Be yourself; Everyone else is already taken.
— Oscar Wilde.
Episode 24: How Fiber52 is Upending the Textile Industry with Sustainable Dying
Transcript
Adam Honig: Now, I’m listening to your accent, Graham, and I’m definitely thinking Southern California. Do I have that right?
Graham Stewart: California. I wish. No, it’s Southern Australia. I lived in Australia for 10 years, but I’m originally from Northern England with a terrible accent. People tell me I haven’t got rid of it yet. I thought I had, but it’s mixed up because I lived in Italy, Australia for 10 years, China for five years, Hong Kong for two years, and now America for 10 years. So, that adds up to about 25 years.
Adam Honig: Hello and welcome to Make It, Move It, Sell It. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving, and selling products—and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today. Instead, today we’re going to be talking with Graham Stewart, the founder of Fibre52. Welcome to the podcast, Graham.
Graham Stewart: Hey. Thanks, Adam. Good to be here, and thanks for inviting me on the show.
Adam Honig: Yeah, it’s our pleasure. You know, we’re going to be talking a little bit about textile manufacturing today, and I’m particularly excited about this because textiles played such a big role in the industrial revolution and the economy of countries like Bangladesh and so on. And you’ve been working in textiles and dying textiles your whole career, my understanding, Graham, is that right?
Graham Stewart: That’s correct, Adam. Yeah. I started at an early age—we were the largest commission dyers in Europe. We dyed just about everything you could think of, and I studied my degrees in coloration. I’ve been in it all my life.
Adam Honig: So cotton, when you grow cotton, it doesn’t just come in like orange, like the shirt I’m wearing. It actually has to be turned into that color at some point.
Graham Stewart: You know, people are working on that, but I think it’s going to be a while. So we’re stuck with other ways of coloring cotton. To your point, there’s a lot of water used in growing cotton, which gets a lot of publicity, but there’s a lot of water used in coloration and processing cotton. Um, and that’s part of what we are about is conserving the environment, but also a big part of that is making sure we use less water in processing.
Adam Honig: Yeah, so tell us about Fiber52 and kind of what you guys are up to.
Graham Stewart: Fiber52 began because I was doing a lot of my own dying, and I noticed that there was a lot of damage being done to the cellulose in dying because they used traditional dying, which is still 95% of what goes on in the world. We’re going to change that, all being well, by using what? Heavy alkaline caustic soda. In fact, we take that out. We use bio products to do the job. You know, some people say, well, you know, you can’t get the cotton clean. We do. Cotton’s bleached before it’s dyed, and that’s to get the trash, as it’s nicely called in the trade, out of the cotton, which is vegetable matter, lignans, and other celluloses which color the cotton. We get that out, but we get it out by using lower temperatures, much less water, and much less time. In our literature, we say we use up to 50% less time, 50% up to, I have to use those words advisedly, 50% reduction in water, 50% reduction in energy, and up to 50% reduction in carbon dioxide emissions. So, it’s a big deal.
Adam Honig: Now let’s talk about this for a second. So, if I’m a textile manufacturer and I’m going to be producing a range of shirts or something like that, I get the raw material, I get the cotton, and I have to apply all of these caustic chemicals to it in order to prepare it to be dyed. That’s a big problem, right? Because that produces a lot of waste you have to use all this water, and, by the way, I don’t know what these caustic materials are. I’m sure you can tell me what they are, but they got to be bad for you, right?
Graham Stewart: They are. If you get them on you, and I’ve done that many a time, they’re just bad for the cotton because what they’re doing is degrading the cells. So your shirt isn’t as strong as it should be or as durable as it should be. What’s happening is the nice side effect of doing it this way in a more gentle, more natural manner, is that your cotton is much, much stronger and much more durable in every way. So that, that was quite a big breakthrough in developing Fibre52.
Adam Honig: Gotcha, gotcha, and so, you can essentially have the benefit of having the cotton clean from all the junk as you called it, not using the caustic chemicals, and it actually comes out better?
Graham Stewart: Yeah, and the tough bit was to harness all these buyer products. The big, big breakthrough for me was after a couple of years, I had managed to find a very cheap bio product. And by the way, this process doesn’t cost more than normal, in fact, it costs less because of all the water, all the energy, and so on that we save. That’s a big saving, but the breakthrough was one bio product catalyzes the whole process. It’s a shorter time at lower temperatures, and the big water saving, is instead of what normally happens in bleaching or getting rid of the trash and all that kind of stuff, getting the cotton white is that you have to drop the bath, right? So you get rid of the water, then you refill it with soap, to get the cotton clean again, ready for dyeing. So it’s prepared for dyeing, and that might happen twice, but if you think of a thousand kilograms of fabric or fiber, and you drop a bath, that’s 10,000 liters of water down the drain just for a few t-shirts. I mean, that’s a thousand kilos, so yes! Presently it’s very wasteful and that’s where we make a big impact. With Fibre52, we don’t drop the bath, we go straight from prepare for dye, into dye, saving time again, but also saving energy because you have to reheat the bath. A big savings in water usage.
Adam Honig: One of the things that I find so fascinating about doing this podcast is getting a chance to talk with people who do all of these things that it’s almost like, you never knew existed. So many people wouldn’t have even thought about this process before, how did you get involved with this, Graham?
Graham Stewart: Again, dye houses, even if I’ve tried in my career to get away from dyeing, I don’t do it. I’m not good at that. It’s been trial and error, a lot of error. And basically, I’m not a scientist. I know enough because I do have a degree in coloration, but basically, I could see all the damage being done. In processing, specifically in cotton, it tends to go on for a long time. And then you’ve got other mixtures. We all mostly wear poly-cottons as well because cotton is often mixed with polyester sometimes for price and sometimes because cotton is being degraded. So it gets mixed with polyester to make it durable. With Fibre52, you don’t need to do that. I’m hoping in the future we can say, why do you need polyester? Because cotton is a natural fiber; it’s the second largest fiber in the world in usage. Polyester still be number one, but we’re not using petrochemicals. It’s wonderful. We’re just trying to make the processing better.
Adam Honig: Yeah, because the sustainability of all the petrochemical products is really challenging, right? All the polyester that’s out there, does it ever break down?
Graham Stewart: It does, but we are long gone by the time it does. To be fair, there are a lot of initiatives, few here in the US, where they’re making polyester compostable. But it’s not easy; it’s not just compostable. You’ve got to have various conditions and so on. The problem with polyester as well is the microfiber issue; it’s going into the seas, choking the fish, making all sorts of problems, and even in our water supplies. Someone might say, “Yeah, but cotton’s the same.” We’re finding that it’s not; yes, cotton does fibrillate and there are small particles, but it’s natural. And again, it does compost, so don’t worry too much about that.
Adam Honig: I want to pull up the conversation back for a second. So, you’ve got this really new approach, which has a lot of benefits to textile manufacturers, but I imagine that textile manufacturers, they’ve been doing things the old way for a long time. So, what is it like talking with them about this new approach and getting them to think differently about these things?
Graham Stewart: That’s a big question, Adam. Welcome to my life. I’m in a DI house every week and usually the person says this can’t work. Upfront, you know, they don’t have enough alkali, the temperatures are too low, they’re not getting all the natural products out of the cotton, and therefore they can’t dye it. So, I’m paying for the trial. I ask them to watch and record. A lot of DI houses have very good controls where you can record the whole process. Just up the road here from where I am in North Carolina, I’m working with a fabulous yarn dyeing house which is called Package dyeing, which is like dyeing a brick. Those guys have been very open. They in fact, donated the cotton to me and let me work in their machines. We go from their normal process and, just this last week I’ve done a very light blue, because most people say, it’s going to be brown. You’re not going to get the light colors. So, I did a very light blue, repeated it a few times and then we compare side by side. So, when I dye Fibre52, I dye the conventional method right next to it. Fibre52 is taking about four hours and 15 minutes, four hours and 30 minutes depending on what happens. The traditional process is taking nine hours.
Adam Honig: Oh, wow! So, in my world, we would call it a proof of concept. Do they pay you for that or are you doing that on your own dime?
Graham Stewart: I do it on my dime or the company’s dime. It’s very important and we even have staffing of other parts of the world now. We have a full-time person in Bangladesh, for instance, who covers India and Pakistan as well, where there’s a big textile, particularly cotton textile industry and processing industry. And of course, in those regions there’s a lot of cotton growing, too. What we try to do is get people to embrace this and, yes, there’s got to be a lot of trials. So usually, if we go to a company to get this process accepted, it’s usually a two to four-month process before it is. Because you’ve got to get over the skepticism to begin with, from management to the shop floor. But the guys on the shop floor, I’ve got to tell you, they go, “Wow, this is great, because we’re not using heavy alkaline. I don’t have to worry about that. And also, it’s much simpler than normal dying. You don’t have to do anything special. You’re carrying the same bucket across the floor; it’s just got a bio product in it instead of a heavy chemical.”
Adam Honig: So, you’ve got this new approach for cleaning up cotton to make the dying easier. But do people worry about the long-term effect of using your method? What’s going to happen to that shirt in six months or a year? Is that part of the skepticism at all?
Graham Stewart: Not at all. Never had that one bit. In fact, this week I did a webinar for a wide textile audience. A lady rang me about 10 minutes afterwards, managing director of a company that makes cloths for cheese, food, and cotton for beauty products.
Adam Honig: I know you do a lot of that. This is why you’re very familiar with this.
Graham Stewart: That’s right. As you can see, this could be a cleaner process for food, you know, a natural process. Everything’s reacted with no residues. It’s just natural, so it was quite interesting for me. We’re getting a lot of interest from the non-woven industry, which is anything from carpets to automotive and plane interiors, and also in personal hygiene. That’s a big interest for many producers.
Adam Honig: Yeah. Well, I know there’s a lot of consumer sentiment around sustainability, but also just about all the potential poisons. You mentioned the microfiber issue before, I know there’s been a lot of talk about that and, we’ve had guests on the podcast, fabric makers and rug makers and people like that. And you don’t think about it, but you bring this kind of stuff in your house and what kind of pollutants are you bringing in? So, I could see that being important for people. So, cotton is used in food production or food wrapping, I guess?
Graham Stewart: Yes, food, fruit, food preservation and so, again, it was very interesting for me to have someone from the food industry say, “Can we get together? We’re really keen to take this further.” Of course, there’ll be a lot of testing. It was a nice surprise.
Adam Honig: So, we were talking earlier about how you go to market with this and you’re licensing the technology to manufacturers. Tell us about some of the challenges with that and the IP issues you have worldwide.
Graham Stewart: We spend a lot of time and money on lawyers to make sure this technology can be transferred around the world quickly and be interpreted quickly. We have to keep an eye on usage, so we may even buy products and send them to distributors to know where they’re going. We look for partners carefully to ensure we can trust them. We’re looking at the value chain from the beginning, looking at blockchain, DNA, and all sorts of things to cheaply monitor the whole supply chain, giving visibility which is important. This ensures Fibre52 is Fibre52 and hasn’t been tampered with using chemicals.
Adam Honig: There’s that old joke that, if you came up with Fibre52, someone can come up with Fibre53. Hey, speaking about Fibre52, you never told me why the company’s called Fibre52
Graham Stewart: Oh boy, that is a good one. One thing is that it was very hard to call anything cotton. All the trademarks have been taken. Fibre52 on the other hand, is the number of chromosomes in the most common cotton in the world and it adds up to 52. So basically, it’s cotton.
Adam Honig: So, it’s like the genetic marker of cotton is Fibre52. It reminds me of Kurt Vonnegut’s book Cat’s Cradle, where they invent Ice Nine, which comes to global ruin. I’m not saying Fibre52 will do that, but it’s interesting. So, it’s the genetic markers that make up the cotton is how you got the name. It’s really hard to name a company. I’ve named a couple of companies and my experience is no matter what name you choose; people don’t like it. When you named the company, was it hard to get everybody to agree on it?
Graham Stewart: Oh, absolutely. And we, and we had an agency involved. Even though they came up with tremendous names, they were caught out by the fact that they’d already been legally taken or people complained about them. None of us agreed on the name, to be honest. But we do like Fibre52. Generally, people are interested, then some glaze over when you tell them. But, it’s certainly an aim that invites questions. Put it that way.
Adam Honig: Yeah, well, we named our company Spiro from the Latin word Spra, which means to breathe. We wanted to breathe new life into the terrible field of CRM. Most people think we’re Greek American, though. Whenever we go to a trade show, we’re surprised by the number of people whose first name is Spiro. It’s always a good time. Our mailman is Spiro too.
Graham Stewart: It’s a nice name for sure.
Adam Honig: Thank you. So, tell me a little bit about what you see coming up on the horizon for fibre52?
Graham Stewart: Well, we’ve gone through the emerging stage and we’re now into the commercialization stage. We’re doing trials all around the world and some of them are quite large. We’re dealing with mills who process as much as 2 million pounds of cotton a week, and they’re interested in our services because if they can save 30% of their time, it’ll result in a lot of dollars. So, we’re getting a lot of interest from the biggest brands and manufacturers in the world.
Adam Honig: So, for you, do you go to places like Levi’s and talk at that level with people, or do you have to speak to all of their subcontractors and so on? Or do you just talk to everybody?
Graham Stewart: We started off talking to the subcontractors, but then we realized we had to talk to the brands. So, we do talk to many of the big ones around the world. The brands are all under a lot of pressure to be more ecological and the ESG pressure is huge. We moved quickly in Italy because I have a lot of friends there and I know the processes and brands. With my friends, we managed to move quickly because there’s legislation coming down to track really fast. And many manufacturers and brands want to make sure they’re in a good place before it hits. So, wherever the legislation is, those are the countries that are adopting the quickest.
Adam Honig: And the legislation is around, sustainability or what kind of legislation?
Graham Stewart: Yeah, around sustainability and, there have been organizations like Greenpeace and the United Nations in particular, which have a 2030 strategy that is excellent. They are looking to be much more sustainable by 2030. So, these sustainable practices just have to happen. Fibre52 is in a very good position for that. In fact, for many companies, we can write a sustainability statement because by using Fibre52, you are doing good for the planet and the people.
Adam Honig: I’m interested in your perspective on this. What I’m hearing is that sustainability and ESG are big things in Europe and the US. Do you see the same in Asia or is that more of a Western kind of thing?
