decision to have to make. So I appreciate you sharing that, John. I also want to ask you, kind of just like table stakes of where are brands, in your opinion, kind of leaving things on the table when it comes to supply chain? Because we'll wrap up with this, and I think it'll be a nice kind of gut check for our audience, just like, Oh, am I leaving something on the table? Is there something I need to assess? So, yeah, what do you think about
John Morgan 41:12
that? Yeah, I think, I think the the best way to state it very broadly is is keep asking hard questions across the board of your supply chain. You know, I think we work with a lot of founders who are inherently better at selling their products than they are understanding what's going on to how it's made, and they should be working with us or their director of operations to to keep asking questions at every step and stage of growth. And like, unashamedly, and you know, you're working with these humans that are critical, and I think people get very cautious or nervous to change anything in their supply chain, like, ain't, ain't broke, don't fix it. Or you don't, you know, you don't need to change anything because it's working. And I we've seen so many projects or engagements where, just like, they never changed their provider, they didn't change their packaging partner, they didn't change their three PL service. But just in doing a data driven analysis and asking, Why does everything cost this way, they saved like 30% right? And then in like the worst, a better other, like a scenario that shouldn't be scary either. We also help companies move entire pieces of their operation in a very high trust, efficient way for them to go realize those cost savings and level up their entire business. So keep asking those hard questions, and the right partners that in your supply chain will will meet those questions the right way, versus kind of burying them or hiding them or dodging them. I think when you go and ask those questions, you'll discover that there's some right blend of what you're in charge of and what you're owning as a brand versus what you're letting someone else manage on your behalf. And so what I would call that as a concern, or thing to look into, is this idea of over bundling. So there's, like a lot of companies that have one manufacturer that does everything, and you're just not taking advantage of this like specialization concept, that's very fundamental to economics, where it's very difficult for one operation and team to be good at everything they you should be breaking it apart into the best packaging, the Best raw materials, the best manufacturing of the product itself, and then how it gets shipped and distributed to consumers. So would warn against that and and there's a lot of really cool innovation that can be done in asking that question specifically, which kind of goes back to what we were talking about earlier on, like that, that make versus buy. I've seen some really, really incredible business models, even in comparison to seed and how large we grew that business that are built on top of, like an in sourced, very innovative, scrappy warehouse or team producing products that have really never been done that way before, that I'm excited to see more of in the future.
Mariah Parsons 44:26
Yeah. Okay, love it. Those are great answers. Thank you, John, for taking the time and being here with me today. I know it's been a lot of fun, and I know our audience is gonna love this episode. Yeah,
John Morgan 44:36
thanks for having me. I could talk about this stuff for hours and hours and hours.
Mariah Parsons 44:47
Hello everyone. It's Mariah again. I am just popping in to say thank you for listening to today's episode, and I am so so so grateful that I have been able to be on this journey for the past couple of years with. This podcast, it's been phenomenal to grow and see our community of 1000s of listeners. See what you guys are up to, what you're learning, what you want to hear about next. So if you haven't already, please like and subscribe to the show so we can continue doing this. Leave us a review. Let us know your thoughts. Follow us on our new social media channels and check out our newly launched website. If you or someone you know would be a great guest for the show, please do not be shy. Fill out the form that we have on there, because those are some of my favorite interviews, and I will make sure that our new website is linked in the bio. It's retention Chronicles podcast.com and as always, let's give a warm shout out to our day one sponsor, Malomo. As you already know, Malomo is an order tracking platform that enables Shopify brands to take control of their transactional email and SMS through branded order tracking. What does that mean? That means you ditch those boring carrier tracking pages, the all white pages that have nothing on them but a tracking number and update on the date of your estimated arrival and swap those with pages that actually match your brand and can help you convert on some of your goals. Customers like you and I obsessively check that tracking page when we're looking for our order at our doorstep an average of 4.6 times. If you can believe it, yes, customers are going to that page 4.6 times. So don't waste out on all that customer engagement, and instead send them to a page that converts in the way that you want it to. I am talking dealing with shipping issues, having cross sells and upsells, having your social media on there, your loyalty programs, anything, anything that you can imagine. So if you want to learn more about how to do that, go to go malomo.com that's G O M, a, l, o m, o.com and if you didn't get that, don't worry. That website link for our sponsor, as well as our podcast website are linked in our episode description. So with that, I will sign off and see you all next time you.
