#2 Global Sourcing Tactics and Tips

Transcript: 

Adar: And our guest today is Thiefaine Magre.Thiefaine is the Cofounder and COO of Prouduct, like “proud of the product”, which helps entrepreneurs go from idea to market with full service global sourcing and end to end supply chain. And it also gives you access to a free executive training session. It’s an invite only session. It’s on the show notes for you to access. So, go ahead and take it after the show. Thiefaine, hello.

Thiefaine: Hey, how are you? How’s it going?

Adar: I’m good, I’m great. And I’m excited to start. Maybe we can start a little bit about your background. Let’s talk about Prouduct. What is it?

Thiefaine: Prouduct is a global sourcing company. We are an end to end rapid supply chain company where we help set up supply chains from idea to fulfillment rapidly and in the smartest way possible, essentially. So we help businesses whether they need to find suppliers, vendors, logistics partners in the USA, Brazil, Turkey, Morocco, China, India, all over the world, giving them solutions for their products. We learned early on that many small businesses are unable to scale because their supply chain is either too expensive or isn’t fast enough or doesn’t give them the capacity or capabilities to expand with their business needs. And same thing with medium businesses. So our goal at Prouduct is to say, let’s get you set up with world class manufacturing from day one. That way, you know, whatever your needs may be in the future, you’re set up to compete at a world class level, and you don’t have to worry about a customer too big or not being able to fulfill a PO or being bogged down by so much QC from failing supply capabilities that you have stress in your negotiations. The goal is for us and we, as entrepreneurs, we get this for all of our customers to be able to focus on whatever they do best. Whether it be sales or marketing or finance or their core function of the business. And to give us the day to day of supply chain and let us be that outsourced COO operations manager to help them oversee their supply lines as much or as little as they need.

Adar: Very nice, very nice. Sounds like a great service. And on your LinkedIn it says that you left your supply chain job when you realized traditional sourcing solutions were broken to launch a product. So why would you say that is broken today in the industry?

Thiefaine: Well, I think there’s a few things that are broken initially with small businesses, if they’re trying to go offshore, their only resource is Alibaba. And there’s nothing to say wrong with Alibaba, but most people are using it completely incorrectly, right? They’re using it like Amazon, not like a global marketplace. And it’s not necessarily their fault. Alibaba is also moving in that direction. But if you’ve been in supply chain, you’ve been purchasing long enough, you know, well if you’re not using it right, that tool, you’re not going to get the right results. Number two, we also noticed that a lot of people were hiring agents that didn’t really have experience with a certain product or process or material and they weren’t getting the best results on the manufacturing end. We’ve seen everything. When I started Prouduct, we had a little consulting with small businesses and we noticed that even though they were able to get supply, it just wasn’t reliable.They didn’t know who to trust, they didn’t know where they can go inspect the factory. They didn’t understand that not only were they allowed, but they definitely should. Right? And so we tried to fix that and say, no, you need to understand your supply line. It’s your responsibility to be involved and to get hands on or put someone in place that’s transparent and does that for you. That way you have confidence and you understand how to do it. I think Prouduct operates a lot like agents traditionally did, but we try to do it in a way that is really holistic, where we don’t just look at purchase price, but we look at total cost to make sure that regardless of what’s going on, it’s a win in the end.

Adar: All right, so using Alibaba right, and understanding your supply line, so how would you say that using Alibaba right, looks like?

Thiefaine: We don’t use Alibaba too much, but we think when you’re using Alibaba, it should be less product driven and more process driven. So instead of searching for a certain good, let’s say I’m looking for a CNC screw, right? Or we’re looking for a custom lug nut or whatever. Instead of searching the lug nut, I should be looking for manufacturers of lug nuts or people that have the capabilities of making this lug nut or whatever the part is it doesn’t really matter, right, or the good. And then once I find a list of all those suppliers, which by the way, that’s a function of Alibaba, instead of clicking products in the search bar, you click suppliers plus you don’t know that, why? I don’t know, but it’s beyond me. Then once you do that you should go through each of those vendors and say, depending on what you’re looking for, am I looking for a trade company that can help me manage hundreds of parts and I just need them to get in between me, or am I looking to go direct manufacturer or am I looking for something else? And you get that list of suppliers on there because they put them all in one basket, right? You can’t sort them out. Right? And then you should say, okay, if I’m looking for a manufacturer, which ones of these vendors are actually manufacturers of these types of goods that have experience in this commodity, then you go through and you make that list. Then you’re going to put them through whatever your strategic supplier screen is, where you’re going to audit them, you’re going to do supplier reviews, factory inspections, check financials, paperwork, employee human resources, make sure they’re compliant, all the things, right? And then once you’ve done that, you might have two or three qualified suppliers that actually meet your criteria. Then you can actually go and get quotes for manufacturing. Most people don’t do that. They just go and they say, oh yeah, this person sells a lug nut on Alibaba. They must be a supplier. I should trust them, I know it’s my money. 

