Episode 39:
Why businesses can’t afford to ignore order fulfilment

Hi, everyone. And welcome to another episode of Freight to the Point. I’m Alex Hersham and I’m joined today by Alexander Leichter, CEO and founder at byrd.

Byrd supports SMEs and fast-growing direct-to-consumer brands with a fully automated fulfillment process that can integrate with any business’s shop system. Through the International Fulfillment Network, byrd can successfully manage peaks in demand and increase order volumes.

Welcome, Alex.

Hey, Alex. Thanks for having me. I’m very excited.

I’m really glad that you are on today.

Okay. On today’s episode, I think what we’re going to try and do is, first, maybe understand a bit about what is order fulfillment, and then move on very quickly to what is the role of some of these new technology businesses, including byrd, in the space, what outcomes can it drive, how is it different.

But maybe just start with the high level, what is order fulfillment and maybe you can provide a brief overview of its key components.

Absolutely.

I think it can be a bit nebulous what fulfillment actually is. I think, for me, the best way to think about it on an abstract level is really everything that happens once you click on “Buy” in an online shop until you have the goods in your hand is broadly order fulfillment.

There’s a lot of processes that fall into that. I think the key component is really here collecting the orders. If you’ve ordered different items, make sure you get all of those different items, package them in appropriate packaging material, and then dispatch the goods, meaning hand them over to a last mile service provider and deliver them to your doorstep. And after that, typically as an industry-dependent, there’s certain return rates and returning all of the process. If you want to take a wide scope, you could also see as part of the fulfillment cycle.

Okay.

You are specifically the warehouse that’s doing the pick and pack, and then you are handing it over to whichever your customers determined to be the last mile carrier, but you are also receiving back any returns, resorting and doing whatever returns process there is there?

Correct. Basically, end to end. Anything that an online merchant needs, anything that can happen in a lifecycle of a good, from purchase to basically refund, all the operational topics that are there. As you mentioned, pick and pack, return and putting it back into the warehouse stock. That’s all we do, and this is the service portfolio we provide, correct.

Fantastic.

And then, if your customer also has either a physical network like stores or they sell B2B who then sell direct-to-consumer, do you deal with that delivery as well or is it just the direct-to-consumer side that’s your focus?

Yes, we do both. In fact, and we started the business direct-to-consumer focused, because that’s our origin that as our brands grew as well, it’s quite natural in this lifecycle of a brand to eventually explore retail as one of your sales channels. And most of our larger brands have an omni-channel strategy, so they sell direct-to-consumer. But they also sell through retail or other options and other platforms, for example. And we cater for all of that.

Direct-to-consumers means typically sending shipments in the size of a parcel, a couple of items. And B2B and retail, our clients tell us, “I need anything from one pallet to 200 pallets shipped to this retailer or this platform.” And it can be 10 thousands of products. It’s a very different process and very different skill set, but over the years we’ve built both modules, the B2B module and the B2C module.

But that’s really exciting in supply chain, this whole idea of direct-to-consumer versus retail. I think those terminologies are going to die off in the next couple of years because, to be successful, you have to be where the customer is, you have to be omnichannel, you have to be thinking about these different strategies. Obviously, we’ve just come off a 15-year period from the mid-2000s, and then reaccelerated through COVID, where e-com was all the rage and consumer expectations has changed dramatically.

Before we get on to specifically what you do differently as a technology player, how should businesses be thinking about the importance of their fulfillment stack and how it drives and should support their customers and the expectation of their customers?

Yes, I think what you just pointed at, the surge of e-commerce in the last 15 years has been staggering and we’ve been benefiting from that as well. Personally, I think what we are seeing at the moment is also that trend to, after coming down from a COVID supernatural high, where we’re seeing it coming down to natural growth levels again in 2023. And that’s still exciting growth. That’s a pretty rapid growth for an industry that has a penetration across Europe versus offline retail of, still in many countries, below 10%. We are expecting the market share to increase their significantly.

The environment is still a very exciting one as a direct-to-consumer brand. But I think what has fundamentally changed in the last year certainly, but even before then, is that a lot of people realised that, potentially in the e-commerce markets, competition for merchants has gone up significantly. And that has driven customer acquisition costs for many brands across categories. To build a long-term sustainable business, in terms a profit, as every business has at some point, you need to diversify your channels. And as you pointed out, you need to be where the customer is.

