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Maximize Product Sourcing while Building Meaningful Relationships with Suppliers - Amazon Business Tips with Francois Jaffres - Part 1
October 11, 2021
Maximize Product Sourcing while Building Meaningful Relationships with Suppliers - Amazon Business Tips with Francois Jaffres - Part 1
Things we discussed in this session:

A. Part 1

B. Part 2

Things we mention in this session of Seller Round Table:

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Transcription in this episode:
[00:00:01] spk_2: Welcome to the seller roundtable e commerce coaching and business strategies with and er not and amy Wiis, mm hmm. Hey, what's up everybody? This is Andy are not with [00:00:16] spk_1: Amy wei's and [00:00:17] spk_2: this is seller round table number 112 and we're super excited to have francois, Geoffrion francois, thank you so much for being here. [00:00:27] spk_0: Hey Jeff that was Jeff ray. [00:00:29] spk_2: Oh man, [00:00:30] spk_0: I even spelled [00:00:31] spk_2: it out phonetically in my doc, you know, to try to get it right, but I'm sorry and I'm sorry, I'm [00:00:36] spk_0: sorry. At least I got the [00:00:38] spk_2: first name, right? You know, [00:00:39] spk_0: that's half the battle. That's what most people call me by my first name. So that's all right. [00:00:47] spk_2: I apologize in advance. So francois 11 of the things we love to do when we get started is just get some background on you kind of uh, we love a long story. Some people just give us kind of like the last few years, but I love to hear the journey but feel free to share as little or as much as you like, maybe where you were born, raised kind of the journey, business school, whatever hard knocks up to today. [00:01:10] spk_0: Yeah, yeah, definitely. Um, and thank you guys for having me, I really do appreciate it. Amy, we just talked not too long ago, only cup leaders and that was super exciting. I think we got a lot of great content out there actually. Um, but going back to, um, I guess my background, I, unfortunately as a kid was not in supply chain enough at least, but I think a lot of things do end up leading towards supply chain. Um, grew up with, with to immigrant parents that really pushed that. I, I had to go to college. That was one of the things. Um, and I say this on a lot of podcasts, but when you grow up with to immigrant parents, you have only a few options. If you go to college, you have to either be a doctor, an engineer or a lawyer. Uh, those are really your three main options or you start your own business, That's the fourth option. Well, I did not start my own business. I was pretty entrepreneurial and you know, running a little school store selling candy and drinks in middle school and uh, in high school I joined this, uh, I've worked for target for a while as a cashier, realized I hated retail, hate those black Fridays and all that. But then I worked for naked pizza, which was a great experience. I think they, you know, even as a 17 year old at the time, they really pushed for me to tap into more of my uh knowledge in just a local market and like how can we attract, let's say the spanish community in Crystal City, in Pentagon City, where I'm a roach. I'm originally from the Arlington area in Virginia. And um, we got to have a lot of fun with uh marketing and really just pushing out this new brand of pizza, essentially that they were bringing from the West Coast through their um went to college eventually, right after high school, actually, and studied computer science, couldn't do the computer. And I know you're in the technology space, but I could not do sitting behind a computer for that long, which ultimately, now, that's all I do for about 15, 16 hours a day. But I couldn't sit behind for computer science and code for 14 to 16 hours for a single project. I mean, I couldn't wrap my head around incursion in java for some reason. Um and so I switched that over to Mechanical engineering for mechanical engineering. I realized i i it just wasn't my path e there. So industrial is what I ultimately ended up with. So industrial engineering was my path in college, and it was more so just a whole slew of problem solving, right? It's you learn a little bit of mechanical, electrical computer science, um Civil engineering, you take all these different classes ultimately to just figure out, like, hey, can you go into any company and figure out what the problems are and how you can solve them effectively. So, you want, you know, a very similar outcome in most cases, but it doesn't matter how you get to that outcome could be, let's say I'm an expert in computer science and I was able to bring to the table, I can code very strongly, but I have no UX design. So I have to bring in someone that can do you X for example, or it can be something as simple as you're looking at a warehouse and two managers just really don't get along well. Their offices are right next to each other and you find out that they're bickering and it's causing a lot of labor issues. Um Well you have to separate them and you need to maybe structure your next warehouse a little bit more strategically, or it's choosing where to set up warehousing. So it dove down into more supply chain also with manufacturing and understanding bill of materials and understanding direct versus indirect labor costs, um minimum order quantities, why factories are having these, how technology helps improve these factors um you know, doing it um