Ian Hartman [00:00:02]:
We negotiated a three year agreement and you know, I was thinking, okay, well, I'm not going to go back and ask for something more until that three years have transpired. Well, that first round when you guys were involved, we went and got 14% and then we went back a year later. We'd done a series of acquisitions and our spend was now different. It had grown. And so it was actually your coaching of us towards me that said, hey, your spend profile is different now. It's more meaningful. You're larger. Let's go back again.
Ian Hartman [00:00:37]:
And when we went back for the second time, we got another 9%. So in the two rounds we are 23% savings.
Glenn Gooding [00:00:51]:
Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I'm Glenn Gooding and each episode we dive into insights, best practices and strategies to help you navigate this complex, costly market. Join me as we explore ways to strengthen your long term partnerships with your chosen carriers and stay competitively aligned.
Glenn Gooding [00:01:18]:
Hello everyone. Thanks for joining me again on another edition of Parcel Perspectives. I'm Glenn Gooding. I have a special treat for you today. Somebody that I think a lot of and have had a chance to get to know both personally and professionally. His name is Ian Hartman. He's the CEO of Right Manufacturing Systems. I'm excited for what he's doing.
Glenn Gooding [00:01:36]:
Now. I will tell you that our story began a couple companies ago in Ian's career and so we're going to take on, I think, an interesting and important topic, particularly in today's market. That question is, why use a consultant to improve your small parts of supply chain? I think that's a distinctive question. There's a lot of stuff out there in the marketplace right now and I thought we'd kind of unpack that a little bit in some detail. So in this episode, we're going to dive into the world of small parcel shipping again. Ian has worked with me, has trusted me to support him a couple times with a couple roles. I'll let him talk about that in a minute. And we're going to also explore how that partnership led to a refined supply chain, improved carrier selection and rock solid data driven decision making.
Glenn Gooding [00:02:26]:
So whether you're growing an E commerce business or simply looking to optimize your shipping strategy, I think this episode is going to offer something valuable for you on the power of logistics consulting. So welcome Ian.
Ian Hartman [00:02:39]:
Thanks for having me on, Glenn.
Glenn Gooding [00:02:41]:
Always a pleasure. I really mean that. Care to tell folks a little bit about yourself and your background before we kind of get rolling?
Ian Hartman [00:02:48]:
Yeah, absolutely. So, you know, I spent Most of my career in the operations side of businesses, that's where I've grown up. Most recently been on senior executive teams, titles like VP of supply chain. And before I came to Right Manufacturing, I was the COO of a business that was about 350 million top line sales. And you know, most of my. You will get into this probably as we go through, but most of my experience was on the inventory planning, demand planning and warehouse operations side of the equation. And then once to know you, Glenn, that's when I really started getting into the freight side of supply chain. So when I think of logistics and operations, supply chain, I think of kind of a three legged stool where you have inventory and demand planning, warehouse operations and then the freight side.
Ian Hartman [00:03:45]:
So that's kind of where I started.
Glenn Gooding [00:03:47]:
It's a great analogy. That stool has a hard time standing on two legs, doesn't it?
Ian Hartman [00:03:51]:
Sure does, yeah, yeah.
Glenn Gooding [00:03:54]:
So your first title, your first role when you and I got together was you were COO of the company at that time, right? Is that right?
Ian Hartman [00:04:01]:
No, the first company I was vice president of supply chain.
Glenn Gooding [00:04:05]:
That's right, that's right.
Ian Hartman [00:04:06]:
And in that role I had the operations side of the business. That business was somewhat unique where we were an industrial distributor. If you looked at our shipping profile on the freight side of the business, we had very heavy concentration in the less than five pound parcel, had a lot of ltl, but when you looked at our parcel, it was very lightweight. So that created some interesting opportunities when once we partnered with iDrive and with yourself to do some optimization efforts there.
Glenn Gooding [00:04:37]:
Great, great. So let's dive into that a bit. I think it's kind of a funny story in a way, what I'd love for you to share with everybody, you know, what kind of led you to hiring a consultant, hiring me in this process.
Ian Hartman [00:04:51]:
Well, you know, I would actually describe myself as somewhat consultant adverse. At least I had been up until when we partnered. And what kind of triggered the partnership there was the business I was working for. We were private equity owned and we had changed hands. We'd gone through a selling process and the new owner said, hey, we've had really good luck using this freight consultant, iDrive. We'd like you to bring them in, have them take a look at your guys's contracts and see if there's some room for improvement. So it was more hey Ian, you should go do this, rather than me thinking, hey, this is a great idea to bring consultant in. But you know, that's kind of where our relationship started and I think you'd say it was probably one of the faster courtships.
Ian Hartman [00:05:38]:
You know, it was pretty quick from introduction to signed contract and getting down to work.
Glenn Gooding [00:05:44]:
It certainly was. You know, it's surprising how quickly the sales cycle goes when you're dealing with a hostage situation. Yeah, right. So, yeah, it's interesting and I think that's an important takeaway. I think there's a lot of folks out there who are probably consultant averse. Right Y in some way or another. So as we consummated the partnership, as we got to work here, you are a very competent VP of supply chain, feel very confident in your ability to get things done and drive improvements. You're kind of more or less coerced or forced into a partnership with me.