Graham Stewart: No, it’s the same. In Asia, you look out east and there are countries that are very involved, as well as big processing areas. They’re dealing with brands that have a big interest in ESG and sustainability, and so they must come up to standard. Adam Honig: Yeah, that makes sense. Even though a lot of the manufacturing is done in Bangladesh, the buyer of those products has certain rules about how everything has to work there. Graham Stewart: Absolutely. Those rules are very onerous. The big brands all have rules to meet their standards and that has to be done.
Adam Honig: So one last question here, Graham. If we’re talking with manufacturing executives who are thinking about launching new products, what is your advice, having gone through this for a while now? What do you think is the most important thing people should be thinking about?
Graham Stewart: Well, I think you have to know your market very well. Legislation coming down the track can affect the consumer, so you have to be in tune with their wishes and the pressures they face. Plus, there’s the education aspect. That’s been the biggest driver for me, trying to get brands and manufacturers to let the consumer know what they’re buying. I think that is reflected in other industries and other manufacturing as well.
Adam Honig: Yeah, no, I think you’re totally right. It’s such an important point. As entrepreneurs, people become very excited about their idea, but it needs to come from understanding how it will be bought, what legislation is changing, and what consumer sentiment is driving the demand. If you can have a great idea that connects with those two things, you’ve really got something.
Graham Stewart: Yeah, and that is my belief. I hope that answers your question.
Adam Honig: Yeah. No, no, that’s perfect. Well, hey, Graham, I really appreciate you joining us on the podcast. It’s been a great episode. It’s been super fascinating to learn about dyeing and cotton and all the manufacturing around that. Who knew it was gonna be so interesting? I really appreciate you coming on the show.
Graham Stewart: And thanks for inviting me and thanks for all the great questions.
Adam Honig: Yeah, no worries. So, for our listeners, as a reminder, you can find every episode of the Make It, Move It, Sell It Podcast at Spiro.ai/podcast. Try saying that three times fast. What do you think, Graham, if people like the show, should they give us a good rating or a thumbs up or whatever they do on the internet these days?
Graham Stewart: All of those things, Adam. Also, if anyone wants to get in touch with us, take a look at our website.
Adam Honig: Just tell everybody what your website is, just to be super clear, Graham. Graham Stewart: It’s really easy, it’s fibre52.com. Even I can remember it. We are getting more and more information out there because, again, we see that as being a very important part of Fibre52, not just for consumers, but for manufacturers as well who might want to get into a more ecological process.
Adam Honig: Excellent. Well, thank you for sharing that and thanks to everyone for tuning in. We look forward to speaking to you on the next episode.
The post Episode 24: How Fiber52 is Upending the Textile Industry with Sustainable Dying appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/podcast/episode-24-how-fiber52-is-upending-the-textile-industry-with-sustainable-dying/
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Best Practices for Managing Your Pipeline
For many businesses, pipeline refers to potential future sales. It’s a crucial component that allows organizations to visualize and track their sales process, from prospecting through fulfillment. Managing a pipeline effectively can lead to:
- Improved forecasts
- Better coaching
- Higher win rates
- Efficient lead distribution
- Process improvement
- Valuable insights from both wins and losses
With Spiro’s AI-powered CRM, implementing best practices around pipeline management is a simple and painless process.
1. Simplify Data Entry for a Healthy Pipeline
Data is the lifeblood of any CRM, providing valuable insights for reports and dashboards. However, excessive data entry can lead to CRM fatigue and hinder the accuracy of your pipeline. That’s why it is important to simplify and minimize data entry by removing unnecessary fields. If there are data points you can live without, eliminate them to streamline the process. Duplicate fields and subjective data entry requirements can also be problematic. It is recommended to be cautious about such fields as they can be data entry killers. Simplifying data entry helps users focus on what truly matters—nurturing and closing deals.
2. Clearly Define Process Stages
To build a solid pipeline, it’s crucial to have 100% alignment within your team regarding the stages and their meanings. Without clarity on sales stages, businesses lose visibility into how deals progress through the pipeline. Spiro allows organizations to configure their sales stages, but here is an example of a commonly used setup:
- Prospecting: At this stage, you’re gathering information and identifying if there is a need for your product or service. No contact has been made yet.
- Qualifying: You’re having meaningful conversations with the prospect and are assessing whether they are a good fit for your offering.
- Proposing: Mutual fit has been established, and you are working on submitting a bid or proposal.
- Closing: You’ve received a verbal commitment or have a strong belief that the deal will be closed within the next month.
- Closed Won: Congratulations! The contract is signed, and you’ve received the payment.
- Closed Lost: It’s time to learn from the loss and move forward.
These definitions and stages are just suggestions. But whatever setup is used it is important that everyone in the organization is aligned on what each stage represents. Regular education and training on the stages are necessary, as they may not be retained from initial training alone. It’s also crucial to extend this knowledge beyond Spiro users and ensure that everyone on the go-to-market team understands the stages and their impact on the business.
3. Learn from Your Losses
Tracking your losses is just as important as tracking open and won deals. It is important to recognize the value in analyzing lost deals to identify areas for improvement. By tracking information in Spiro such as competitors, reasons for loss, friction in the quoting process, and price comparisons, you can conduct a detailed analysis and make incremental improvements for future deals. If you’re not already tracking this information, we recommend tracking it in Spiro as soon as possible.
It’s important to remove the stigma around lost deals. Sales reps often hesitate to admit defeat, but embracing losses can lead to valuable learning opportunities. It can be a good idea to encourage sales reps to close lost deals if they don’t see a path forward in the next six months. If the opportunity re-emerges, a new one can always be created. By removing the stigma, you create a culture of continuous improvement, where learning from losses becomes a natural part of the process. If a deal is going nowhere for an extended period, encourage your team to remove it from the pipeline to maintain its health and accuracy.
4. Recurring Pipeline Meetings for Active Management
To effectively manage your pipeline, it’s essential to establish recurring pipeline meetings. These meetings serve as a platform for actively managing your pipeline, discussing progress, and identifying areas that require attention. We suggest running these meetings using Spiro to help design a pipeline dashboard that acts as a springboard for conversation. The same approach can be applied to one-on-one meetings as well. Consistently running these meetings from Spiro reinforces the idea that Spiro is the central hub for pipeline data. It ensures that all relevant data is prepared and readily available for the next pipeline meeting.
5. Remember to Celebrate Milestones
A pipeline consists of multiple stages, and each stage represents a step toward closing a deal. Spiro encourages companies to celebrate the mini-wins along the pipeline journey. If your team excels at converting prospects into qualified opportunities, celebrate this achievement company-wide. Recognizing these milestones helps solidify the importance of the sales process and fosters an understanding that the journey is just as crucial as the destination. By celebrating progress, you motivate your sales reps and reinforce their commitment to the pipeline management process.
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Pipeline management is a critical aspect of any sales organization, and Spiro’s AI-powered CRM is designed to help users implement best practices in this area. By simplifying data entry, defining clear process stages, learning from losses, conducting recurring pipeline meetings, and celebrating milestones, Spiro provides the tools and guidance necessary for effective pipeline management. With Spiro, you can improve your sales forecasting, gain better visibility into struggling deals, enhance coaching, optimize lead distribution, drive process improvement, and create a culture of continuous learning and improvement. Take advantage of Spiro’s AI-powered CRM to elevate your pipeline management and achieve sales success.
The post Best Practices for Managing Your Pipeline appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/resources/guide/best-practices-for-managing-your-pipeline/
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Episode 23: Using Data to Build a Wholesale and Retail Network for Nectar and DreamCloud Mattresses
Transcript
Adam Honig: And do you tie that individual consumer back to the store and say, “Hey, we sent you guys 5,000 door swings this month.”
Bob McCarthy: We have that ability if the retailer is willing to share data with us, and we have probably about 20% of our transactions now, we do share. That goes back into our algorithm. We use machine learning and AI to enhance that algorithm.
Right, so it’ll get smarter as we feed more data into it, and then we can provide data back to the retailer. That said, we do a matchback of those email addresses. You can go back to them and say, “X percent of the sales that you made last month came from people that visited our website.”
Adam Honig: Hello and welcome to Make It. Move It. Sell It. On this podcast, I talked with company leaders about how they’re modernizing the business of making, moving and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today.
Instead, today we’re talking with Bob McCarthy, the Managing Director of Retail for Resident, the makers of Nectar and Dream Cloud mattresses, and actually, a lot of other products as well. Welcome to the podcast, Bob.
Bob McCarthy: Thank you Adam, thank you for having me.
Adam Honig: Yeah, it’s pleasure. Maybe you could tell us a little bit about Resident, because people are a little bit more familiar with the brands than the company.
Bob McCarthy: So residents started in 2017 with one brand Nectar, which has become our flagship brand. Quickly grew in the digitally native space, so we’re a digitally native brand. We sold 100% online and the first couple years of existence, we grew to 40 million in year one, year two, broke 200 million. I joined the company in 2018 as Managing Director of Retail, as they felt a need to create an omnichannel experience and really create an opportunity for our consumer that wanted to try our product before they actually made the choice to buy it,
and position it across brick and mortar retail stores throughout the country. So we started in 2018, shipped our first product the end of 2018. So 2019 was our first full year, and since then we’ve, grown to about 4,000 store locations across the us. On the wholesale side of the business we’re eclipsing over almost $200 million in sales annually on the wholesale side of the business.
Adam Honig: Wow, it’s like you’re a AI startup, just kind of going crazy with growth.
Bob McCarthy: Yeah, I joined Residents, with kind of a startup mentality, even though they were a couple years old. What I was building was really a startup within a startup and having come from a previous company, West Creek Financial, which is now called Qualify, that was also a startup that I joined as their fifth employee.
Spent a couple years there helping them scale. I kind of have that in my blood. It’s a heck of a lot of fun building companies from scratch.
Adam Honig: Yeah, no, I certainly know about that. It can be challenging, but it’s super rewarding as well. So the company started by selling mattresses online to people, and had great success with that.
And then they said, “Hey, we’ve got this other idea. We want to sell ’em through retail as well!” Talk to me a little bit more about the strategy behind that.
Bob McCarthy: So when you look at a mattress purchase, I mean, we literally can talk to, at any given time, about 10% of the US population is what we’ll call in market for a mattress.
Our marketing teams have built really an amazing algorithm that can connect with consumers that are in market. So when you look at some other companies out there that do more brand awareness advertising, that is a much less efficient spend of the marketing dollar. We spend our marketing dollars extremely efficiently.
Bringing lots of people to our website. Literally tens of thousands a day in some cases. Some of those actually buy on the site, but then there’s a lot that kind of sit in the funnel, which we continue to interact with them. The data showed that the number one reason that they weren’t purchasing was they would like to try the mattress.
55% of consumers said, “I would like to try it before I actually make the decision to buy. So I love what you’re telling me. Everything looks good online, but even though you have a 365 night comfort trial and a forever warranty, I still feel that, I’d like to meet my mattress before I actually take it home.”
Adam Honig: It’s kind of amazing anybody buys it without trying it first.
Bob McCarthy: I’ve been in the mattress business now since the nineties, and I was with Simmons, and then I went to Tempur-Pedic in it’s very early days. Spent a lot of years at Tempur-Pedic, but when I was recruited to go to West Creek in 2016, there really weren’t a lot of digitally native brands. They were just starting to get into brick and mortar, right? Or even just starting to sell, a mattress and a box online that can be delivered by UPS or FedEx. So that two years that I was away at West Creek, that sector of the business really started to explode.
And I agree with you, I was shocked at how many consumers were actually saying, I’ll give it a try without going into the store and buying it. Because if I don’t like it, I can just send it back. That part of the business exploded, but when you took those companies that are really good at marketing and then put it into a retail store too.
It’s a true omnichannel experience for the consumer, and they can have their choice. If you just feel like sitting on the couch and ordering it on your phone and it shows up a few days later on your doorstep, great. Or, if you want to put it in the consideration set, and go into a mattress furniture or appliance store, try it out, make sure you like it, and then have them deliver it, that works as well. So, it’s really helped us increase our conversion significantly.
Adam Honig: That’s amazing, do you ever get feedback from the retailers that they feel like you’re competing against them because you’re selling it direct as well as selling it through the stores?
Bob McCarthy: Initially, yes. I think there was a lot of apprehension that they were going to show room for us and they would just wind up buying it online. I think we’ve proven that one of the reasons we’re the leader in the space is we are truly channel agnostic.
We don’t care whether you buy it directly from us online or if you buy it in a retail store. I’ll spare you from the unit economics of the direct to consumer channel versus the retail channel, but there’s a really big number on the direct to consumer side called customer acquisition. That when you plug that customer’s acquisition costs into the unity economics math, it makes the profits about the same, right?
So when you go from cost of goods to retail and plug customer acquisition cost into the mix, versus going from cost of goods to wholesale, it’s about the same. At the end of the day, it’s good for the retailer. We’re creating more door swings, we’re providing them with unit economics that, while they’re not as good as the legacy brands, there’s a huge value to that door swing that we provide.
So they’re very happy and then we’re happy because we’re increasing our conversion without spending more marketing dollars.
Adam Honig: I want to talk about these unit economics for a second just to make sure I’m getting it properly. People often think, “Oh, we’re gonna sell online, we’re going to put up a website, it’s going to be super easy and profitable,” but they don’t realize just how much effort it takes to actually attract people and keep them on the site and have them go through this online buying process. It’s actually really expensive to do the right SEO and SEM is extremely expensive right now.
Bob McCarthy: It’s literally, hundreds of millions of dollars that we’re spending every year on that line item. So yeah, when you break it down into a per unit basis, 2 to $300 per transaction that we’re adding on for customer acquisition. Which is why it’s super important to be efficient on the marketing side when you’re spending that kind of money and you’re advertising to people that are not in market.
Adam Honig: It can be very wasteful, definitely. Now let’s talk about these door swings for a minute. Just tell everybody on listening to the podcast what that means, first of all.
Bob McCarthy: So when the consumer’s interacting with us online, our algorithm can determine whether that is a online or offline buyer based on thousands of data points that we analyze within split seconds of them being on our site.
And we can tailor that message to the consumer if we see that. They are more of an offline buyer buying in department stores and brick and mortar stores, and then we’re going to tailor a message to them that’s probably more directed towards our store locator and finding them a place where they can go and shop and be comfortable, versus somebody that is an online buyer.
We’re going to tailor that message so they’ll buy directly from us online. The door swing means when that consumer gets up off of their couch walks into a retail store, it is now a prospective customer for that retailer. That’s really valuable when you look at what does a retailer spend to make a door swing?