with in house labor versus outsourcing processes. So it was um it was very interesting to me to see how supply chain all tied together. Um And that's ultimately, I I got really lucky with stumbling upon a posting for an internship with new Zealand. Uh and when I saw it, I was like, what the hell was a nephew? And I wanted to work for one of the larger corporations, so the larger companies, I did coca cola for a while, I shouted the industrial engineer, and I also crossed um the way that I even got that job, I had to be a merchandiser also. Um So I have to do the grunt work in order to even work with their industrial engineer and shadow them. Um So, I mean, a lot of it ultimately taught me that there are so many different facets to supply chain, and and it really fascinated me to see how they all tie together. Um And that's ultimately what we do at Novi land is we we simplify the supply chain by tying the multiple layers of the supply chain together and trying to do it in a simple way. Um which right now everyone thinks uh It depends actually who you ask, but I think a lot of businesses right now are starting to see how complex the supply chain actually is after 2020. Um and it's no longer being able to do, you know, business as usual, there's no status quo, really, there's no one week to the next. You have to consistently innovate, you have to consistently uh figure out new problems that you're solving and how to effectively solve them, which is what our team does. [00:06:40] spk_1: So it's so great to hear like that you've gone through a lot of different businesses, a lot of different things that you've done in your journey before, kind of getting up to working for na'vi land and getting into sourcing. So speaking of you were, you were talking about supply chain. What are some of the difficulties that sellers are facing with sourcing today, that you're seeing? What are those primary difficulties? [00:07:04] spk_0: Well, I would say going back to doing business as usual. I think a lot of businesses are coming in with the same mindset of, hey, my product is going to cost the exact same amount. The lead times are going to be exactly the same as I'm used to. Shipping times are going to be the exact same container costs are going to be similar. Um They're not realizing that factories right now, we're taking larger orders than ever because major corporations and, and and other medium sized businesses are placing larger orders into next year. Um, so I think a lot of the realities are actually changing in supply chain and particularly insourcing um and that's why I'm excited to actually just talk about some of these, some of these um I wouldn't call them taboo, but there are definitely things that sourcing agents and manufacturers and freight forwarders like might not want to talk about because ultimately it makes them work a little bit more because they have to educate and that's not their job, Their job is not to educate, They hope that you come in educated. Um and that you understand what the challenges are before you start anything. Um But I would say the biggest challenge is really that a lot of businesses are still trying to do exactly how they did their supply chain, 2016 2017, 18, 19, even 2020 when in reality, that's not how you can do business at all this year. Um Probably not even into next year, we're going to see a continuously change. [00:08:34] spk_1: Very cool. So what about the different countries that sellers are sourcing from? What are you seeing in terms of what people are looking for? Different trends in different countries? What are the most popular countries discourse from right now, [00:08:48] spk_0: china, I would say, I would say is still the largest country that a lot of businesses are sourcing from now. Of course they are looking out to and I've talked to a mega Bhardwaj about this also sort of this china plus one model where they are, they might have fully invested all of their supply chain in china for the past decade, two decades, three decades or even the past five years maybe for newer sellers. So that's all they know, but we are starting to see them go into Bangladesh into Pakistan into India, maybe for more handcrafted goods or more wooden products. Um, even some, some electronics are starting to move into India for example. Um Vietnam very strong with furniture for example. It is something that a lot of people don't know. But also the textile industry looking outside of china is a great idea in some cases, particularly if you're just starting out, if you're looking for maybe a more handcrafted design, um we see a lot of fast fashion particularly does come from china, but they are starting to even outsource that into other countries like India. Um, so I think a lot of it isn't necessarily moving out of China. I think a lot of businesses are starting to diversify though, so even though they keep their main supply chain in China, they may say, well we're going to have a backup in India that produces 30% of my inventory and we're just going to diversify our supplies in that way, mitigate a few of those risks. [00:10:22] spk_1: Awesome. And you talked about some of the products that people are sourcing, they're getting into some more handicraft types of types of things. Um I know eco friendly is a big trend, but can we talk about the trends, the things that people are sourcing? What are the product trends that people are sourcing now? Is it mostly still kind of commodities white label kind of