Adar: Yeah. 

Thiefaine: And whatever the part is, it could be a bathtub or a cell phone or whatever. And this is what we saw with Covid. A lot of people got burned because they want to, like, off and said, this person sells masks. I’ll just buy their masks. And they realized, wait a second, the person that was selling me masks usually sells picture frames. Why is this person selling masks? 

Adar: Sorry, what are the signals for picking the right supplier for what I need? Like, what should I look for to understand that, yeah, this is the right supplier for exactly what I need?

Thiefaine: Yeah, good question. So we screen for a few different things and like in procurement, right, we sorted out the product, which is basically function and durability. Does it do what I need to do? Does it last how I need to last? Can I get it when I need it? And then is the price what it needs to be? And so we try to screen our suppliers with that in mind as far as the product right, to make the deal make sense. Is this person able to make what I need them to make? Can they make it the quality I need it to be made? Is it going to be as durable? Do they have experience in this skill? Are they available to make it? Or are my lead times just through the roof and it just doesn’t make sense? And finally, can they make it the price it needs to be? And so that’s what we go into it. We try to look at the bigger picture. Just because they’re not currently making this part doesn’t mean they don’t have the capability of making that part. And oftentimes where you find a diamond in the rough, someone that can and would if they had the opportunity. And so they want that business because it gives them a new vertical of business, a new category of products that they can sell and pitch to other businesses. And so that’s really where we look to strive. Someone that’s highly skilled, that’s very good at what they do, but they aren’t necessarily doing this and the other advantage of doing that we don’t think about. If a manufacturer is making your product, but they’re not traditionally in that industry, that means your competitors aren’t going to know this vendor and they’re not going to see your products on the floor currently being developed, right? I see an example. Watches. We made a lot of watches. We’ve made watches in China. No, not the Swiss watches, but very nice Chinese watches. The best manufacturers don’t allow you to walk the floor, right? And so they’re trying to conceal the branding and the future launches of their customers. You can do that with apparel where you move it to a facility that others don’t know or you can have a part made that would normally be made in like a medical facility, but you’re making it in a different facility just to make sure your competitors don’t have access to it. 

Adar: Nice. So, consider working with manufacturers. Don’t necessarily do exactly what you’re doing, but have the capability to do that, maybe you’ll find golden opportunities. Is that right?

Thiefaine: Totally. And if you can find a vendor that does exactly what you’re doing, and that’s what they do all day long and they’re a specialist, they might have the best price, but they might not be the most available. And so, you’re always trying to measure, like, what’s the right way? But we found the diamond in the rough is usually that person that’s got the capabilities. They’re hungry, they’re interested in the business, something they want to do, and then they’ll take you on and say, let’s make it happen.

Adar: Nice, that’s a great tip. And obviously there’s also the supply chain challenges right now, probably you’ve heard of them.

Thiefaine: Yeah, not sleeping much. 

Adar: Definitely. So how do companies face these challenges, especially small businesses or start ups that don’t necessarily have the leverage on suppliers, don’t necessarily have the buying power. How do they work and face these challenges? What do you see?