And I think many brands that we’ve seen that navigated those times most successfully are the ones that have a direct-to-consumer strategy but also have a strategy to get into retail. There’s a whole other discussion to be had, what’s the right timing for that and strategy for that. But I think ultimately that’s where the future is going to lie. I don’t think direct-to-consumer retail is going to be that strictly separated but, as you said, it needs to be both if you want to have a long term sustainable business.

What that means for the fulfillment stack is, I think, very clear. The requirements that you have to fulfill as a merchant in terms of your supply chain capability is increasing massively, because of the omnichannels you have to drive the simple just direct-to-consumer and back, which in itself is not as simple as it sounds. Anyone who’s in logistics knows that. But that is going to get multiplied by providing differential selling through your own website, your platform, retailers. And so you need to either be very good at it yourself or have a partner you trust to handle that very well. I think, very important, yes. Talking one logistic guy to the other, of course.

Yes, of course.

And what I love about the future of commerce, especially for brands, is that some decisions around, “What do you want your business to look like?”, then trickle down to, “And how do you manage your supply chain?” If you have a store network in the future, which I think many brands or most brands probably will, what is the point of that store? And that then feed right back into not just the landed cost, like the overall cost to then sell it to the consumer, how do you best manage your inventory central versus distributing all the challenges that come to that? We’re probably not going to dive into that today, but that’s one of the many things that gets me super passionate about the next five to 10 years in supply chain.

Fully agree.

Okay. You are the team managing the inventory, picking, packing, sending it to customers. Place an order for one of these Shit Happens T-shit and Alex at byrd or fit it for you. Totally get that. Businesses have been doing this since before byrd, and now byrd has come into the market and is saying, “We can do it better leveraging technology.” Why?

Good question.

As you said, fulfillment has been around since the age of e-commerce, which is a bit older than byrd. I think what makes our approach unique is that we set out from little Austria, where I’m from originally, and the challenge we saw is that merchants, in Europe in particular, are extremely limited by their supply chain. Meaning you start, for example as an Austrian merchant, you try to go to Germany, you immediately have a big supply chain challenge because you need suddenly a warehouse in Germany and you need last mile services in Germany when you were only used to maybe work with the Austrian post and had your goods in-house. And that was the starting point that we said, “Why is that? Why is that e-commerce is progressing so far, but we are still stuck with 250-year-old supply chains, national supply chains in Europe?”

The mission we took upon is really not building the best Austrian or best German fulfillment for that matter, but really build European fulfillment. We wanted to offer a solution that merchants can use to basically tackle all of Europe with one partner, one unified technology. We will never be able to fully eliminate the complexity that’s built over the 250 years, but we can certainly help navigating that and managing that through technology.

What we do as byrd is effectively we provide our merchants a solution, a technology solution that gives you not access to one warehouse and one or two last mile services in a given country, but when you join byrd, you actually get access to currently over 30 warehouses in seven different countries and as many last mile logistic services. And that’s relevant for you even if you only have your home country strategy with many brands who, for example, started in Austria, then expanded to Germany and now they have a warehouse also in the UK and in France, and they’re benefiting from massive cost reductions by being able to ship locally, lead times are a lot faster and not to forget also CO2 emissions are significantly lower because more than half of the CO2 emissions happen on last mile, that we can significantly reduce.

All of that is the service we provide and that has never been done before. There is no European fulfillment solution that it is. And the only way we are able to do that is really by integrating all of the factors that are relevant, the last mile solutions, the freight forwarders, most importantly the warehouses. Our 30 warehouses that we operate together with partners, they run on our own proprietary warehouse management systems that gives us full control and visibility and we work with the local partners who we’ve sometimes been in business with over 100 years and have the local expertise and also the best talent on the ground. And that’s what makes us special.

We use technology to overcome the national hurdles in Austria but benefit from the wealth of local expertise that has already been there for hundreds of years and we helped them getting into the 21st century. That’s how we describe it. I hope it makes sense.

Yes, it does.

If I break this down, you are a technology layer, you work with great warehousing and fulfillment providers, you give them your custom-built WMS systems and you also integrate with a myriad of last mile solutions. A brand can come to you and say, “I’m already working in Germany, I plan to scale to different markets,” and you have plug and play solutions for them. And then, you essentially give them global visibility because you’re streamlining all the WMS, because it’s all yours, into one macro review, but then they have all the goods in market. And you’re paying on the trend of, “How can you find great local partners?” But then all the benefits of distributed inventory that you mentioned, cost, lead time, and I love that emissions stack because I didn’t realize it was that heavy on the last mile.

Is that a good way of describing it?

Yes, that’s a good way of describing it.