stuff? Or are you seeing more product development? [00:10:47] spk_0: So in in our particular model, it's it's a bit different to where we, when we first started, a lot of people that were coming in to source products through us. They were almost white labeling. It's not really private labeling more. So just seeing what they saw in alibaba and saying, I want to copy this, but I want my own box. So that is the key difference between white labeling and private labeling. Um Now we are starting to see a lot more private labels in regards to more custom designs, more cad files even. Um but the downside to that is that we are also seeing videos, for example, out there saying, oh, it's super easy. Just tell a manufacturer the small changes that you want because they're so easy to make those small changes. Well maybe we talked about this at lake uh, not too long ago. They're not, they're not easy. Um We are starting to see a lot more customized products, but that also means that the uh, you know, the average order value is going to be larger. The defects may be higher. You need to pay more attention to smaller things like packaging, for example, for something that's more fragile you need and you can't necessarily always rely on your supplier to give you all the information up front. They're not there to babysit you, they're not there to teach you there, they're there to be a partner and a partner will give you the recommendations, but they won't do the job for you, right? They're not your them to design these things. [00:12:15] spk_1: I know that, you know, we definitely went into depth in this and you know, it is, it's it's so important if you want to have the best prices and the best products, you need to know your product and you can't expect your sourcing agent to, I mean, you can't expect them to know it and they should know it. Um, and you should expect your supplier to know it, but if you don't and you don't define your requirements, you're just going to end up in trouble. So speaking of china and dealing with suppliers, there has been so many political things going on, there has been so much um employee turnover in china. There's a lot of logistics. There's some suppliers have seen just like raising their prices like crazy. Um others, you know, running out of their their business is kind of going under and they don't tell their there are people that of course there there um clients that and so you know, a lot of sellers that are kind of seeing these frustrations. So how do you kind of hedge against this new norm, which might not be so friendly going forward um dealing with your suppliers in china? [00:13:26] spk_0: Yeah, I mean, relationships are always number one. no matter what anyone says to you, it doesn't matter how much you spend with the supplier. If you don't have a good relationship with them, uh, you will, when the time comes, you will be, uh, so, well, right, you, you will not have the luxury of being told, Hey, we're going out of business, so don't place your order right now. Um, someone that might be going out of business and you have a great relationship with, they may even be able to refer you to someone else, um, to make sure that your business continues running because they appreciate that relationship that you have with them. Um, but also things like you mentioned, um, unit costs going up, That is 100% a reality that, uh, in the world, raw materials prices are going up. It's almost across the board Now. Here's the thing though, they aren't necessarily going up by as much as a lot of factories are charging. So I've seen in some cases, factories charging 2-3 times what um, the product costs initially, what if it was $1 it might be two or $3 now, uh, raw material, most raw materials at least are not going up that much. Uh, it's all about, you know, they see this as an opportunity to uh, to leverage your lack of education, uh, in the market, your lack of knowledge in the raw materials, um, and use that sort of, not necessarily against you, but for their best benefit. Um, and this is why I always hound, I really do hound on, you know, make sure that you are keeping up with supply chain and every facet of it. And I know you're a big proponent of understanding your product and understanding what goes into your product is just as important as understanding the functionality of it. Um, so understanding, like, you know, hey, if uh, this particular type of plastic residents really going up, if you just see it going up for some weird reason, well are there any alternatives? And if you have a good relationship with your supplier, they're more likely to tell you, Hey, yes, you know, a. B. S. Plastic might be a good alternative because we have a big surplus of it or it's really strong in our local region or we have a lot of imports that are still coming through. So it's important to establish that relationship, leverage it um, and and not necessarily uh doubt them but always trust but verify. I would say on on every end whether it's your suppliers, whether it's your freight forwarders, um understanding that the markets are changing but verifying how much they're changing is important. [00:16:00] spk_1: And speaking of that, I think that's really, really good advice. Um always know your product. Always verify. We, we have a mastermind member who has a long time supplier that she has met in person and they suddenly raised the prices and she went and looked on the open market, looked at the prices and they hadn't gone up