It’s anywhere from a 100 to $200 per consumer, walking through that door is what they’re spending on marketing. So if we can supplement that off of our marketing dollar, that is extremely profitable for the retailer, especially a furniture or appliance store that sells more than just mattresses, right?
That consumer’s potentially creating a lifetime consumer for them. They could buy a sofa, they could buy a dining room set, they could buy a refrigerator based on the door swing that we sent them because they were originally looking for a mattress.
Adam Honig: Got it, and do you tie that individual consumer back to the store and say, “Hey, we sent you guys 5,000 door swings this month.”
Bob McCarthy: We have that ability if the retailer is willing to share data with us, and we have, probably about 20% of our transactions now we do share, that goes back into our algorithm. We use machine learning and AI to enhance that algorithm. So it gets smarter as we feed more data into it.
Then we can provide data back to the retailer. That said, we do a matchback of those email addresses and can go back to them and say, “X percent of the sales, that you made last month came from people that visited our website.”
Adam Honig: Yeah, I bet that’s got to be really powerful when you’re meeting with these retailers and showing them what’s happening.
Bob McCarthy: It is extremely powerful, but I will tell you, that anecdotally, from the retail salespeople that generally work on 100% commission will tell you that without fail, they will say, we send them a ton of traffic. That’s the best barometer that I have. You can’t argue with the data, but that person selling our products on a day in and day out basis, that’s really our customer on the wholesale side.
If we keep them happy, keep sending them traffic, they’re going to keep pushing our brand and as I travel the country, that’s what I hear time and time again.
Adam Honig: The business of mattress is very interesting that way. I did some work with Sleepys a number of years ago, and just in my own personal experience, it’s a little bit of a tough business selling mattresses.
Bob McCarthy: If you make it a year or two in the industry, you don’t leave and you can provide a very good living for your family in the mattress industry. There is a fair amount of turnover like any other retail, but the people that kind of get it in their blood and are passionate about it really live it every day and, and they really provide a great experience for the consumer.
The ones that are just there to sell a widget generally don’t last, and some of those people kind of give the industry, I don’t want to say a bad name, but like as you said, sometimes it cannot be a great experience.
Adam Honig: Yeah, thinking about that, when you look to bring new retailers on, is that part of your criteria for what you’re looking for or how does that work?
Bob McCarthy: We ask for fair representation, so if somebody comes in and asks for our brand, that they get a great presentation on the brand, and we have an extensive, and I think, a best in class training team to really get them all the information they need to be able to sell the product. But beyond that, we want to make sure we’re going into stores that are reputable, have good reviews, are leaders in their marketplace.
We tend to try not to do business with the dirty window store. Those are the ones that maybe have a questionable reputation. We’ve said no to a number of retailers who’ve wanted to floor our product that say it’s really just not a fit. No disrespect, but it’s just not a fit.
Adam Honig: That’s got to be a hard conversation to have with them, but ultimately, you are building a brand. I suspect that’s a big part of the differentiation that you guys have in the market.
Bob McCarthy: It is, I think our founders have built an amazing brand in a very, very short period of time. If you’re in the market for a mattress, you’ve heard of Nectar, you’ve heard of Dream Cloud, without fail, we do a great job.
A lot of times if you haven’t bought a mattress in a number of years, you haven’t heard of us because we’re not spending dollars against you. But, if you’ve done any kind of Google search for a mattress or been on Facebook and type the word mattress in, you’ve probably heard quite a bit from us.
Adam Honig: Yeah, and so besides the brand, how do you differentiate the product? Because it seems like there are so many options today for mattresses.
Bob McCarthy: We’ve been, what I’ll call a fast follower, so we provide more for less. It served us well over the last few years. Especially now where the demand for mattresses is down. In 2020 and 2021, everybody was really focused on their home because of Covid.
A lot of people bought new mattresses. Our business really exploded during that time, and we’ve been fortunate to be able to maintain the Covid level of business, where a lot of retailers have kind of gone back to 2019 at this point. We’ve been very fortunate in that space but, I think we are fortunate because we’ve been able to offer a great product at a very, very fair price.
Adam Honig: You know when somebody buys the mattress from the retailer, do they pick it up in the store or does it still get shipped to them through the mail?
Bob McCarthy: It can be really one of three ways. They can pick it up in store, we’re in an instant gratification world, so sometimes people don’t want to wait five or six days for UPS or FedEx to show up.
The retailer generally keeps stock in their warehouse so they can make the delivery. Which, it’s a slightly enhanced delivery versus UPS or FedEx just showing up and leaving it on your doorstep, so they’re actually bringing it in and setting it up in those cases.
Or, the boxes of ours will fit in the back of a Prius. So, you just put it in the car and take it home. That’s really a win for everybody too, because the consumer’s getting instant gratification, it’s very easy to set up, might be a two-person job, but still relatively easy. The retailer’s saving on having to send a truck with two people on it to go and do set up and take away. So, it really becomes a win for everyone across the board.
Adam Honig: You mentioned training a little bit earlier, so this is a big part of the strategy to keep the retailers engaged. What else do you do to try to really engage with those salespeople that are selling the product?
Bob McCarthy: Essentially, retail engagement is one of the most important things we do.
We try to A, make our trainings fun. It’s not one of our reps saying, “two inches of this type of foam and three inches of this type of foam, and this really nice cover.” It’s really less about that and more about how the product can give a better night’s sleep, but also making it fun, you know?
We have to do it more virtually now, so we use programs like Slido, for example. I don’t know if you’re familiar with Slido, but it’s an interactive app that ties into a PowerPoint or Google Slides presentation that allows us to do quizzes or polls or just get feedback from them in real time and shows on the screen.
It’s a lot of fun, we can gamify the training a little bit and keeps the RSA, retail sales associate, more engaged.
Adam Honig: Huh, maybe we should do that for one of our webinars. That sounds very interesting.
Bob McCarthy: It is, it’s a lot of fun.
Adam Honig: And do you have prizes and stuff like that too? Is that part of the training
Bob McCarthy: We do, we’ll sometimes, raffle off a mattress, sometimes we’ll do gift cards, things like that. But again, things to keep it fun. Our training team will sometimes come up with fun themes and dress up appropriately for whatever that theme is. We’ve had people dress up as Mother Nature, we’ve had people dress up as, Nectar B.
So just trying to kind of, keeping it at a fun level so when we come calling for the next meeting, people want to be part of that.
Adam Honig: Yeah, nobody wants to hear product specs, right? I mean, that’s the thing, you got to really drive to engage people on something that they’re interested in.
Bob McCarthy: We want to provide more than just the specs, and we also don’t want to be, the pizza and donut delivery people. Feeding them is important, don’t get me wrong. I like to eat too, but that shouldn’t be the reason that people want to come to our meetings.
Adam Honig: Yep, I understand. When I talk with people in manufacturing, I love to talk with them about, special orders that have been requested by customers. We were talking with one of our friends who’s in the crane manufacturing business, and they wound up building a special crane to drop the New Year’s Eve ball in the middle of Time Square.
I was wondering, in the mattress business, do you guys get special orders? Do people come and say, “Hey, I need this kind of interesting mattress.”
Bob McCarthy: In my career, yes. Currently at Resident, we don’t do that, we do an awful lot, with a relatively small team and our supply partners. We’re ordering literally thousands of mattresses a day.
We don’t get into creating heart-shaped ones or round ones, when I was with other companies, we’ve had that option. It is interesting what people will ask for.
Adam Honig: Can you share with us any kind of really unusual thing that people ask for?
Bob McCarthy: Well, I’m not joking about heart shaped ones. There has been requests for heart shaped beds in a previous life.
We’ve made beds for some NBA superstars that were extra-long. Then there’s extra, extra-long, right? If you’re seven feet, four inches tall, NBA Hall of Famer, then you might want a little bit of a longer bed. Generally, there are some for some interesting people who want the unique shaped beds, but generally it’s for somebody of size that needs something a little bit different
Adam Honig: Yeah, that makes perfect sense. I actually stayed at a hotel in Dallas recently and I came to find out that their top floor, their hotel is where all the NBA players stay when they come to town. It’s right near the American Airlines Arena because they have extra, extra-large beds there.
When we think about selling through retail, if you were advising a company who’s thinking about doing that, what kind of advice would you give them?
Bob McCarthy: I think, look at the market, number one, and make sure that there’s a demand for your product. I believe in retail that it needs to be demonstrable, right?
If it’s not demonstrable, then there’s no reason not to buy it on somebody’s website. If you’re selling a premium product that you need to point out the features, benefits, and attributes of the product, then moving to brick and mortar retail is going to increase your average order value significantly.
It’s kind of when I see the interplay between the direct-to-consumer side of our business and my side of the business, I’m always pushing for higher tickets. Because what drives engagement on the retail side, is traffic. Which we’ve talked about, it’s ticket and conversion.
If you swing my door and I sell, and they buy a, a very expensive mattress and I can do it relatively quickly, and then RSA is all in, they’re on your brand as much as they can be. On the direct-to-consumer side, it’s about value. What’s the offer? Is there any giveaways? What can we do to kind of create that urgency to the consumer to get a mattress in front of them today?
So when you look at, kind of the average tickets between the two channels, if you apply, retail dollars to the units that I move versus what’s moved on direct to consumer, I tend to move a much higher amount of the premium products because they’re pointing out the differences and it’s online.
You can read the differences, but when you can touch and feel and lay down and roll around on the difference, that’s what makes the sale.
Adam Honig: Plus, you have an educated associate with you who can help point out those things and drive a higher margin for everybody, I imagine. That’s great advice.
Bob, this has been great. It’s been really interesting learning more about the mattress market. I totally didn’t know that 10% of people were in the market for a mattress on any given day. That’s super cool.
Bob McCarthy: 10% annually, right? Yeah, ideally as mattress professionals, we would love everybody buy a mattress, new mattress every eight years, right?
That’s been kind of the tagline for some of the larger retailers, replace every eight. It’s really probably more like, 12 or 15 years is what most people do, but if you use an average of 10, then that’s about 10% of the population.
Adam Honig: Yeah, I also really love this concept of the door swings, about how you think about, not just selling your product, but adding value to the retailers and helping them sell everything else that they’ve got in the market.
I think that’s great advice for anybody who’s thinking about their channel distribution strategy. It’s not just about you, it’s about the ecosystem.
Bob McCarthy: Right, you’ve got to be able to create value beyond just what’s in that box that you’re selling. If you’re giving that consumer a great experience on your brand, then they’re likely to come back to that store and buy something else.
Adam Honig: Right, I think for anybody who has a product that they’re selling through distribution, if you can help your partner sell more of their whole set of skews, they’re going to be that much more loyal to you and keep working with you and expanding the partnership.
Bob McCarthy: Yeah, absolutely, especially in the mattress business. Literally hundreds of brands for the retailer to choose from.
You know, I’m flattered when anybody makes a commitment to put our products on their retail floor. We average about four slots per store location, most stores have anywhere from 50 to 70 beds on the floor. So, we have somewhere between 3 and 5% of the retail space available, it’s dedicated to our brand.
So at that point now it’s really up to us to create that engagement and get that sell through. The easier part of the job is having that owner or buyer give us the commitment to put us on the floor and give us a chance. The real work begins when we start dealing with the literally thousands, or tens of thousands of retail sales associates that we have to deal with on a daily basis to continue to be engaged in our brand and having great products like Spiro.ai to manage, that helps us.
Adam Honig: Right on, we appreciate the shout out on that. Well, Bob, this has been a great conversation. Really, really appreciate your joining the podcast today, thanks for coming on!
Bob McCarthy: Well, thank you for having me, it’s been a pleasure.
Adam Honig: As a reminder to our listeners, you can find every episode of the Make It. Move It. Sell It. Podcast at Spirit.AI/podcast. Be sure to subscribe, I don’t know, Bob, you think people should give us a good review or a thumbs up or something like that?
Bob McCarthy: I’d love to get some thumbs up for this podcast.
Adam Honig: Yeah, let’s do it! Go ahead, hit that thumbs up button right now. I don’t even know if there is one anymore on Spotify or Apple Podcast, whatever you’re listening on. But really appreciate your tuning in, looking forward to speaking with you on the next episode.
The post Episode 23: Using Data to Build a Wholesale and Retail Network for Nectar and DreamCloud Mattresses appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/podcast/episode-23-using-data-to-build-a-wholesale-and-retail-network-for-nectar-and-dreamcloud-mattresses/
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Easily See ERP Data in Spiro
Many manufacturers and distributors rely on ERPs, such as Epicor, Microsoft Dynamics, Plex, and others to manage customer orders, finances, and other core business functions. But often these systems and their data are isolated from sales teams. Spiro’s AI-driven CRM is built for manufacturers and distributors, and is designed to integrate with virtually ERP without IT involvement, providing sales teams with full visibility to their customers’ orders and activity.
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Episode 22: How Commtrex is Helping Modernize the Rail and Freight Industries
Transcript
Adam Honig: I could do this intro in my sleep, and sometimes I do. I used to practice it, you know, a bunch of times before every podcast, and now I’m just like, all right, whatever.
Hello and welcome to Make It, Move It, Sell It. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving, and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spirit ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today.
Instead, today, we’re talking to Martin Lou, the CEO of a company called Commtrex, which is a tech enabled rail logistics provider. Welcome to the show Martin.
Martin Lew: Thank you, Adam. Thank you for having me on the show today.
Adam Honig: Yeah, my pleasure. Hey, just tell us a little bit about Commtrex and you know, kind of how you got there.
Martin Lew: Yes, absolutely. So, Commtrex was started, back in 2017 and in a prior life I was a commodity trader for JP Morgan Bear Stearns on the Coal and Environment markets desk. Um, and we were moving millions of tons of coal a year. And I saw, uh, several inefficiencies with how shippers interface with the industry.
And the, uh, vision was to create a digital ecosystem or a platform that connected the supply and demand side to the industry. Um, because I saw that the puck was headed in the direction where, eventually there was gonna be, one centralized platform or database where shippers would have to go in order to be able to connect with all the rail surf terminals, ports, warehouses, uh, leasors and service providers and railroads.
Um, and the rule – the concept was to create a very simple way for, for these shippers to connect visa marketplaces, uh, create a very sort of, vast knowledge base or repository of information so that as the expertise leaves the industry, there is a centralized, uh, corpus of knowledge, that shippers can always tap into.
And then, uh, number three, uh, really sort of making, uh, connectivity, uh, much, much easier. Instead of having to pick the phone up and have to wait to a conference to meet somebody, you can do it all through a electronic, uh, platform.