We are the partners for our merchant. They come to us and we are totally hands-on. You have a contract with us, you have one partner to negotiate with on the price side, on the quality side, we guarantee you highest standard SLAs. You don’t need to deal with all the local partners and the complexity that comes with it. That’s part of the beauty, is that we are your single touchpoint to manage the entire network on your behalf.

But in a nutshell, I think that’s beautifully summarised.

Okay. I love this.

Let’s not talk about the tech versus the service, but the outcomes that you can drive. If I’m a brand, you are making me inherently scalable now across dozens of markets. I don’t know how many markets you are in but, in theory, dozens of markets across Europe. Rather than having a strategy for the UK, a strategy for France, a strategy for Germany, you’re basically adding scalability and firepower to these businesses.

That’s exactly it.

What we have built is really, also in all of those markets, currently we have warehouses in seven markets, Germany, Austria, UK, France, Netherlands, Italy and Spain. We can also ship in all other markets, but in those markets the value-add is the biggest. And we’ve built volume in all of those markets, so we have a great setup in terms of the warehouses but also in terms of the last mile. All of it is pre-negotiated at very competitive rates.

You come to us, you immediately benefit from us already having the scale in a certain market, you can jump on top of it, so you don’t need to… If you were your own brand and you’re just starting in the market, you’d probably have to talk to the local warehouse first, they don’t know your brand, you have to talk to the local last mile service, they have never heard of you, so you’ll get not so competitive prices likely, as well. And that’s what we had to do as well at the beginning. The beautiful thing is we’ve done that work for you, so you can hop on the train that many other brands already benefit from and basically get a competitive setup in terms of prices, and most importantly maybe in terms of service levels.

Yes.

You’re supercharging their growth, you are reducing emissions, improving customer satisfaction and doing that in a way where they leverage your scale so it keeps cost down. That makes a ton of sense, I totally get the value prop. We can discuss in a moment how you go to market, how you sell, I would love to hear about those conversations.

But a lot of that ends up being you’ve created this asset-like network for them or the scalable network across these different countries for them. How do you think about supporting them in terms of rooting decisions? Or is it up to them in terms of the POs that they raise and the flows that come into these various warehouses?

Very, very good question.

What we do, we provide a ton of data for our merchants. And you can get extremely customized data reports from us, whatever you need, starting from simple things like reorder points and stock limits when you run out, to more sophisticated conditions. But we do not make the decision, on behalf of our merchants, where to locate the stock yet. The simple reason for that being is that we don’t have full visibility to make the smartest call. A simple example is we would think, based on the supply chain data, that maybe we need to shift some inventory from UK to France. But what we don’t know is that our customer has a huge marketing thing planned for the UK and that’s why-

Yes, you haven’t got the demand side.

Exactly, we don’t have the demand side.

What we are working with, at the moment, we have excellent account managers that have regular conversations with our customers, “What’s your plan for your quarter? What are you up to?” And when we know that, that’s what we can make the smartest decisions and also consult our clients based on the data, “You have X shipments to this destination. It would be smarter, we could save some cost if we move it left to right.” We need the demand side input from our merchants to make the smartest decision.

Yes, and do you do the inter-warehouse transfers as well?

Yes, absolutely. We are also integrated with a few fantastic freight partners that help us make that as smooth as possible. Again, competitive rates and also great visibility for our merchants because they see where the stock is and when it’s in transition, so it doesn’t disappear.

Fantastic.

I want to touch on, just quickly in a moment, who you sell to and how you sell because there seems like there’s return on investment stirring from many different ways. And so I would love to hear about that conversation, the type of companies and how you support them on their journey.

But I just want to pause on the point you made there about not having demand information and maybe speak to why I was personally excited to partner with byrd, at Zencargo. If I think about the future of supply chain, it is the combination of demand forecast, inventory and warehouse, and flexibility and distributed inventory, and inbound visibility and inbound data flows at a skew level. And it sounds very simple, what’s coming in including what’s been ordered, what’s in the warehouse, or warehouses if they work with byrd, and then what’s the demand, and how do you make smart decisions.

It is incredibly difficult when you say that’s across a hundred thousand skews, across seven countries or eight countries or nine countries, or in the future 20 countries powered by byrd. It makes supply chains very, very difficult to manage. But I think there’s a huge opportunity over the next five years, as digitization just accelerates and goes through the roof, for businesses like ours to partner. We don’t want to be the best at what you do, and likewise I think you don’t want to be the best at what we do. But partner and really drive our customers forward.