and she basically called their bluff and they started making other excuses and she ended up going and finding a new supplier and now she has even more options. And you know, just so I think it is good to kind of check things, especially maybe if you started and you were kind of new when you found that supplier, you never know. They may have to have personnel turnover if you're with a different salesperson, whatever. You know, definitely check things yourself. And, and there's nothing wrong with, uh, with saying, hey, you know, you need to make money, right? This is not a charity. So your supplier needs to make money, but you also need to make money. So it's, it's good to make sure that you're checking up on those things. So speaking of relationships, you were talking about supplier relationships, what are some things that sellers can do to improve their relationships with their suppliers? [00:17:15] spk_0: Great question. And I think every, every single business owners should be asking themselves that same question before reaching out to suppliers every single time, what can I do? Because this is a two way road, right? Like you said, you both need to make money and that's perfectly acceptable. Um, but realizing that they are also human, right? It's coming off with the level of kindness, um, that I think this, um, we have been moving away from, because things have become so transactional. So thinking of like, Hey, I understand. I'm just clicking a few buttons and I might not, you know, think about how is your day going? Just are they having a good day in general? Uh It's a very, very simple question. It's one sentence with a question mark at the end of it, how are you doing? Right, asking them that can go so far because maybe they do have a horrible day, maybe their pet died, Maybe they're having family issues, whatever the case may be be that one question can really help establish the rest of that day, the rest of your relationship. Um And so starting off with something like being human, I would say is the number one thing to starting off a good solid relationship with anyone. I mean whether it's your supply or your neighbor, right? So um [00:18:32] spk_1: that's such great advice. You know, whenever I do um calls, I sometimes do calls with my clients suppliers. And um, that's the one thing that they always take away from our calls is I spend about the 1st 10 to 20 minutes just understanding them and getting to know the factory owner, um, understanding their family. Like, you know, hey, are your, how long have you owned the factory? You know, are your kids going to take over? You have kids? You know, we talk about what region they live in. We talk about the food, we talk about how we're looking forward to coming and visiting and you know, and it is all about just that human element. I mean, these are people with families and businesses just like us. And that's such good advice for any relationship is to start by being human. I love that. Um, so let's talk about logistics hacks because oh my gosh, there. I know you you at novel and are also having issues with this, There's issues across the board. So are you guys discovering any logistics hacks with all the stuff that is going on right now with importing with delays with container shortages? Um, with the increased shipping prices, like what can we do to improve the situation? [00:19:49] spk_0: Yeah. Yeah. I mean right now, I wish that, I can tell you there was a hack for anyone, but there's not, I mean, even for major corporations, they're struggling to lock in containers in way and they're doing it in ways now that they've never done it. So where before they might have a guaranteed contract, let's say directly with the shipping carrier for 100 containers per month. This is a, this is a very real case where large corporations tend to go directly to shipping carriers, let's say Mayor square Costco. Um, and they say, I guarantee you I will ship from china to the US on this specific trade line going from let's say Ningbo to um Long beach are going to Oakland because it actually goes from port to port the trade lanes. They don't go from just China to the US so they locked them in on these very specific trade lanes. Um and they'll say I need you to guarantee me 100 containers and if I don't hit that 100 containers I will pay a penalty. Um Well now they're signing these these contracts that say essentially we will give you containers as we see fit. We're guaranteeing you that we will give you 100 containers. But it's like a yeah we were kind of guaranteeing you that we're going to give you 100 containers and you know if you if we have the actual space and if it makes sense fiscally, Um because if they locked in at like $789,000 and they could sell those same containers for $14, I mean they're going to be making a crap ton more money selling that at the spot market rate, right? Um So I would say the biggest thing that we have learned or at least our logistics team is pushing for is establishing new relationships uh is finding not necessarily the cheapest straightforward or which we've never done. We've never looked for the cheapest freight forwarder, but it's finding the most reliable one. It's finding one that says, hey, I will guarantee that I have you this one container, this thursday at your factory um and you can get them into a wee chat and they can lock it in and you can pay them whatever the down payment is to to get that in there. Um and they don't immediately change the