Thiefaine: Well, I’m not saying this anymore, but a year and a half ago, the solution was bigger purchase orders, order earlier, buy more, plan on having inventory on hand. We know a lot of businesses that bought a year’s worth of inventory in advance because they had the cash and they knew that they were going to need it. So that’s what most businesses did, including Walmart, Target, Costco I mean, major enterprises, they just issued fat purchase orders and now they’re actually cutting those back and it’s in the news, we’re like, recession. Well, that’s not really what’s going on there. They’re leveling back to their previous level, right? For most small businesses, if you are actually a small business and you’re not spending enormous amounts of money in POS, you don’t have the huge buying power. I say be transparent with your business partners, with your suppliers. They get it. They work with other small businesses, they understand. They want you to be successful. They have no interest in you failing. They want you to grow. They want the relationship to last. They want you to continue to place orders. And so be transparent. Say, look, what is it going to take to get it in these times? What are their constraints? Tell me straight. You know in China, they never want to lose face, they never want to be embarrassed, you never want them to feel that way. So if you give them the opportunity to say, what needs to happen for us to keep supplying on the same schedule, when do I have to make my payments? Have them be forthright with you with that information, and then you need to execute on what they’re telling you. That way you push the burden of responsibility back on to them to deliver based on the criteria they provided you. The last thing is, you do have to be patient. I mean, there’s just a lot of disruption, whether it be raw material shortages, lockdowns, shipping delays and congestion. You have to be understanding. But I think just transparency, straight talk, get to the suppliers and say, what will it take to deliver on these dates, in this timeline, in these quantities? This is what I need. And I’ll tell you this, a lot of suppliers are negotiating again and they’re moving the needle a little bit on payment terms for businesses that needed to place bigger purchase orders. That did happen.You know, three or four years ago, especially in China, they’re kind of saying, too bad, so sad, right? It’s happening again right now. So, it’s an interesting opportunity for people to renegotiate payment terms and move things in their favor. We even have partners that said, I’ll store the increased inventory overseas until you need it. So, they’re allowing you to place bigger purchase orders and not pay the balance of the entire order until you need it again. So, lots of creative things you can do, but you don’t have options until you talk about it directly, openly, just straight business talk. 

Adar: Right. So transparency, relationship building, expectations setting. And also there are various opportunities like renegotiating payment terms. Sounds like some tools that can help face these challenges. 

Thiefaine: And there’s so many options. And your supplier might say, oh, you know, we’ve done this for another company. It’s a creative solution that you haven’t thought of. And so I say, just talk straight. You won’t know what they are and what they’re willing to do until you start having the conversation, right? And who knows, maybe your supplier is hurting and he can’t help you and you’re like, well, if they’re in financial trouble, maybe I should start thinking about that, right? So I think just relationship, straight talk, it’s the best way to identify opportunities and options to improve, streamline, move out of the way, whatever has to happen, right?

Adar: Right. Just relationships and direct communication is such a key. It’s so important to have the transparency and level of trust between you and the suppliers. You know what they are capable of, they can offer you some options. So, this is key. So many times I see companies that treat their suppliers, like, only on a transactional basis. That’s such an opportunity loss, that there’s so much that they can do so much more to it. It’s not just about costs and lead times, it’s about much more than that. And it could be impactful in your business.

Thiefaine: Well, I’ll tell you this. It was two years ago, it was during Covid, actually, when most factories had crazy delays. And I had a customer call me and they said, we just landed this enormous PO, but we have to have the goods landed in the USA in five weeks and needed to make bags. No, I’m sorry, we had eight weeks. And bags traditionally take about five to seven weeks to make. So we had to make it, we had to design it, make it, ship it in eight weeks. And I called the supplier in the middle of the night and he picked up, said, send me the drawings, it’ll be done. It doesn’t always happen.

Adar: Right. 

Thiefaine: But when that happens, it’s because of the amount of business. When I told them, I need this, like, I need this right now, I’m not going to call you for every order, but this one I need right now. And it wasn’t a question, let’s do it. Executed. And we delivered and the customers ordered again and again and again. 

Adar: Right.They value the relationship and you know that they can be trusted when you need them to do it. So that’s key.

Thiefaine: Yeah.

Adar: Definitely. So, what about aligning different teams? I see a lot of challenges between when engineering has to be involved in certain orders and then purchasing has to also be involved and approve the purchase orders. How do you align these different teams that are involved in different stages of purchasing, basically?