Maybe just tell me for a minute then in terms of what size customers do you work with? And candidly I’m just interested, when you sell, do you sell based on education and, “This is what it can unlock”? Or do you do a real deep dive, “This is the tangible dollars and cents or euros that we’re going to drive in your supply chain, over the next two years”?

Yes. First, let me quickly respond to your point. As well as hitting it with great freight partners, we are very excited to work together because the analog nature of supply chain makes it inherently hard to predict and measure. And I think what you folks are doing is going to be hugely exciting and beneficial, I think, for both of our customer bases. Excited to do more of that, as well.

And with regards to our customers, who are they and what’s our pitch, if you will. We work with a range. I think, historically, it’s been pure play, online, direct-to-consumer merchants and that was how we kicked off the business. Many of them have grown into large omnichannel brands by now and so have our customer group expanded since then. We are still serving those folks. They typically start in one country, they have maybe a smaller portfolio of companies. But since we have shown that we can enable them to scale and grow to many different products in many different markets and we’ve expanded our market coverage, the target customers that also come to us have become a lot larger.

We have a lot of big brands, also US brands for example, they’re not interested in Austrian fulfillment, to go back to that, or Spanish fulfillment. But they’re interested in accessing Europe. And that’s a really exciting bit where we work with customers in Europe but also outside of Europe. Anyone who wants to access the market, I think, finds a really good solution with us.

And what we consult them on or sell them on is basically the best supply chain setup. We ask for a ton of data. To be honest, there’s a bit of homework to do, but I think it’s required if you really want to build a sophisticated setup. We ask for the type of products, the destinations, to keep it simple. And based on that, we do an analysis and basically what we try to do is we don’t come up as like, “Here’s the price, that’s what it’s going to cost you.” But we really try to assess their status quo and we try to assess how we can improve that status quo with our capabilities, and then give them basically a return on investment suggestion. And it’s typically because we don’t have complete information, a bit of, but then we discuss it. And ideally, when our customers sign with us, they know exactly how it’s going to improve their supply chain compared to where they are right now.

I really like that because, for me, there’s a lot of excellent professionals in our industry, but I think the next wave is all about tangible value. When we at Zencargo are talking about what we do, we don’t just say to prospective customers, “Here’s some visibility, now come work with us.” It’s the same spirit as what you are saying, is there’s a lot of hidden value in supply chains. Our mission is to make our customers’ supply chain their competitive advantage. And I think businesses like yours and ours, in terms of how we go to market and how we think about our hidden value, is exactly the right approach and will benefit customers the most.

I have to say, from what you’re saying, if I was a brand either in Europe and thinking about expanding, an American brand, a Chinese brand, an Australian brand entering the market and trying to have flexibility, I totally get why they would want to speak to you and perhaps they would want to work with you.

Maybe one last question for me, just looking ahead. Huge value prop today, the market is moving in this direction of more distributed and flexible inventory. Where do you see the innovation cycles over the next couple of years, three to five years? What else is going to push on?

Yes, it’s a very good question, it can go into multiple directions.

I think what we are going to see is a lot more data generated by a company like us, a company like yours, but also down to the last mile, returns, et cetera. I think we’re going to sit on a wealth of data in the next five years, they’re going to have another huge level of potential because no companies can… Supply chain is so big and so complex that there’s always going to be specialized players in certain parts of the supply chain. And bringing their data pools together is going to be incredibly valuable to provide visibility.

I think a lot of it remains, even if it has been for the last five years certainly about visibility, it will remain a key topic. And then benefiting from data and analyzing that data I think is going to be a hugely important thing. That’s certainly the way we look at things because we want to help more with what we touched upon earlier, automating decisions, because as the complexity grows, even with advanced solutions, there’s a ton of decisions to be made and a ton of things to be considered. And with more data, you can then support that. And I think that’s going to be the most relevant thing for merchants. As they are required to upgrade their supply chain, we need to help them to cut through the complexity of it. And so I think visibility and decision-making based on data is going to stick around for the next five years. Yes, for sure.

We’re early on a journey that will be incredibly powerful for the next five years.

Alex, thank you so much for joining us today. It’s been great to hear about byrd, about your journey and about the value that you offer to brands, omnichannel brands, direct-to-consumer brands, from Europe or entering Europe. Incredibly excited to see what you do next and glad that we’re aligned and that we’ve created our partnership between Zencargo and byrd.

And thank you to all of you. Whether you are at home, on the way to work, at the office listening to this podcast, please don’t forget to like and subscribe. And I hope to see you all soon.