Adam Honig: So, let me see if I understand this correctly. So you were trading coal and other commodities, you know, real man kind of materials, right? And then a lot of it being shipped over rail and you realized there was this gap in the marketplace that was really, you know, the, the shippers and other people were kind of disconnected.
And your service kind of connects the two together?
Is that how it works?
Martin Lew: That’s exactly right. So, um, in the trading world, timing is of the essence. So anytime there was a position you wanted to put on, uh, you had to figure out all the different inputs for that delivered cost. So everything from the barging, the freight, the trucking, the rail piece…and the rail piece was always the part that was the toughest to put in place because of the opacity that existed in the industry.
Uh, and then you wouldn’t know who to call if you weren’t a part of the industry. And so sitting at one of the largest banks in the world I was having issues with it. I just foresaw: if I’m having issues, there must be shippers of all sizes that are probably experiencing the same issues. And then as time goes on and, and you, you didn’t have those relationships, that issue was only gonna get exacerbated over time.
Just like every other industry that was getting effectively enabled by technology. rail was just probably one of the, the modes of transportation that didn’t catch up yet because in, in trucking there were load boards and in ocean going freight. There were very liquid exchanges and platforms, even hedging instruments, and in rail.
Nothing was created at the time that I started Commtrex.
Adam Honig: So you’re focused on rail, at least initially. And I know there’s other parts of transportation that we’re gonna get to, but, tell me a little bit about the rail industry. There’s been a lot of consolidation, you know, going on in the industry. You know, how much materials is sent through rail these
days?
Martin Lew: So when you think about the goods that move over land.
So there’s only two rays really to move freight over land. It’s truck and rail. About 40% of all goods that move on land are gonna move by rail. And then when you look at commodities, Specifically, you think about your consumers and producers of raw materials, that’s closer to 60% of all goods that are commodities that are moved by rail.
And rail has a significant tailwind behind it because of the sustainability angle. Effectively, it’s four trucks for every one rail car when you’re moving freight. So rail is about 75%, uh, more sort of sustainable or carbon friendly than trucking.
So right now there is a big push going on in the industry for there to be a lot more conversion of truck lanes to rail lanes because of the significance, sort of push to that ESG is having across the world.
Adam Honig: Yeah that makes a lot of sense. I mean, I think that, when people think about rail, I mean… I commute via train. So I’m, you know, involved with trains a lot. But I feel like trucks are so visible because everybody’s driving around and seeing them all over the place that it just feels like everything gets shipped via truck.
But, you know, 60% of commodities, that’s a pretty high percentage.
Martin Lew: And the, you know, the two primary parameters that when you’re a shipper and you’re thinking about moving by rail, what, what is really the filter is to decide whether it makes sense to move by rail.
Number one is distance. Any freight that’s moving 500, 600 miles plus, rail is gonna be the cheapest per ton, per gallon, per mile.
Because it really, you know, if you’re moving coal, for example, coal is, uh, at the consumption level. You know, the US consumes about 600, 7,000 million tons of coal each year. And there’s just not nearly enough trucks to be able to move 600 million tons of coal across the US. Infrastructure in the US isn’t fit for that.
So number one is, the, um, distance.
And then number two is the volume of product that you’re moving. So when you’re talking about large commodities like coal or oil or chemicals, plastic pellets, still lumber, those types of common commodities that move in high volume, there’s just not enough trucks to be able to facilitate that.
So that’s why, you know, trains and then think about where trains go, right? They’re going a lot of times to very rural areas. They’re going through mountains, they’re going through, areas where there’s just not a lot of infrastructure. So trains can do a lot of things at a much cheaper cost that trucks cannot do.
Adam Honig: So it’s cheaper, it’s more environmentally friendly. So it sounds great. I mean, of course you can’t have the train come to your door, but besides that, you know, what are the disadvantages of
rail?
Martin Lew: I think what you just said. So the rail is for the middle mile of the move. That’s where rail competes with, with trucking being that middle mile piece. But, the disadvantage, uh, of rail, and this is, something that, uh, a part of the supply industry called transit kind of addresses and solves is that first and last mile piece.
Rail is expensive to be able to implement or to install at your facility. So if you don’t have a rail service facility – if you’re not gonna invest the millions of dollars into investing into that rail spur and all the different components of that rail spur to be able to facilitate rail coming in and out, the way to be able to move freight by rail is through transloading.
So you would truck your product to a transit facility. And then loaded onto a rail car at the facility.
So that’s probably the biggest constraint, is just the CapEx investment that would go into being able to move freight by rail at your facility.
Uh, and then also there’s not as many telematics, uh, that exist today as there are on trucking. So you can track trucks in real time, Tracking of rail cars is done in near real time. But telematics is something that is coming. If you need something and that’s that, it’s a real-time tracking capability.
Rail, uh, isn’t quite there yet, but it’ll soon be there because there are companies out there that are proliferating IOT sensors so that you can track it in real time.
Adam Honig: Right, right, right. You just throw an apple tile on it or whatever those things are called. But let’s go back to Transloading, cause I’m really interested in this. A lot of people have been talking about transloading, so just in case people aren’t familiar with it, you know, just maybe tell people what it is.
Martin Lew: So Transloading is a pretty simple concept. It’s really just moving freight from one mode of transportation to another.
So there’s two different contexts that you can think of transloading in. Number one is, you know, any container that’s coming in from overseas. So think, you know, containers coming in from China to Los Angeles, or somewhere on the West coast.
Those containers, uh, get transloaded off of a ship, then on to land and it gets trained, uh, to a warehouse, uh, or put onto an intermodal train. Then moved to, you know, wherever it’s going in the US, Canada, or Mexico. So that’s one component of transmitting when the other component of transmitting is, is commodity sort of transmitting where you’re moving actual physical goods.
So whether that be liquids such as oil or chemicals, whether it be hazmat or non-hazmat chemicals, or if you’re talking about, uh, dry bulk products such as lumber, steel, non-ferrous metals, or any type of metal.
So those are the two assets that- the two different sorts of buckets of transloading.
Um, the one that probably is most obviously everybody, the containers that you see at any port across the country. The one that’s probably less obvious is when you’re talking about moving liquids or moving dry bulk products. But it’s a very critical piece to the supply chain.
And it’s something that doesn’t have a lot of visibility. But, an analogy that I always like to use is airports. The more nodes that you have on the network, so the more regional airports you have, the more people that you could move across the different regions of, of North America.
So for rail, one of the largest and most important mechanisms for them to be able to grow their footprint, is transloading because not everyone is going to be able to invest or justify the spend on CapEx for putting rail spurs facilities. But if rail does make sense because the volume is there and then the distance is there, transloading is the way for them to do that, and that’s why there’s a lot of investment going on right now, not only from the, the rail side of the business, but also from the shipper side. There’s a lot of diversification that’s going on so that they don’t have to rely so heavily on just trucks moving their product, uh, either first, middle, or last mile.
But now everyone, you know, post COVID is trying to create more diversification and less concentration and exposure into one mode of transportation.
Adam Honig: Gotcha. So if I’m a ball bearing manufacturer and, and we have customers in the ball bearing business, I don’t mean that like, in a funny way, it’s just something that’s super important. Actually, there was a lot of news about ball bearings recently cuz there’s a bit of a shortage in the war in Ukraine, but that’s a completely different topic.
So, if we’re making ball bearings, we might just think, oh, well trucking is the only way to go. But with Transloading, this is the opportunity for us to now, get the benefits of the environmental approach, as well as the lower cost of rail transportation.
Martin Lew: That’s exactly right. So flexibility in the supply chain: I think Covid really highlighted how inflexible,the supply chain was. And it worked great. You know, prior to Covid… obviously there were bumps, there were still blind spots as far as visibility is concerned, and the supply chain.
But when you have a Black Swan event like COVID happen and there’s a lot of issues with being able to get product to from origin and destination. All of a sudden you have to look really hard at how you’re moving things because you can’t think that there is not gonna be another Black Swan event.
Uh, you know, that comes and, and now that you have shippers, uh, whether it be a big box store or commodity consumer-producer, now they’re getting ahead of that. So they went effectively from a “just in time” model, which was kind of your more traditional sort of way that you manage supply chain to what they call a “just in case” model.
So you have more areas where you’re having product staged so that if there was this major disruption or interruption in your supply chain, uh, you can quickly flex to another mode or to another sort of, a hub and spoke part of the country
Adam Honig: And we’ve been talking with a lot of people who’ve been, uh, focused on bringing manufacturing back to North America too. I mean that, how is that impacting the rail market from your perspective?
Martin Lew: That’s a significant tailwind for rail. There’s a lot of onshoring that is happening. In particular you’re seeing a lot more facilities or manufacturing plants coming up in Mexico.
Obviously the reason why people offshore is all costs, right? It’s all labor costs. When you’re thinking about where to put that auto manufacturing facility or where to put that chemical facility, cost is always gonna be top of mind for you.
Not only is cost top of mind, but you’re also thinking transportation. So, you know, volatility was extremely high during COVID. Even pre COVID. So if you’re moving anything across North America, instead of having to rely on that ocean freight market being consistent and having less volatility, that the pricing for that market does not have as many swings…there’s a lot more that you can control if you’re working within the parameters of North America. And I think that’s just, you know, overall politically, there’s a real higher sense of how can we keep jobs in North America?
You couple that sense of wanting to do more here in North America, um, not only for economic reasons, but for political reasons, um, I think there’s a major tailwind for rail because the primary way that you’re gonna be able to move those products that you’re onshoring in North America particularly because you’re dealing with long distance moves and typically high volume moves, rail’s gonna be probably the biggest beneficiary of that movement.
Adam Honig: right. And I think combining with the transloading, you know, where you can basically use both, you know, rail and traditional trucking to carry products, it makes it a lot more attractive for people. Cuz you’re right, the container cost, you know, coming from Asia, I mean, it’s tripled. It went in half, it went up, it went down again. I mean, it’s just been all over the place.
Martin Lew: That’s exactly right. So you, you know, at its peak it could go up to $20,000 and now you’re looking at a $1,000-$2,000 container cost from Asia to the west coast of the United States.
Adam Honig: But the rail prices have been more consistent?
Martin Lew: The rail price is Yes, exactly. There’s not, there’s not much volatility. You, you have a closed network.
uh, and you have seven Class I railroads, and then you have your Class II railroads. Um, so it’s a pretty contained environment, versus, you know, the ocean. And you have several major ocean carriers. And, it’s a much less volatile market because you have a much more contained network that you’re moving, goods and, and volume on.
So in some respects, I think that is very helpful because I think supply chain is all about being able to project what that delivered cost is. And you know, that volatility swing, whether it be in trucking or whether it be in ocean freight, you don’t experience that same sort of swings and volatility in rail.
Adam Honig: Yeah, no, for sure. Well, let me ask you another question. So I know in a lot of our customers we’re seeing sort of a generational change. You know, maybe in a family business, the more senior family members are kind of stepping back and there’s a new generation coming up and they’re implementing new things within the businesses.
What are you seeing in your sector in that way?
Martin Lew: That is actually – you know – I’m glad you touched upon that because that was the primary investment thesis when we started Commtrex. Um, at the beginning of the, of the company when we were raising our first round of investment capital, that was the, the, the one of the main theses that we were sort of, um, uh, talking to investors about was the fact that there was a major generational shift that’s happening.
You know, back in 2017, we were looking, you know, forward looking and 2020 it was gonna be 50% of the global workforce were gonna be millennials. And by the time you get to 2020, 75% of the workforce would be millennials. Now the thing about millennials is they’re the first generation of digital natives, uh, that, that exist.
And obviously it only has become more progressive now with the Gen Y and Gen Z generations. But if that truly is the case, uh, I think, uh, an important stat that really sort of stood out to me was the average amount of time that a baby boomer stays at one company or in a job is eight to nine years.
Uh, Gen Xer, which is the generation I’m in is, uh, six to seven years, and a millennial is, uh, two to three years. So if you just take that stat alone and you take that and couple that with the fact that the generational shift is happening at an enormous amount where you know, half, if not, you know, two thirds of the workforce will be millennials.
You’re never gonna have a 15 to 20 year fleet manager or supply chain manager ever again at one company. And historically in rail, most of that is in source. So that knowledge, those relationships, those connections that they have, um, you know, that was never historically an issue because that one person knew their railroad rep or their lessor rep or whoever that is on the service side to deal with.
But, um, if you were to take that same sort of position or seat and that knowledge goes away and leaves, leaves that particular company and there’s no in succession plan or there’s no institutionalized knowledge, there’s no very easy way to, for them to be able to pass that knowledge and pass those connections along.
So that was what we saw sort of back in 2017, was there was gonna be data or a repository of information and someone was gonna need to create a marketplace so that if you stepped into a seat at, you know, you named the big box retailer consumer, um, you wouldn’t have to know rail for the past 10 to 15 years to be able to understand all the dynamics of moving a rail.
You wouldn’t have to have all the relationships there. You could log into a platform, have visibility into the supply set capacity, be able to look at prices and data and then be able to connect with the supply side. And you know, the other thing we do is we also have a resource center. We have newsletters that go out over three times a week.
And what the idea was, we need to create this education and this format so that if you’re new to rail, you don’t have to rely on, uh, speaking with that person who’s been doing rail for 15, 20 years. You can go to a centralized repository and be able to learn about it. Educate yourself so when I go into a marketplace, connect, negotiate, uh, and be able to execute a transaction with very limited experience and knowledge in rail.
Adam Honig: So, let me make sure I understand this correctly. So, Big box retailer, let’s just call it, uh, Target. You know, there was somebody, or a couple of people who knew everything about rail and they had it all in their heads and they just knew, you know, what, what to do. But the problem is that, you know, over the coming number of years, a lot of these people are retiring and, you know, it’s a little bit of a specialized skill.
And so there was no real good way for people in the next generation to really know how to do that.
Martin Lew: That’s exactly right. Yeah.
And, and just to put another final point on that versus trucking. You could pick the phone up and you can call, uh, a 3PL, a 4PL. You can call a freight broker and have a product moved, from Chicago to LA off of a phone call and a quick onboarding document, credit check that that isn’t possible in rail.
You would need to be able to establish a credit line with the railroad. You need to be able to figure out how you’re gonna get rail cars, whether that be system cars in the rail, or if you’re moving liquids you need to figure out how to source those cars from a lessor. You need to be able to figure out transloading.