Thiefaine: Yeah. It’s extremely challenging, especially when working with people that don’t have experience in the sourcing or procurement side of the business. Great people, we love them all. But an engineer will always want to make things perfectly, the ideal way, the way it was designed to be made. And on sourcing and manufacturing, you’re more, I’m going to make this, or I’m trying to find a solution to make it in a way that’s most economical, we might have to pivot a little bit from the original design. Then sales and marketing, they’re like, sell, sell, sell fast, fast, fast, right? We gotta make it right, we don’t want to sell defects. And again, I think that the solution that we found is just setting expectations from the beginning, telling them, this isn’t a one week thing, this isn’t going to happen in a month, these are the milestones and checkpoints have to happen along the way for us to be able to source and sell this. The problems generally happen under time constraints. We found that people work around costs, they understand cost constraints, they understand negotiations or sacrifices have to be made from one party in order to win. Like, that’s usually understood. Time constraints are usually what people don’t understand. Some goods take longer to make, and that’s where frustrations happen, because sourcing is waiting on engineering, and engineers say, well, we’re not done. We haven’t validated, we haven’t tested. And sales are waiting on sourcing, and they’re talking to sourcing guys, why isn’t this done? We’re like, well, the engineering guy’s not done, or the manufacturer is still sampling, or DHL is taking three weeks instead of five days, right? 

Adar: Sometimes people are not exposed to the different issues of others. So the engineer doesn’t know that there are so many things that delay the process from the sourcing perspective. And they just like, why didn’t you issue a PO yet? But there’s a lot of issues to be solved yet, you don’t really know about them. Is that right? So just having that transparency is sometimes challenging.

Thiefaine: Yeah, having the transparency and setting expectations, I think, just regardless what your role is, so for example, if you are the salesperson and you say, look, we need to be selling in four months, like, on October 10th is our sales date, like, it has to be here, then everyone knows, okay, front of the line, this is our only priority. Or if it’s not possible, they would have to come back and say, that’s not even doable. It would have to be November 10, or whatever it is. That’s the only way it’s successful. When you skip that expectation step, problems happen.

Adar: Yeah. 

Thiefaine: Major problems happen. It’s just basic project management, you know. And even if you’re not the project manager, it’s your responsibility to say, these are our criteria, our protocol, our timeline, our constraints.

Adar: Got it, yeah. And what about, you work with many startups, you work with many small businesses as well. And probably sometimes it’s about the time that they have to be the supply chain team. What’s the right time to do that? When is the right time when they should seriously consider adding a supply chain person? Start thinking about manufacturing terms rather than initial prototyping. What’s the right signals or stages for that?

Thiefaine: So, that depends on every company and business. I don’t know that, there’s a right revenue number. Someone has to make the purchasing decisions, right? You can outsource the actual sourcing. You can outsource the logistics, the manufacturing, the fulfillment, the warehousing. Those are all things you can outsource. But the actual procurement, telling someone, I’m going to pay you and make it. That’s an inhouse process. There’s many businesses, you know like, Apple has a supply chain team, but they outsource most of the sourcing, manufacturing, logistics. We’re talking about the second largest company in the world. Right? 

Adar: Right.

Thiefaine: So, when is the right time? The answer is, I don’t know. Every business is different, but you have to control the procurement, the development and the sales, and then your sourcing and your supply chain are involved in that. But you don’t need to control every function of the supply chain to be successful. So, you’re probably bringing in a planner and a procurement officer and maybe a controller who’s in charge of payments and just following up on things initially. And then that person would probably, if it were me, would probably direct the sourcing activities and manage them as an outsourced solution, just like you would an employee. I feel most businesses undervalued and underutilized their vendors. They don’t realize their vendors have tons of resources, experience, they’ve seen different products, different solutions, and different applications. And I feel and I’ve seen this personally, where they spin their wheels trying to fix a problem, when really they could have just turned to their partners and say, hey, how would you address this? We’ve done this in the past. Where we turn to a factory like, you know we’re looking for these products. We can’t find it, oh, we also make that in a second. What? You go, oh, yeah, we have a whole other building that’s dedicated to these types of products, and it just opened our eyes, wait a second. Where they have excess capacity, excess skills that we’re not utilizing. So, when is the right time to bring an employee? I don’t know. 

Adar: It depends.

Thiefaine: But, before you bring someone in, I would say, can this person be more involved and provide more solutions for our company?

Adar: Nice. Thiefaine Magre, Co Founder and CEO of Prouduct. Thank you for being with us. Today was very, very insightful. 

Thiefaine: Well, thanks for having me, this was a ton of fun. 

Adar: Thank you.