rates on you last second. Um I think these small things that are still part of a relationship building are the most important parts. It's not priced right now, it's a game of survival and those were the best relationships are going to win no matter what. [00:22:20] spk_2: Yeah, that's a good point. I think that You know, cheapest isn't always the best, right? It's like as I'm getting older now, you know when you go into like the store and you needed like a blender or you know, it's like oh that one's 20 bucks, cool, I'm gonna buy it and then you know, after like a year of use, it starts smoking and burning up. Whereas if you go spend the vita mix money, you know that things in the last year, I think ours has been like eight years, you know, I mean? Like but that's uh that that analogy, you know, translates in terms of like, you know, with the climate, the way it is, you're competing not only against other small businesses, but also multinational corporations, like you said, with all this all these resources. So if you have a trusted relationship, you know, then you're going to be, you know, even maybe even ahead of, you know, some of these large companies, you don't have personal relationships. So I love that uh you know, uh quality over quantity in terms of, you know, getting stuff locked in and and and having that relationship um on that note, you know, a lot of people go at themselves, you know, go direct to the manufacturer, do everything, try to do everything themselves. Um but, you know, if you're scaling and things like that, sometimes that, that's not the best route, right? It's sometimes better to offload some, you know, whether it's like PPC or, you know, uh, sourcing or whatever it is. You know, sometimes when you're trying to scale your business, the, the, you actually end up saving money in the longer term by getting time back, which time is money. So in what situations should sell us, consider using a source sourcing agent or agency versus going direct, you know, on their own. [00:23:45] spk_0: Yeah, that's a great question. Um, and there's a few different tiers to it, right? There's a sourcing agent, which is a single person that takes care of your sourcing itself and they'll flip every rock to try to find unity suppliers. And they might even help you vet the suppliers or handle some communications, um, but based on their level of expertise or based on my knowledge of them, I should say. Um That itself can even be hard to scale, right? If you're looking for 10 different products and they're all different industries, well let's say that sourcing agent needs to talk to at least 10 manufacturers for each product. That's 100 factories still for one person. Um So they're sourcing agents um they're sourcing agencies that you can get a few different agents at also their sourcing companies like novell and also that you can have an entire team that actually works for you. Um So I think the real question is at what point do you um want to scale up your operations and what is your time worth to you? Right. If if your time is worth you staying up from eight p.m. To four a.m. Every day and you could do that successfully and talk to the different factories and negotiate successfully. Um and you can do that at scale. So meaning, you know, you're not just trying to get one other product, but you're looking at 10 other products and somehow you can manage all the different conversations then all the power to you. Um if you can go to China and you can have a few agents running around with you and helping you talk to them all, the more power to you um Now, truly offloading it is uh, is different, right? That's where you can just say, hey, these are exactly the products that I need, find me the best suppliers for them and take care of my shipping. So calculate what my estimated costs are gonna be, calculate what the actual production lead times are going to be and make sure I don't script the relationships with any of the factories along the way, That's more so what you might get from a sourcing company, Um particularly if you're looking to do, you know, four or 5 skews at a time. Um that's more so what we do. And it's funny that you mentioned, you know, it's something where you save money sort of down the road. Uh that's very much the case, the time that you don't have to spend their, the time that you don't have to talk to. All the different factories vet, all the different factories gather, all the different quotes, negotiate with them. Uh not only that, but stay informed and up to date as to what's going on globally in supply chain is just as important as all those other little tidbits that I talked about. Um that's that's really where you're saving thousands, if not tens of thousands of dollars. Uh it could be a month, depending on your size and your scale. Um So it's hard to really say at this number, you need to start considering outsourcing. Um but it's once you realize that you really do want to scale up your operations, uh it's knowing what you're good at what you can build an internal team with how much that's gonna cost you versus how much a different company like Neverland would save you. [00:26:48] spk_2: Thanks for tuning in to part one of this episode, join us every Tuesday at one PM pacific standard time for live Q. And A. And bonus content after the recording at cellar Roundtable dot com, sponsored by the ultimate software tool for amazon sales and growth seller S. C. O. Dot com and amazing at home dot com.