If you’d have a rail service facility, you need to find a transloader or a port or a warehouse. You can move that to, um, you need to understand how to manage the freight rates and not how to manage to merge and how to manage storage. There are all these elements that you need to figure out. And this is one of the reasons why we actually started a logistics services or managed services business last year is because about a third of all the shippers that use our system have never even moved freight by rail before.
And, you know, at the end of the day, you know, if you’re a shipper, the goal is to find the cheapest, most delivered cost and more efficient way to move the product. And, their goal isn’t to train and become experts in rail. What they really wanna do is they want to be able to find a platform or find a provider they can work with that they know they can trust to be able to move that freight and product while also being educated enough to be able to communicate to the VP or to the management why they’re choosing to move that freight via rail.
So, you know, the, the, the managed services component with the technology and data, all three of those together are, were, was really the issue we were trying to solve.
Adam Honig: So, it’s less expensive, more environmentally friendly, but a little bit harder to do in a way then. Especially without that specialized knowledge.
Martin Lew: That’s exactly right. And I, and I think once you do have that specialized knowledge sort of historically, that did become an edge for your business because you did have that ability to flex on rail where if you didn’t know how to do that, you couldn’t take advantage of those cost savings that you get with moving freight by rail.
So that was really what we were trying to solve and to speak to the generational shift. That was the reason why a lot of shippers were actually coming to us. If you knew rail, there was no reason to use a platform like us. And then all of a sudden what happened was you had this generational shift, probably not too different than what you’re seeing with your platform and the next generation comes in.
They said, “Well, how can we do this in a better, more efficient, more effective way?”
And then when they speak to a Spiro or to a Commtrex and they discover how much efficiency and how much data and how quickly they can make data driven decisions, it becomes a no-brainer for whatever the spend is.
It’s a drastic transformation for that business.
Adam Honig: Yeah, no, it’s really interesting. It’s very analogous to our situation a lot. You know, the customers that we’re working with, they’re dealing with the retirement of their sales teams. Uh, and you know, these are guys who’ve just been working a territory for 30, 35 years, 40 years, and, and they’re gonna leave and retire.
And, you know, frankly, the company doesn’t have a relationship with their customers, the salesperson does. And so, getting that institutional knowledge as you put it, is, uh, super critical. So it’s like we’re kind of approaching the same sort of issue that way.
Martin Lew: That’s exactly right. And the knowledge, uh, that you’re capturing in the, in the CRM system, the knowledge that we’re capturing in our platform really is all driven around data and the way that we make things easier to be able to have data at the fingertips of our shippers is the same thing that you’re doing to be able to create a very quick way for your customers to have access so they can make quicker decisions when they’re trying to move a commercial deal or a commercial opportunity along the pipeline faster.
Adam Honig: Yeah, no, that’s that. It sounds very, very similar. Now let me ask you this.
So I know, like, a lot of our customers don’t feel like they’re technology forward businesses. And it sounds like in rail. But even in these industries, I feel like AI has really grabbed people’s attention.
So what has been the attitude in, in your world, about AI?
Martin Lew: I, I think AI hasn’t really hit home yet as far as how transformational AI is going to be. Not just to our industry, but to every industry and to all of our personal lives. Um, obviously, you know, with the proliferation of chatGPT, three and now, now four, which just came out a few months ago. Um, it’s really sort of changing the way people do things, you know, and changing where really that expertise needs to lie in order for people to execute, you know, sort of effectively.
So I do think that AI, and I always reference, when I think AI, it sounds like a very complex topic, but I boiled AI down to really simply: it’s just that the science of decision making, you know, how can you make decisions more, more effectively, you know, using as many data points as possible. And AI is really just a co-pilot for the decisions you’re making in whatever context you’re making them in. Whether that be trying to decide, you know, what’s the best restaurant to go to for your date night with your wife, or whether it’s what’s the best mode of transportation to move or how should I more effectively, uh, be able to move a sale on the pipeline.
Everybody needs a co-pilot to help do things that they can’t do as quickly. I think this is probably gonna be the most transformative technology outside the internet that we’re gonna ever see in our lifetime.
Adam Honig: Yeah, for sure. I mean, we see applications of it all over the place. I’m sure you do too. But, uh, to help people, you know, come up with the routing and planning and optimization of shipment, uh, I think there’s a lot that the AI can be doing in that area.
Martin Lew: Absolutely. And the timing of AI coming out there, there’s no coincidence that there’s this major uptick in people using AI, even though it just came out so quickly and the generational shift that’s happening. As the next generation gen comes into these seats, these business-to-business sort of seats where there’s a lot of industry knowledge, kinda like you were saying, where there’s this generational knowledge that, that typically was there, but then someone jumps into the seat and they don’t have that background, that knowledge.
There’s those relationships, you know? How do you, how do you sort of make up for that? How do you compensate for those 10, 15 years of experience? Well, how you do that is you lean on data and you lean on data that’s gonna be effectively processed in seconds through a co-pilot, you know, in, in the form of AI.
And so for us, that’s a component of technology that we are working on integrating into our system. Because I think, you know, no different than your industry and, and how you’re working on integrating AI into the CRM platform, we are also figuring out how can we create a co-pilot experience so that when someone’s looking to lease cars, when they’re looking to transit, or they’re looking to store cars, when they’re looking for a terminal port or warehouse, they don’t have to go try to consume information quickly, understand it, process it, talk to people.
You know, in theory that can all be done through a mechanism called AI.
Adam Honig: Yeah. Yeah. No, it’s very exciting. Uh, I mean, I, I totally agree with you. I feel like we’re right on the cusp of what’s gonna happen with it. And I think one of the exciting things for me and, and people I’ve been talking with is that nobody really knows exactly how it’s gonna play out. You know, so that, that’ll be super interesting to see.
Martin Lew: Yeah. And I do think that there’s a lot of caution from the folks at OpenAI who created chatGPT and others that are shepherding the AI sort of technology along. I think there’s a little caution in making sure that it doesn’t roll out too quickly. Because, uh, you know, something that, uh, I think comes up quite often is how is the next generation going to think if they can go to an application and the application does all the thinking for them. Um, you know, unlike when we were growing up where, you know, we actually had to go to the library, you had to lean on books and you had to learn in order to write that essay in college. Um, it’s different now.
I mean, how does a teacher distinguish whether AI or chatGPT wrote an essay versus whether an actual person wrote the essay?
Adam Honig: Yeah. Well, and there’s a lot of trust issues involved in AI. I mean, I know that anytime the AI is gonna make a recommendation, whether it’s about who to call or you know, the best path to take for, you know, something in logistics, like if it gets it wrong, that’s a major issue.
You know, and so I think one of the challenges that we’ve been seeing with the chatGPT style, large language models is they do have a tendency to hallucinate a little bit and just pull stuff out of their ear, so to speak.
Martin Lew: Yeah, and you hit the nail on the head. I think that is probably in the near term. That’s probably the greatest danger that we face, is you, you come to rely on the information and data that’s coming through chatGPT and it provides you with so much information with such conviction that it’s correct.
And obviously conviction is used loosely because it’s just text that’s coming at you, but you rely on it. And you think that when you put in a question that it’s gonna give you something that’s factual. Well, if I go to ChatGPT and ask who is Martin Lew of Commtrex, it said I worked at these banks that I never worked for.
And it also says that I had experience, you know, at other companies that I never worked for. Um, I mean it captured, you know, maybe 50, 60% of the information correctly, but, if, if you didn’t know that, if you weren’t Martin Lew and you were just typing that into chatGPT and that was the information that was that you got as a response or reply back you would not know if that was true or not, and you would question whether my profile on LinkedIn was actually accurate or not.
Adam Honig: Yeah, no, I, I like to tell people that it’s a hundred percent accurate 70% of the time because that’s, that’s, that’s the way that I really feel about it. So, you know, in some domains that’s acceptable. But I think where you and I come from, I think we demand a higher level of fidelity.
Martin Lew: Yeah, absolutely. And if you’re the younger generation coming through, uh, you know, education or through your career and, and obviously it’s just gonna get more refined over time… how are you gonna be able to distinguish whether it is true or not?
When that becomes, you know, almost gospel for you when you’re making decisions because you, you’re relying upon the, the, the integrity of the data to be correct or accurate.
Adam Honig: No, I, I’m with you. Hey, Martin, this has been awesome. I’m so happy you were able to make it onto the podcast. Really appreciate your coming here today.
Martin Lew: Well, thank you for having me. Hopefully this was enlightening for the audience. I know rail is a very niche topic. Niche in transportation supply chain cuz it’s not as sort of widely known as, as trucking and ocean freight. But I absolutely appreciate you having me on to talk about what we’re doing and how we’re really trying to, uh, add value to the, to the, the rail logistic space.
Adam Honig: Yeah. 60% commodity shipment. I don’t think that’s, you know, small. I mean, I think we need to, you know, get more people thinking about it, especially for the environmental benefits, you know, that, uh, that we’ve been talking about.
Martin Lew: Absolutely. And I always tell people, you know, just look around your house or look around your office or restaurant, every single thing, whether it be the electricity for the lights or the wood for your walls or the metal, uh, for your desk, everything that, that you’re using to be able to sort of function in life.
Those are all driven by commodity inputs. Um, and they all got to you most likely in some form or fashion. It touched rail at some point in that move. So it just really is a critical component of the supply chain and the economy.
Adam Honig: Just hopefully touched it in the car, not on the rail itself. That’s all I want to say
Martin Lew: That’s exactly, that’s exactly right.
Adam Honig: Gotcha. Well, once again, Martin, really appreciate your coming on the program.
Martin Lew: Well, thank you again for having me. I’d love to be back sometime.
Adam Honig: Right on. As a reminder for our listeners, uh, you can find every episode of the Make It Move It Sell It podcast at Spirit.ai slash podcast. what I recommend you do is, you know, subscribe. If you think that it’s a good podcast, why not? Maybe give us a good review. Martin, what do you think? Should people give us a good rating?
Martin Lew: A hundred percent when they have topics like rail where they’re gonna educate people. Absolutely. Everybody should be giving, raving reviews about the podcast.
Adam Honig: Exactly. Just do it for Martin, if not for me. But, uh, thanks for everybody for tuning in, and we look forward to speaking to you at the next episode.
The post Episode 22: How Commtrex is Helping Modernize the Rail and Freight Industries appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/podcast/episode-22-how-commtrex-is-helping-modernize-the-rail-and-freight-industries/
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Episode 21: Using Artificial Intelligence and Building Strong Customer Relationships with Elgin Fastener Group
Transcript
Adam Honig: So there’s no, “Hey, Alexa, where are my fasteners?” As I say that, I’m worried something’s going to happen in my house. So, I got to be careful when I say that.
Joe Shoemaker: Well, my speaker just went off when you said that.
Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving, and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today. Instead, today we’re talking with Joe Shoemaker, the VP of Marketing at the Elgin Fastener Group. Welcome to the podcast, Joe.
Joe Shoemaker: Thanks, Adam. A pleasure to be with you.
Adam Honig: Yeah. Thanks so much for joining us. Let’s just start tactical for a minute let’s talk about fasteners. I get the sense that everything would fall apart if it wasn’t for fasteners, but maybe you could just tell the folks at home here a little bit about what they are, who buys them, what your customers are like, and so on.
Joe Shoemaker: Fasteners are a critical part of mostly everything that’s manufactured from the eyeglasses that you happen to be wearing to the chair that you’re sitting in, and a number of instruments and technologies that go on beyond that. At EFG, we manufacture specialty fasteners. And the difference between that and something that you might walk down the aisle of a home center and see is the minute that you need something to be a little bit different, whether that’s length or diameter or coding, et cetera, you would come to someone like EFG who can build a fastener to your print.
Adam Honig: You make fasteners to order essentially.
Joe Shoemaker: Yeah. And there are a number of characteristics and physical attributes that have to be factored in to make those properly for our end customer. And we service both OEM folks as well as larger distributors who ultimately then sell to OEMs.
Adam Honig: Gotcha. And I was reading that the market for fasteners is about $86 billion internationally. Does that sound right?
Joe Shoemaker: Yeah, it does. It’s amazing. They’re used in things that you probably overlook every day and don’t realize. But in the global market, we play in a subset, which would be the North American market. And even then there are three big buckets. There’s automotive, aerospace, and industrial. We service primarily the industrial market. We do have some entryways into automotive with some of our key customers, but that’s mostly for secondary things like roof racks on a car, et cetera. Not critical engine components.
Adam Honig: Gotcha. It’s really interesting. $86 billion jumped out at me because that’s the size of the CRM software market too. I always think that’s big. And fasteners, you guys got us beat by a little bit. Probably growing at about the same rate.
Joe Shoemaker: Right. The big difference is we have to sell millions and billions to realize significant revenue, versus a software package, et cetera.
Adam Honig: It’s true. And when we sell new licenses software, we just turn them on. You guys actually have to make something. So, it’s different.
Joe Shoemaker: I don’t know how much you know about fastener manufacturing, but everything starts as a coil of wire. No matter what the end product is, if you can envision a spool of thread just being very much larger and being wire, that’s where everything starts at.
Adam Honig: Oh, yeah. I was in the factory of one of our customers that makes electrical conduit and they start with those big spools and get it down to the right width and encase it in plastic and do whatever with it. So, it sounds familiar.
Joe Shoemaker: Exactly. And the folks that work on those pieces of equipment are part scientists and part artists because there’s a nuance in working on some of that equipment that’s decades and decades old.
Adam Honig: Let’s take the conversation up a little bit. Let’s talk a little bit about the strategy at EFG. You guys are making things to order, so it’s a lot more specific than the commodity part of the business, but how do you differentiate the company?
Joe Shoemaker: Our ability to service our customer base through the widest product offering of specialty fasteners and also licensed fasteners. So, you’ve heard of things like Phillips or Torx. We’re able to manufacture those under a license for our customers, which is really important. We also offer blended sourcing and that allows us to offer the lowest total cost of ownership to our customer base. Customers that would maybe formally be sourcing things globally or from an Asian market can now source through us and will handle all the logistics, and all the quality control. When there’s a demand spike and a product is stuck on the water, we can turn on our machines and meet that demand spike with domestic made production. The last pillar of our stool from a value prop is our ability to do all of that with industry-leading quality and customer support. Our cost of poor quality is less than 1 ½%. And what that means for our customers is they can be sure that they have guaranteed uptime, so that they’re not losing revenue because they’re waiting on a small screw that’s holding up through production process.
