Ask HN: Figuring out logistics for a personalized gift box

[cegascon]

I take care of logistic at www.spoil.co at YCW15 company and wanted the input of HN on our biggest hurdle at the moment.

We run a personalize gift box service. This means that all our boxes need at least 3 different items in them that are all personalized to the description we have of the recipient.

Experienced purchasing professional select items we currently hold as inventory and purchase any missing items to make each gift unique if needed.

Now that system is very time consuming but also highly risky since we hold various types of inventory and would constantly need more in curated to an even more specific level if we didn't want to buy at full price.

Would HN have any item on how to grow our network of suppliers without having to hold on to some inventory and manage complexe shipping logistics?

Our skills is in software and we feel like we aren't investing our time at the right place to be efficient and with high growth in sale the problem gets bigger and bigger each day...

Thanks for your tips, Charles

[akg_67]

> Experienced purchasing professional select items we currently hold as inventory and purchase any missing items to make each gift unique if needed.

You need to push inventory back to the suppliers but centralize the location where suppliers store their inventory.

You need suppliers who hold their inventory at single location/platform. Which platform has the highest number of suppliers storing their inventory? Amazon.

Another option, make agreement with a warehouse service provider where suppliers can store their inventory for you as well as suppliers' other customers. You can make agreement with warehouse service provider to discount inventory storage fees for your suppliers to encourage suppliers to switch warehouse and shipping service provider. Offer suppliers discount on warehouse storage fees in proportional to the inventory you use from them.

Find a warehouse service provider that also does shipping.

Now what left for you on logistics side to monitor the suppliers' inventory and mix-match products available in their inventory to create gift box before placing order and get warehouse service to ship the box.

You challenge will be to find a warehouse service provider and find incentives for suppliers to use warehouse service provider specified by you.

[cegascon]

YEs those warehouses are called 3PL's (Third party logistic provider) the issue with those is that local products and niche items aren't using those since they don't have the volume to be in them. The idea of having one warehouse is good but most of the large companies (Does using 3PL's) already have theirs signed. Now I could partner up with them but it won't allow me to gain diversity in my items.

I know I sound negative about it but challenge me on that cause it would be the easiest scenario to go with if I crack that model correctly.

[akg_67]

If you are using niche product and your suppliers are small, they are too small individually for 3PLs but collectively they can be big enough for 3PLs to accommodate them. Pool together such small niche suppliers yourself to be attractive for 3PLs It is similar to consolidating fractional container load to have one shipping container worth of material.

If your suppliers are large companies, they already have 3PLs. So you need to go to the 3PLs which has most of your large suppliers or setup your operation within local delivery area of these 3PLs. Most 3PL warehouses tend to be located nearby to each other.

I will suggest talking to operation research people at a business school. Those people teach and do this for living. Also look into some of the case studies on consolidator models for ideas (Amazon, Walmart, Costco, Toyota).

You challenge is you are too small of a consolidator and your suppliers are either too small or too large. You need to hack existing models to fit your need. I would most probably start with a hybrid approach of setting up my consolidation and shipping operation near the warehouses of my large suppliers and offer onsite inventory storage and shipping for small niche suppliers. Until you become large enough, you will have to give up some efficiencies of scale.

BTW, you are not in software business, you are in consolidation and shipping business.

[jefflinwood]

Is your problem the working capital required to maintain your inventory, or that your inventory is aging out, or that you simply don't want to be in the business of running a warehouse and putting together boxes to ship?

Your suppliers can't necessarily drop ship to your customers, because their items will need to be combined with others - if you have your suppliers drop ship to you, your gift boxes will take too long to come out.

Your core business (at least from the web site) is the ability to customize these boxes.

The good news is that you can keep track of which shipments your recipients have received, and that your buyers have purchased. As long as you vary the contents of the boxes if either one of those is a repeat for the same theme, you can get away with carrying a lot less SKUs in inventory - if I ship a "nerdy" gift to someone, I don't really care if someone else gets the same exact box, as long as I don't find out about it -after all, you're selling customization.

[cegascon]

"Your suppliers can't necessarily drop ship to your customers, because their items will need to be combined with others - if you have your suppliers drop ship to you, your gift boxes will take too long to come out." - Jefflinwood

That is exactly the issue simplified! Thank for such a good explanation.

You are absolutely right on the last point but we are looking to build a model were our customization is from the item picking part not the warehousing part. Be a tech play more than a warehousing play. Now we currently ship to us the items, repackaged and send back which is a very non-scalable way to grow not to say non-profitable too.