Adam Honig: Yeah, I’ve heard a lot of horror stories about manufacturing lines being down for lack of all kinds of components. Hopefully, a lot of that is behind us at this point. Let’s go to the manufacturing location for a second. Is most of your manufacturing in the US? Or is it split between here and abroad?
Joe Shoemaker: We do all of our manufacturing domestically in one of seven different locations, largely in the Midwest. But we have contract manufacturing with some Asian sources to offer a blended model for those customers that so desire. An overwhelming majority of what we do is domestically made.
Adam Honig: Gotcha. And we’ve been talking with people, I’ve been hearing a trend of more and more production being done in the US though, or at least in North America to avoid the transportation issues as well as who knows what else is going to happen.
Joe Shoemaker: Yes, that’s true. There has always been a question mark around quality when it comes to globally sourced products. But now you layer on top of that, the cost of freight from a container being $3,000 jumping to $20,000 to ship the product. And then you add in the complexity of delivery with delivery schedules being all over the board. It has a lot of companies looking to insource production again back in the states.
Adam Honig: Yeah. I think that trend is definitely going to continue. The challenge that I’ve been hearing from a lot of people is actually the labor side of the equation, in terms of staffing, facilities, whether it’s warehousing or manufacturing or anything like that has been a bit of a challenge.
Joe Shoemaker: Yeah. And we’re not immune, we’ve experienced some of the challenges that many folks in the marketplace have seen from a labor standpoint. From our perspective, it was a very limited window. We’re more limited. So, we’ve come through that tunnel and we’re on the other side and we’re enjoying robust levels of production and staffing. And we continue to hire for key roles even right now.
Adam Honig: Are there any sort of approaches that you’ve taken to the labor market that you feel are unique or interesting for folks? For example, we were talking with somebody on the podcast who was hiring seasonal farm labor to help get everything done because they were like, “Well, during the winter, everybody in Wisconsin or wherever doesn’t have anything to do. So, it’s a great overflow capability for us.” Is there anything interesting like that that you guys do?
Joe Shoemaker: I wish I had some secret sauce for you, but we’ve explored a number of options, as you’ve mentioned, with bringing folks in that maybe were in non-related markets to help out from a labor standpoint. But at the end of the day, it just became, how we could rally around this notion of taking care of our employees. And that put us over the edge because we were competing with not only other fastener companies but non-related ones. There were automotive people, there were manufacturing RVs that were paying a lot of money to direct labor. So, we had to compete with people outside of our industry.
Adam Honig: I’m sure you’re probably competing with Amazon on some level too.
Joe Shoemaker: Exactly. We put a lot of focus and lot of effort into improving our benefits packages, wages, and our work-life balance for our teams. And that has resonated very strongly.
Adam Honig: Speaking about Amazon, what are you hearing from the customer side of things? We’ve been talking with a lot of folks who’ve been saying that customer expectations are being shaped by people like Amazon today. And even though you’re an industrial goods supplier, that people still have expectations of tracking packages, knowing when things are going to arrive, and quality levels, do you feel like that’s going on in your part of the world?
Joe Shoemaker: It’s a great question. We haven’t seen the expectation bar raised to an Amazon level. However, I think that it’s fair to say that as new workers come into the workforce and other ones get promoted, they’re being backfilled by the next generation. There is an expectation in their mind that people should perform in an Amazon way. That’s not to say that we should deliver in 24 hours or deliver in a three-day window. It’s not realistic from a manufacturing perspective, but to have information available at their fingertips, I think is an expectation that we and many others are going to have to meet in the coming future.
Adam Honig: So there’s no “Hey, Alexa, where are my fasteners?” As I say that, I’m worried something’s going to happen in my house. So, I got to be careful when I say that.
Joe Shoemaker: Well, my speaker just went off when you said that. I would think that as of right now, it’s probably not the expectation that that would be the case. But if I put myself in the seat of a consumer, I would want to have access to things like product history, order history, and configuration capability without having to talk to somebody if I should choose not to. All of those things are being worked on at various levels in our industry. And in fact, we are working on a product configurator, which will be delivered at some point here that would give those customers that ability online.
Adam Honig: From an e-commerce perspective, it sounds like this is your first foray into that. Is that true?
Joe Shoemaker: I would say that’s fair. It’s a little non-standard e-commerce. When I think of e-commerce, I think of product category A with a known SKU number that you can put on a shelf. Because everything that we do is custom, it’s not expected that we would have things on the shelf built to a customer’s print, but we should be able to give the customer the ability to configure that online, then we could quickly price it, they can agree to it and we can get it into production. So, e-commerce for us feels a little different than maybe what Amazon would be with a finished product.
Adam Honig: Right. And what about reordering? Is it common that if a customer creates a certain type of fastener that they need and you do a run of a million or 2 million or whatever it is, next year they’re going to be like, “Okay, now I need 6 million,” so they could maybe buy that online?
Joe Shoemaker: That’s the hope. They can look up a previous order with a unique part number tied to that configuration, which dates back to that drawing that they supplied. Then it’s as simple as putting in a request for 20 million more. Then it’s just a function of verifying, the current cost and processing the order.
Adam Honig: Yeah, that makes sense. We could just add an extra zero to it. So every time they order, it just goes up by a factor of 10. I’ll make a note. Let’s talk about marketing for a minute. You’re the VP of marketing for this fastener company, not an industry known for innovation and marketing. Tell me about some of the interesting things you guys are doing in the space.
Joe Shoemaker: It’s very difficult to stand out through a traditional sense. There are not a lot of publications that cater to this market. In fact, there are three. Google AdWords and things online are nice, and we certainly do those. Social media for us has become very big. It’s big for a few reasons. Because not a lot of folks on our space are active in it, and we try to be very active in it, putting out posts a couple of times a day, every day of the week. We try to make those a little bit fun, certainly engaging, and informative. We rally around the concept of how now wow, educational, informational, something that’s going to throw them or surprise them. That has served us well. Our following has grown, and our interaction has grown. And frankly, our level of top-line funnel inquiries has grown. What we’re finding from both our web presence and our social media presence is that we get inroads at the top of the funnel for more nebulous kind of, “Hey, help me understand what you do and how you can help me” conversations, and very actionable bottom of the funnel, “I have an immediate need for part number 123, quantity of a million, give me a price.” Those get turned around very quickly with our quoting team and we’re able to win new business. We see digital, whether it’s online or social, as being a very strong differentiator for us in the marketplace.
Adam Honig: The thing about digital though is that not only are you trying to capture the attention of your potential buyers, but you’re competing with everybody. You’re competing with McDonald’s, Coca-Cola, and stuff like that. So how do you break through that landscape to get people to pay attention to you?
Joe Shoemaker: We’ve got very specific language. We’ve got very relatable content. For the people that are searching for our kind of product or service, I don’t think that we compete with McDonald’s as much as I would love to. We’re carving out awareness for our brand through the content that we generate. There’s an acronym in sales of, ‘Always be closing’, ABC. And in marketing, it’s ABE, ‘Always be educating’. We put that out from a content standpoint to build trust and create awareness. And I think that that’s endeared us too. Our new customer counts have risen year over year. We have seven product categories and our cross-brand sales hit record levels last year. That’s really tied to our ability to educate our customer base because largely they came in on one platform and they had one need. But once we got them into the fold, we were able to talk to them, educate them, and entice them to expand their buy with us or share a wallet. And digital is the way we’ve done that.
Adam Honig: Talking with a lot of people in manufacturing, it seems like building relationships with customers is super important. Do you see this strategy as enhancing the relationship with them?
Joe Shoemaker: I think so. I think your example of Amazon earlier is a great one. I’ve never talked to an Amazon employee. I’ve said hi to the driver and given them a tip, but from a deciding-to-order standpoint, never had a conversation with them. But I have strong brand loyalty to Amazon and their entire relationship with me is digital, over my phone, or my pc. I think the better we become at building those relationships by listening to what our customers say is important and delivering the content and the tools that they need or that they want to be more effective in their communication with us, that will build loyalty, trust, and hopefully, that will lead to continued business.
Adam Honig: I once did have a conversation with somebody at Amazon. You can find an 800 number to call them. I don’t remember exactly what the circumstance was, but some order went really awry and I’m like, I’m going to call them. I got the number and spoke to a perfectly pleasant lady and got everything resolved, but it was super weird. It felt like this shouldn’t be happening.
Joe Shoemaker: Like they’ve done everything else wrong that you have to call somebody now.
Adam Honig: Exactly. Speaking about digital and relationships, I want to spend a little bit of time talking about AI. We’re obviously an AI company. We’re spending a lot of time with it ourselves. But I’m really interested from a manufacturing and industrial company perspective, what’s your perspective on all of this AI that has suddenly become very present for everybody?
Joe Shoemaker: It has exploded. My birthday happens to be on November 30th, the same day that ChatGPT launched. Initially, I didn’t think much of it. Two weeks into it, enough people had been talking about it, that I checked it out and I am all in. I believe AI could be game-changing. There’s a lot of concern in the marketing community about whether it will replace marketers and whether it will render obsolete roles that exist today. I don’t know if I subscribe to that, I look at AI as a very powerful tool that in the hands of a capable user can be magnitudes of capability above what they’re doing today. AI is a tool in the same way as a paintbrush is a tool. But if you give me a paintbrush, you’re not going to get a Picasso out of me. It has to be utilized in the right way. And the people that can develop the right skill sets from a prompt generation standpoint to get the most out of the tool are the ones who are going to elevate themselves and leapfrog the competition.
Adam Honig: I completely agree with you. I think that a lot of the low-value things that we just have to do in marketing can be done easily. And that gives us more time to focus on the more exciting stuff too. But I do wonder in a world where the machine can write great copy for you all the time, are we going to be more editors than writers? And if we’re going to be more editors, do we need less people doing stuff too then?
Joe Shoemaker: I think there’s some truth to that. If you typed something in ChatGPT now and asked it to put together a marketing campaign, would you be satisfied with what you received? There’s still a lot of work to be done and nuancing, refining the information that comes out. I certainly agree that for more transactional tasks, AI will replace that function. But the challenge is to elevate our game. The challenge is to think more strategically and not transactionally. AI will allow us to take that part of our day away perhaps, and let us focus on the bigger picture of how we can make our brands more engaging, more loyal from a customer-based standpoint, and certainly more relevant than the competitors that we’re up against today.
Adam Honig: Are you using this technology in the business today?
Joe Shoemaker: Absolutely. Like most, I have ChatGPT. We’ve also started putting out videos with a product called Synthesia. That’s going fairly well. We have Copy.ai and several other tools that we’re using to help us with social media efforts and just general information. Arming our sales team with better responses for commonly occurring objectives during the sales cycle, AI is a wonderful way of brainstorming those items as well.
Adam Honig: I’ll tell you another use case that I discovered that I was not aware of, but it’s for people who have dyslexia too. A thing like ChatGPT can be a real game changer. We recently introduced a new feature in Spiro where you can just basically give Spiro the gist of an email and it’ll write out a nice, professional email using the same technology behind the ChatGPT. I got a call from one of our users and he was like, “I’ve got dyslexia. I’m 45 years old. I’ve been writing business emails my whole life, but it’s a struggle and I hesitate to do that. I just want to thank you because now, I don’t have to have anxiety about if my writing is going to be bad or if I am going to look dumb to people.” And I never would’ve thought about that. I think there’s a lot of ways that this is going to go and use cases are going to come up that we were like, exactly. Who could have thought it?
Joe Shoemaker: You’re already on the cutting edge of this. Your platform is generating connections and making assessments of data that otherwise would’ve gone undiscovered. You’re blazing trails with this stuff every day. Folks like us are just trying to catch up. We’re running to try to get relevant and you’re setting the bar.
Adam Honig: Well, thank you for that. We try, but for me, it’s the unexpected. Obviously like, oh, Spiro can tell you that this customer isn’t ordering and you should give them a call. Very valuable, but straight down the fairway stuff. These other things like dyslexia that are just coming up, I’m super amazed by it. Maybe because it is a surprise. That’s always a bit of interest to me when things are unknown.
Joe Shoemaker: Give it two days and you’ll discover some new thing that just came out. I haven’t seen anything this rapidly advancing before.
Adam Honig: Well, I’ll tell you what I’m hearing is coming next and this is where it gets crazy. I don’t know if you’re aware, but AI is also really good at writing code. So, our engineers are using AI to help us accelerate product development, which is fantastic. I haven’t been a programmer since the nineties and even I can use it to write great-quality code, which is crazy. But what’s really crazy is the researchers who are training the next generation of AI models to train the next generation of AI models. Once we get to the point where it can be teaching itself things that way, I don’t know what’s going to happen. If you think it’s going fast now, just wait until that happens.
Joe Shoemaker: You’re right. It feels like the matrix.
Adam Honig: A little bit. The good news is even though AI tech is super exciting, it is very limited in its way. Like if you ask ChatGPT to make a value judgment about something, you give it an email and say, “Hey, how important is this email?” Let me tell you, I’ve been trying to get it to give me good responses to that and it’s not doing it. It’s very positive all the time on stuff, so I don’t think it’s going to replace our good judgment, which is probably one of the most important things. Relationships and judgments, I would say, are what keep us all in business.
Joe Shoemaker: I agree.
Adam Honig: Well, Joe, this has been a great conversation. It has been fascinating to hear about, the uses of fasteners and just how you’re thinking about innovation in an industrial context. Because I don’t feel like that gets a lot of attention in the market today. So, this has been really great. I really appreciate you coming on the show.
Joe Shoemaker: My pleasure. Thanks for having me and for forwarding ahead this conversation around marketing and AI.
Adam Honig: Yeah. And as a reminder to our listeners, you can find every episode of the Make It. Move It. Sell It. podcast at spiro.ai/podcast. While you’re thinking about it, maybe it makes sense to subscribe to the show or maybe give us a good rating. Joe, do you think people should give us a good rating if they like the content?
Joe Shoemaker: Of course, they should. Absolutely.
Adam Honig: Share it on social media, just like Joe does with all of his campaigns. Tell your friends, just anybody you got. But it was really great talking with you, Joe, and thank you to everybody for tuning in, and we’re looking forward to speaking with you at the next episode.
Joe Shoemaker: Thank you so much.
The post Episode 21: Using Artificial Intelligence and Building Strong Customer Relationships with Elgin Fastener Group appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/podcast/episode-21-using-technology-and-building-strong-customer-relationships-with-elgin-fastener-group/
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AI-Generated Customer Summaries Help Manufacturers and Distributors Manage Relationships
Manufacturers and distributors rely on healthy customer communications to run a sustainable business. The best customer relationships require a salesperson or account manager to know everything going on with that customer. The challenge is maintaining consistent relationships with many companies or branches, at scale. Having that level of insight in tens of thousands of customers is one of the more direct ways that Spiro’s artificial intelligence (AI) can help.
Spiro’s AI Engine automatically collects, correlates and analyzes customer data from across virtually every interaction. Spiro’s AI Engine then summarizes key points about the customer (or specific contact) and proactively alerts the account manager to action that should be taken, but that hasn’t happened yet.
Understand Your Customers to Ensure Strong Relationships
It can be frustrating to not know what is going on with your customers, and logging into a CRM, marketing tool and ERP to find a bunch of data points still doesn’t show who in the company called or met with a customer. Even after gathering that information, one or more conversations are typically required to understand what’s going on with the customer and what the next step should be. Doing this in a timely fashion is a fool’s errand.
Spiro’s approach is to provide updated, contextualized information in a digestible way. For example, at the top of each company record, the AI Engine provides a summary of the company’s overall activity, which may include recent communications, orders, or where they stand in relation to their annual order budget.
These AI-generated summaries highlight issues that may otherwise be hard to catch, such as a customer falling behind their usual pace of orders. By bringing this information to light, AI can help manufacturers and distributors avoid lost revenue.
Document Communications and Recommend Next Steps with Each Contact
Sales representatives often have to keep track of a lot of contacts at many different companies or branches. Even with communications logged in a CRM, it can be challenging to remember to circle back with each customer at the right time and to access their order information and specifications. At the contact level, Spiro provides users a summary of communications as well as recommended next steps based on past interactions, making it easy to find everything they need to make a call with confidence.
In addition to providing helpful summaries at the contact, customer, and activity level, Spiro recognizes that sometimes the problem is not knowing which company or contact needs your attention. This is where the Spiro Assistant helps by directing users to contacts, companies, or opportunities that require urgent attention based on prior communications or past buying patterns.
The Spiro Assistant can be set up to remind users to check in on customers for a variety of customizable reasons, such as delayed orders, stalled orders, lead follow-up, and more. This allows Spiro to be tailored to your unique business model and that of your customers.
Capture Notes and Next Steps to Stay Ahead of Customer Needs
After a customer call, it can be difficult to take notes on everything that was discussed, particularly if it is a longer call with a customer who has a lot of specific requirements and various stakeholders. This is another area where AI can do the hard work for you. In addition to providing a transcript of each call, Spiro’s AI Engine summarizes the conversation, including highlighting the key points and action items.
Based on that summary ,Spiro provides a draft email to send the customer with the same information. This helps account managers keep customers up-to-speed, which in turn leads to happier customers.
Manufacturers and distributors need to maintain strong customer relationships in order to thrive. In order to succeed, companies need both visibility into their customer communications and orders as well as the knowledge of where to look. Spiro’s AI Engine is designed for manufacturers and distributors to help highlight the important pieces of information needed to drive better customer relationships.
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from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/resources/guide/ai-generated-customer-summaries-help-manufacturers-and-distributors-manage-relationships/
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The E.B. Bradley Co. Accelerates Sales with Data-Based Insights
The E.B. Bradley Co. is a national leader in the interior building materials industry, providing distribution for more than 27,000 products from over 300 vendors worldwide. What started as a small business distributing cabinet drawer hardware has expanded to a massive operation over the past 90 years. In that time, the business has expanded and the industry and clientele have evolved. In order to keep up, E.B. Bradley has effectively leveraged technology to stay ahead of the curve and better understand the nature of their sales cycle.
As a distributor that services commercial and residential interior building design, some deals take years to come to fruition for the E.B. Bradley Co. To complicate matters, they sell their services to both the fabricator in charge of a project as well as the architect or designer the end user has hired, since both may have a hand in deciding what materials to purchase. Some of the challenges they encounter with this business model include:
- Long Sales Cycle That is Difficult to Manage: Construction projects of any scale can take a long time from conception to completion, particularly those done on a commercial scale.
- Many Stakeholders in Bigger Deals: It is vital for the E.B. Bradley Co. to keep track of customer and designer communications, as well as inventory and vendor relationships in order to ensure a deal is progressing. With so many moving parts over an extended period of time, the sales cycle is difficult to keep track of.
- Hard to Know What is Working: Due to the nature of their business model, the E.B. Bradley Co. has an entire sales division dedicated to encouraging designers and architects to use their products in projects with mutual and potential customers. With a large portion their sales team never directly generating revenue, it is difficult to know where to best focus their resources.
- Lack of Visibility into Data: The long sales cycle and the numerous parties involved both contribute to a lack of centralized data to gain insight into pipeline and ROI. Without understanding where deals stand and what makes them close, it is impossible to make informed decisions.
The E.B. Bradley Co. was using spreadsheets to start tracking their larger deals and really connecting the two sides of the business. But spreadsheets can only get you so far, and the company decided to modernize their sales platform with Spiro’s AI-powered platform. Since turning to Spiro, the E.B. Bradley Co. has been able to:
- Automatically Capture Communications: Spiro automatically captures and logs calls, emails, and text messages to prospects, clients, designers, and vendors in a single platform. This enables The E.B. Bradley Co. to effectively monitor active deals over time and ultimately learn what is most effective for their business models.
- Ensure Deals are Progressing: In addition to aiding the E.B. Bradley Company’s internal teams in effectively collaborating, Spiro’s AI Engine ensures outgoing communications and expected orders are not overlooked or missed by providing users alerts and recommendations.
- One-Stop Platform: With all of their data going through Spiro, the E.B. Bradley Co.is able to better understand where ongoing deals are at as well as finally gain insight into which areas are driving the most revenue.
Jonathan Thompson, the VP of sales at the E.B. Bradley Co. is a firm believer in using data to drive informed business decisions. He also says the key to their sales cycle is effective customer touches. Spiro’s AI Engine brings these pieces together to help the E.B. Bradley Co. get the visibility they need into every customer interaction from project conception to final construction.
“Spiro opened new doors to us, empowering our sales team and giving us the visibility and data we needed.” -Jonathan Thompson, VP of Sales at E.B. Bradley
The post The E.B. Bradley Co. Accelerates Sales with Data-Based Insights appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/resources/case-study/e-b-bradley-co-accelerates-sales-with-data-based-insights/
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4 Ways Spiro’s AI Engine Helps the Supply Chain
Companies who make, move, or sell physical products are under more pressure to do more with less because of supply chain issues, increased customer demand, and in many cases, a retiring workforce. Artificial intelligence (AI) can help. Here are four ways that Spiro’s AI Engine can help manufacturers, wholesalers, and distributors to stop wasting time, and improve their customer relationships in order to grow their business .
1. Save Time by Automating Data Collection
Spiro’s AI Engine automates data collection – capturing emails, phone calls, texts, meetings, and even the status of invoices and marketing engagement. Spiro automatically creates contacts and companies based on this data, and the AI Engine summarizes phone conversations for a quick review, and markets whether customers are engaged or stalled. This provides a complete view into every interaction your company has with a customer, prioritizing all of your company’s efforts in helping both your teams and your customers.
For example, Spiro works with a medical equipment company whose CRM lacked basic functionality. They had only a single contact for most of their customers. This was confusing and seemed inaccurate. When they started using Spiro’s AI Engine to automatically track their emails, calls, etc., the AI identified several contacts at each customer with whom they were interacting. This enabled this medical equipment company to get to know their customers better and made developing targeted marketing campaigns much simpler.
2. Proactively Monitor Order History to Avoid Losing Revenue
Spiro’s AI Engine can spot patterns in a customer’s order history, helping you better understand changes in orders placed. With AI, you can monitor all of this in real-time, receiving alerts when orders are missed and prevent any adverse impacts to your profitability.
For example, a flexible conduit manufacturer who uses Spiro manages order histories from thousands of customers. This volume of orders was impossible to track manually, resulting in the company realizing a customer wasn’t placing consistent orders until it was too late. Spiro’s AI Engine not only gives them visibility into their orders, it proactively alerts account executives to follow up when buying behaviors change.
3. Improving the Productivity of Your Sales Team
Spiro’s AI Engine ensures that your team reaches out to customers on the right schedule by generating automated reminders based on your specific sales processes. This creates a smart process, so salespeople are productive and stay on task. Developing this level of productivity builds trust, which nurtures customer relationships that drive future sales in a very powerful way.
Spiro’s AI Engine can also save time in other ways. For example, a large fabric distributor who uses Spiro requires sales teams to visit top customers monthly, but developing those schedules takes time. Using the Spiro Assistant, the team is proactively reminded to schedule these meetings as part of their process, leaving more time for selling.
4. Build Strong Customer Relationships with Proactive Order Alerts
A common use case for Spiro’s AI Engine in manufacturing is leveraging the AI to monitor fulfillment status against orders and proactively alert your team when anything is delayed. Teams can proactively reach out to customers when their orders may be late, maintaining positive relationships.
Like many in the space, one Spiro customer that makes custom parts for trucks had a significant number of their orders shipped late due to the supply chain disruptions. To keep their customers updated and manage expectations, they are now using Spiro’s AI Engine to proactively alert account executives to production issues that could delay orders. By automating this process, they no longer need to waste time with internal meetings to manually review this information, which means they can spend more time with customers.
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Spiro is on a mission to kill CRM for the supply chain. To learn more about how manufacturers, wholesalers, and distributors are using Spiro’s AI Engine to improve customer relationships and increase revenue, contact our sales team today.
The post 4 Ways Spiro’s AI Engine Helps the Supply Chain appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/resources/guide/4-ways-spiros-ai-engine-helps-the-supply-chain/
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Episode 20: How SEF Energy is Innovating Oil Field Manufacturing with Automation and AI
Transcript
Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today. Instead, today we’re talking to Tim Marvel, who’s the Vice President Business Development and Technology for SEF Energy, an oil field manufacturing company. Welcome to the show Tim.
Tim Marvel: Thanks Adam, appreciate you having me.
Adam Honig: No, it’s great to have you here. Maybe just tell us a little bit about SEF and what you guys are up to.
Tim Marvel: Yeah, so SEF is a private equity backing company. We’re a holding company that holds two companies. One is Downing, which manufacturers really well heads and pressure control equipment for the industry. And then Oso, which is a perforating company. What we focus on is really manufacturing in the United States, one and two, bringing new technologies to the industry. So we do a lot of innovation and when I talk about innovation, we talk a lot about patented innovation.
Adam Honig: So let’s start by talking about manufacturing in the United States. I feel like there’s been more and more of an emphasis for bringing manufacturing back to the US. What’s your perspective on that?
Tim Marvel: Yeah, so when our company was started about eight years ago, one of the thesis that our CEO had was that we could manufacture competitively in the United States. And so we’ve been executing on that over the past eight years. We started with a smaller company in Oklahoma City, and since then we’ve grown. We’ve added about 140,000 square feet of manufacturing facility there. It’s a beautiful facility. We’re pretty efficient and we have a great manufacturing vice president that’s done a great job there, bringing efficiencies to what we’re able to do. One of the nice things, and you’ve seen this in the last couple years with COVID, is that as supply chains have got strung out, we’re able to respond to our customers quickly because we manufacture right there in Oklahoma City.
Adam Honig: What do you think is stopping companies from doing more manufacturing in the United States? Is it more of like a labor cost thing or just from a mindset perspective?
Tim Marvel: Well I think labor costs one, but I would say more in what we see is labor skills, skill sets. One thing I’ll brag on my brother a little bit real quick, but he’s a principal in a high school up in Alaska and one of the things that they’re bringing is they’re bringing in vocational training into the high schools. This is something that’s, I think, critical, machinist skills and that type of thing. And I think we forget sometimes in our country, that those skills are highly valuable and they pay well.
Adam Honig: I’m happy to report that last night I went to my son’s open house . My son’s in eighth grade, he’s going to high school next year, and they have a whole manufacturing program at his high school. And they’ve got like local companies they work with and teach things, and they’ve got 3D printers and all kinds of great stuff over there.
Tim Marvel: We need more of that. That’s good.
Adam Honig: Yeah. So you’re focused on manufacturing in the US, tell me a little bit about the thinking around automation in the factory then. Is that a big focus for the organization?
Tim Marvel: What we really automate is out on what we do a lot around frack sites. So we do a lot of automation on the frack site. So if you think of a frack site, when you’re fracturing an oil well, if you think of that as a manufacturing site, which it really is, we are automating a lot on that location. So from job to job to job, we’re automating the functions around that and pulling people out of what are danger zones. That’s where a lot of more of the automation comes in, more so than in our manufacturing, although we have a lot of automated equipment.
Adam Honig: And do you provide the equipment that does the fracking or you guys are actually like setting up the fracking situation yourselves?
Tim Marvel: Well what I’d tell you is there’s three systems. Think about when you come out to a frack site, right, your pumps, you have your wire line, and then you have the surface systems and so we provide the surface systems. So the operator, the oil company right, they hire different companies to do these different services. So we provide one suite of those services out there.
Adam Honig: Gotcha. And so going back to the manufacturing of the United States, you feel like you’re seeing a trend of companies following you guys in expanding manufacturing in the United States?
Tim Marvel: Some yeah, I do think there’s a lot more, and you hear a lot of buzz around that, and you see a lot more people coming back, and I think that’s a good thing for our country.
Adam Honig: But it seems like from what you were saying, that skill development is a challenge that people are gonna run into if they do that.
Tim Marvel: Yeah, I think culturally and skill-set wise, I think we need to be encouraging our people that they have two paths, right? You can go to college or you can go and get a vocational, both worthy and needed skillsets in our country.
Adam Honig: Yeah, and I know it doesn’t have to be either or, right? Because I was up at one of our customers’ manufacturing plant, they had a whole room full of University of Indiana engineers in there fixing all the machines that were on the floor, which are constantly breaking.
Tim Marvel: Yeah, you still have to have both. You marry both of those together, right? We have some excellent operational people that really understand the operations around whether or not it’s manufacturing or like I said, treating the frack site that do an excellent job and then you marry that with the engineers that can engineer out some of the processes or engineer out some of the problems or the hazards, that type of thing.
Adam Honig: Well, I talk with a lot of people, I feel like I’m hearing a lot more about people building or expanding facilities in the United States for manufacturing especially. And I think what you mentioned before about being close to the customer, shortening the supply chain so that they’re able to get all the materials and everything that they need locally. It’s just who knows what’s gonna be happening in the Pacific in the future, I think, is on a lot of people’s minds.
Tim Marvel: I’ll tell you another thing that’s really nice about marrying your manufacturing with your engineering. So we are able to engineer something and then we walk downstairs and we’re able to build it, and then our engineers are able to see what issues are, that type of thing. And so your speed of innovation is much faster when you have manufacturing there versus let’s say a six month supply chain that you make something and six months later it shows up and you realize, oops, I probably shouldn’t have done this. And now you gotta go back to the drawing board. So our speed of innovation, which is one of the keys of what we do, marrying manufacturing and innovation together really helps us.
Adam Honig: When people think about oil drilling and fracking, I don’t think innovation is the thing that comes to mind. I think that they think of guys wearing hats and boots and stuff like that. But you’re right, if you look at fracking just in general, like we couldn’t do any of that work 20 years ago. That’s all brand new technology.
Tim Marvel: Well especially in the shell, being able to frack a non porous rock and get oil out of it, that is definitely an innovation the United States has led on. So I’ll give you an example on the drilling side. So you just get an idea of the technology, but we are drilling down 10,000 feet, so let’s say two miles, and then we’re going out three miles from the spot you’re in. So imagine drilling underneath the city while you’re out on a farm. So you drill underneath that city and we can pinpoint within feet of where we want to hit on that wellbore, let’s say a six inch wellbore when you get out there. So there’s quite a bit of technology, lots of pressure, lots of temperature. So when you look at the hurdles from an innovation standpoint, you’re right up there and honestly, with what everybody thinks about it, the space, that’s a challenging environment, but underground’s very challenging.
Adam Honig: Yeah, I’m trying to even picture in my mind how that would work. I’ve got one of those cutaway pictures of the earth with a drill going underneath the city. It’s gotta be actually a lot more challenging underground than out in space. If you’re in space, there’s nothing to really bump into unless you get pretty far out.
Tim Marvel: That’s right. It’s all the same atmosphere. Or the other conditions around you whereas down hole, you are going through all these different formations. And then you have caverns and you have water and pressures and temperature, geothermal, whatever you name it, we got it. So it’s actually pretty fascinating when you get into it.
Adam Honig: It’s so funny. So I spend a lot of time talking to people about software development as well, and people sometimes can’t really understand why we have trouble doing estimates for software development. I always explain, well it’s kind of like digging a pool in your backyard, until you start digging, you never know what you’re gonna hit, right? But in your business, it’s literally like the same thing.
Tim Marvel: Yes, well we don’t always know what we’re gonna hit when we go down a hole. And I’ve worked on different sides of the industry. So on the drilling, there’s challenges and then when we complete the wells to be able to get the oil out of the ground. I think a lot of people think that you just poke a hole in the ground and that oil comes out. Those days ended a hundred years ago, so now you have to go down, you have to drill, and then you have to stimulate what they call the rock around you to get the oil and gas out of the hole.
Adam Honig: I saw you were with Baker Hughes, was it at the start of your career? I did a little bit of work consulting for Baker Hughes at the start of my career and it was the first time I learned anything about oil drilling, except in like a Bugs Bunny cartoon when he drills a hole and gets some oil. And I think that’s the way most people think about it, you know, you just boop, put a thing down and kind of there you go.
Tim Marvel: Yeah, absolutely.
Adam Honig: Tell me a little bit about the innovation side of things. What are some of the innovations that you guys are working on now?
Tim Marvel: I’ll talk about a couple of them, but they’ll give you a good example. So when we frack a well we actually plug off different zones underneath that. I talked about that being three miles out, two miles down, three miles out, right? We go down there, we isolate an area, and then we blow holes in the casing. There’s a steel pipe down there, we blow holes in that, and then we pump fluid down the hole. And when we do that, it’s like a 10,000, 15,000 PSI to fracture all that rock down there. Every time we isolate a certain section of that three miles, we do that, let’s say 80 times. Well there’s transition times on the surface. So in those transition times and all this equipment, and you have people in what’s called the red zone, where you have, like I said, you have pressurized iron. So I don’t know if you’ve ever seen anything that goes off at 10,000 psi, but it’s not a pretty site. You don’t wanna be around that.
With all that’s going on there, we automate a lot of the functions that were going on where, let’s say, every time we frack a zone, it would take us 45 minutes to transition to the next zone, to the next zone, to the next zone. We’ve got that down to about 30 seconds now. And all of that is through automation, right? So we’re automating a lot of the functions, control systems, we’re using tons of data that’s coming in. We’re streaming data to the Cloud real time that we then use to further optimize what we’re doing. We can do remote operations into a frack site. So for instance, we had a time where we had a little issue on site not related to us, I’ll make that clear, where we had to close in a well. We closed it in, it was in Pittsburgh or up in the northeast area and we closed it in from Dallas. So those are the types of things that we’re innovating really around lots of software and control systems that we’re bringing into the industry.
Adam Honig: Gotcha. Are you guys using any AI techniques to be dealing with all that data? Because if you’re capturing all that data, that’s something that the AI can really help with.
Tim Marvel: Oh yeah. We get a lot of calls from our guys around AI, yes. So we’re doing a lot of analysis, a lot of algorithms. We have very high frequency data. So there’s things that we can see in that data that people didn’t know about before. And now we’re learning and we’re using techniques. We have a PhD in signal processing that works a lot with what we do. So when you talk about innovation, this kinda gets exciting, Adam, this is where I get pumped up. You talk about the things that we’re doing and the data that we’re utilizing, that people before didn’t realize that this stuff was actually happening and what you can see in that data, so it’s really exciting.
Adam Honig: I know it’s a little technical, but is there something you can share that maybe a more general audience might be able to understand about the kind of insight that you get from the data?
Tim Marvel: I’ll give you a couple examples. One, we get a lot of perceptions. Hey, that thing takes 20 minutes to do that operation, right? We get these customer complaints, well then we go in and we actually disaggregate all that data, bring it down, tear it apart, and look at just that function, whatever that is in the mass of all this other data. And then we show them, well, in actuality, yes, we did have one event that was 20 minutes, but out of 310 times that we did this, that was 20 minutes once, the rest of it was 30 seconds. So those types of things changed the conversation with the customers. And then the other thing is, okay, that 20 minutes, why did that happen and what do we need to do to fix that? And one of the things I’ll add to that, Adam, is that we talk a lot about human workflows versus automated workflows. In our industry, when you have a human workflow, they go through a bunch of procedures, checklists, that type of thing. And remember what I said at the beginning, you are working with a lot of different companies out there. So when something goes wrong with human workflows, what do you get? So you try to find the root cause that everybody does this, you know, they’re all pointing at each other. And then once they do find a root cause or think they find a root cause, invariably it has to do with them adding more checklist procedures, we gotta train better, right? And one of the things I always talk around is you can never out-train your problems. I mean it’s impossible. You talked about automation, right? If we have an issue, we get one second data, that one second data that’s coming in, and that’s our slower speed data. We get a lot of faster or higher hertz data than that, but that one second data, we can tell exactly what happened. Even if it’s on us, we know what happened, we can tell the customer this is what happened, and then here’s the key. We look at that and we engineer it out. And guess what, whatever that problem was, doesn’t happen again. Other problems might happen, but that one doesn’t happen again.
Adam Honig: So I’m hearing kinda like a quality control feedback here, that you’re using the data to spot the problems and then instead of adding a human solution, use automation in a way to get rid of that problem. And obviously there’s gonna be other problems, but at least that one won’t happen again.
Tim Marvel: Yes, take your data, take your AI, take your control systems and work through that problem and get rid of it.
Adam Honig: It’s gotta be challenging though to be dealing with a number of different companies all at the same site.
Tim Marvel: It is, but here’s the deal. So what we’ve done, we’ve taken a different approach, instead of marrying all these surface systems together that don’t talk to each other, and the interaction between them is a human being. We’ve taken all those, we’ve connected them, interlocked them through one control system so now we have feedback from every one of those systems. And so we know exactly what’s happening in that surface system. So that goes a long way versus what we had traditionally, we have five, six different control systems out there that don’t talk to each other, that only interact through a human being. So there’s no way to get rid of that problem.
Adam Honig: It doesn’t sound like you’re a manufacturing company, sounds like you’re a technology company at this point. I mean, you guys are almost a software company even.
Tim Marvel: Well, we have a lot of that. Yeah, we are a technology company and we do a lot around technology. We have some very good PhDs that are in control systems, signal processing, and they do a fantastic job of innovating.
Adam Honig: I think tying it back to manufacturing, though, I think this is something that the United States has a big advantage in. If the future of manufacturing is really the smart manufacturing or the AI, augmented manufacturing, I mean, we might have a shortage of skills in some of the areas, but I think in that area we can do pretty well.
Tim Marvel: I agree. I’ve been very fortunate, like with Baker Hughes, worked around the world. I definitely am a believer in the quality of the people that we have and the innovation that a lot of our people have the ability to think through problems.
Adam Honig: Let me ask you this, one of the things we’ve been talking with people about is changing expectations of customers. Somebody coined the phrase “the Amazon effect,” everybody expects you as a business to be as quick to deliver products and finish projects and stuff like that as Amazon often seems to be. Do you feel like customer perceptions are changing in your industry?
Tim Marvel: You know, it’s interesting. So our industry, there’s a lot of de-risking, right? You know, when you talk about technology, they try to get these processes in place and then they try to do them over and over again. So to break into that cycle, it takes a little bit of convincing to try something like what we’re doing, which is completely different than what everybody else does. So we talk a lot about this when you’re introducing new technology, and Adam, you probably know this because you’re doing the same thing, but when you talk around perseverance, grit, it takes a lot to get people to think through and say oh, you know what, I can do this differently. I don’t know if I answered your question exactly, but that’s what we see as one of the issues is really driving change to what’s traditionally done.
Adam Honig: No, you answered a much more interesting question for me, which is sure, if you’re gonna do something different in the drilling industry, how do you get the customer to feel comfortable with that? I mean, there could be catastrophic results if things don’t work out the way that they’re supposed to, right? That’s gotta be a big hurdle to get over.
Tim Marvel: Yes. But let’s go through what you just said, I think that’s really good. So we talk a lot about the risk associated with the old way versus the new way, they may have gotten used to some of the risks on the old way. Where we have getting rid of a lot of those risks associated with whether or not it’s people, error, that type of thing. One of the things I talked about earlier, we’ve interlocked these systems together. So now if one system has an issue it alerts the other and if the condition isn’t correct, the computer won’t go to the next step. So it actually is a safer system than doing it manually, which is what we’ve done historically.
Adam Honig: Gotcha. So even though change can be perceived as risky, what you’re showing is actually the whole system is designed to lower the risk.
Tim Marvel: Designed to de-risk.
Adam Honig: I assume with your buyers, that minimizing risk is a key element for them.
Tim Marvel: Yes, absolutely. So I’ll just give you some numbers. If a typical well, and I’m gonna get this wrong, but let’s say it’s between two and a half million to 5 million to 7 million, 8 million to complete one well, there’s a lot of risk associated, dollar-wise on that and the returns associated with that. Well, one of the things we have to do is talk to our customers about de-risking that and getting rid of some of those costs.
Adam Honig: Gotcha, fascinating. I’d like to ask people about maybe an unusual or different kind of situation that you’re in. Is there something that comes to mind when I mention that?
Tim Marvel: Really one of the things that we’re innovating is around trying to do a system that you can fracture 24 hours a day, seven days a week. And when I say fracture, meaning fracture the rock. So today, efficiency, on a 24 hour day is let’s say 16 hours typically. Which means that you have a typical frac fleet, let’s say costs between 25 and 40 million dollars. So that’s the capital that you have out on a frack site, so eight hours a day that you’re not using it to do what it’s intended to do is not good.
Adam Honig: You’re just eating that cost.
Tim Marvel: Eating that cost, right? So what we are doing is trying to come up with systems that allow you to get greater utilization of your equipment. And so I mentioned one earlier about going from that 45 minutes to that 30 seconds between the different zones. The second one that I would highlight for you is when these frack trucks are out there, there are 18 to 20 of these frack trucks out there that are pumps that are pumping that 10,000 psi down the hole, right? But they go down, they last maybe 5, 6, 7 stages or zones and then they gotta pull them out. And typically, what you have to do is you have to shut down the whole frack site, bleed down all that pressure, pull those out, and then we gotta fix all those trucks. What we’re working on is being able to actually pull a truck out through automation while the rest of the trucks are pumping. So imagine a system where nobody can go in the red zone, have to keep people out of there, you have to be able to unlatch and latch quick connects. You have to be able to drain this fluid, bleed off the pressure, and then you have to be able to back a truck back in, reattach, so we have arms going out, grabbing, couplings, you know, coupling these together, clamping them.
Adam Honig: I’m seeing the world’s biggest NASCAR pit. That’s envisioning, yes.
Tim Marvel: That’s right, without the eight people around it.
Adam Honig: Right, exactly, just robotic or somehow, yeah.
Tim Marvel: Yes. So that’s one of the exciting things I think that we’re working on right now.
Adam Honig: Yeah, that’s amazing. Well Tim, this has been awesome, I feel like I’ve learned so much about fracking I didn’t even know was possible before and three miles under and two miles down. That’s crazy stuff, man. That’s so impressive. Really love hearing about that. I love hearing about the manufacturing in the United States, definitely a big believer in that. And hopefully we can get more people coming outta school to be interested in pursuing that as a vocation for sure.
Tim Marvel: Yeah, we’d love that.
Adam Honig: I think that’s what we need here, but no, it’s been awesome, so I really appreciate your joining me on the podcast.
Tim Marvel: Adam, thank you very much for having me, really appreciate it. It was a lot of fun.
Adam Honig: So as a reminder, you can find every episode of the Make it. Move it. Sell it podcast at Spiro.ai/podcast, be sure to subscribe. And I don’t know, Tim, maybe people should give us a thumbs up or a like, or something like that. What do you think?
Tim Marvel: Absolutely. Good review, yes.
Adam Honig: We need a good review from you Mr. Listener or Miss Listener, so thank you for that. And of course you can always subscribe if you like, but I’d like to thank everybody for tuning in and we look forward to talking with you on the next episode.
The post Episode 20: How SEF Energy is Innovating Oil Field Manufacturing with Automation and AI appeared first on Spiro.
from Spiro – Spiro is the first and only proactive relationship management platform. Our mission is to help sales teams close more deals. https://spiro.ai/podcast/episode-20-how-sef-energy-is-innovating-oil-field-manufacturing-with-automation-and-ai/
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