Glenn Gooding [00:06:17]:
What kind of expectations did you have or goals of this partnership kind of going in like that?
Ian Hartman [00:06:22]:
Well, you know, going into it, I thought that we had a very competitive contract with our small parcel carrier, which was UPS at the time. I thought we'd done a pretty decent job. We'd been through the negotiation process with them once before. I had been there probably two or three years before we changed hands and we'd negotiated that contract one time and I felt pretty good about it. So I wasn't expecting that we were going to knock it out of the ballpark, but we did. You know, in the end, once we started peeling back the onion there, we found a lot of opportunity.
Glenn Gooding [00:06:57]:
Interesting. So I think that's another important thing. So you were kind of the architect of the work that had been done so far. Was there any concern, defensiveness, kind of territorialism going into this? Like, who is this consultant Glenn Gooding, and is there a potential risk from your perspective at that time?
Ian Hartman [00:07:15]:
Well, I think yeah, that can be uncomfortable when you are the architect of what's in place. But at the end of the day, as a leader and a manager in a business, if you can show bottom line results, if you can drive bottom line results, people have a short memory. They're going to forget about the past and just focus on, hey, we're getting some meaningful savings. And it's what have you done for me lately? Not what did you do for me, you know, a year ago.
Glenn Gooding [00:07:42]:
Amen to that. So anything surprising in those early assessments that you hadn't considered initially as we kind of get going? And I think you were charged with saying, hey, have this firm take a look at the program, what you have going. Any real surprising outcomes there?
Ian Hartman [00:07:58]:
Well, I think what was surprising for me was there were certain elements of the contract that I had worked hard to get that were emotional for me, like maybe a reduction to the minimum charge. But there were other things as we peeled back the onion and looked at the data that I hadn't considered that had a really big impact on the overall cost of the contract.
Glenn Gooding [00:08:24]:
Okay, so if I could restate that, if I understood correctly, you had a perception of what you thought was driving expense for the company, you'd really kind of gotten your gut into those, you'd really worked hard to improve those. Right, right. And it sounds like on that initial assessment, having kind of a data driven approach allowed you kind of a greater perspective with greater detail of kind of where the money's going and what the opportunities might be.
Ian Hartman [00:08:49]:
Yeah. And Glenn, honestly, I think one of the things that you guys did very well for us that brought a lot of value into the process was understanding how UPS in this case, well, UPS or FedEx, you know, the value was bringing in how UPS approaches the contract, what's of importance to them, where they can bend and where they can't. So, you know, if I focus in on a piece of the contract that is very difficult for them to bend on, I'm not going to get anywhere. But if I focus on another area of the contract that's easier for them to bend on, I can get at least, or maybe even more than what I thought I could get on this other area. And going back to that three legged stool analogy, in my career I've been very focused on inventory and demand planning and on warehouse operations. And then I was put into a role where I was leading the whole supply chain side, but I wasn't an expert in the freight side and I didn't understand some of the cost drivers for the small parcel carriers. And that's the perspective and the expertise that bringing you in was allowed me to understand. And I would say that at this point in time, having gone through, you know, I brought you into the first company, we then partnered again a couple years later at another company.
Ian Hartman [00:10:08]:
I would consider myself, you know, not expert level to your level, but compared to the average Joe, I know a whole lot about the parcel space now.
Glenn Gooding [00:10:17]:
Yes, you do.
Ian Hartman [00:10:18]:
And I can be pretty effective looking at a contract and saying, hey, we're doing good here, we have opportunity here, which, you know, it's like I brought in a fractional expert, you know, like in my current business, we're not a real big business and we have a fractional cfo and he's a tremendous asset to me, but I don't have to Pay a full CFO wage. And that's kind of what I got out of you guys was I got a fractional freight expert and you guys provided a lot of value in that regard.
Glenn Gooding [00:10:46]:
Great. So I don't know of any supply chain initiative that didn't involve cost reduction is one of the main tenants. Right. So what were the cost targets? What were the expectations of this project as you brought a firm in?
Ian Hartman [00:11:03]:
Yeah, so in my experience, we like to talk about freight as a percent of revenue over percent of sales at the highest level. Obviously there's ways to break that down in different dimensions, but we were targeted. We had seen freight as a percent of sales escalate in both businesses. We'd seen it escalating over the period of 12 or 24 months. And we wanted to get that down to where it had been historically and put those dollars back to the EBITDA line. And so that's really where we were focusing mostly was freight as a percent of sales.
Glenn Gooding [00:11:39]:
Great. So we did an assessment. We identified potential areas of opportunity. Right. At that point, it was kind of time to circle around and determine how we were going to go about this. Right. How were we going to message that? What did you think or what was your perspective on the approach we took to going to market, talking to your incumbent, talking to the non incumbent and kind of the negotiating steps throughout the way? Right.
Ian Hartman [00:12:08]:
Well, we touched on the data driven aspect, you know, and that's hugely important. When you're sitting across a negotiating table with a UPS or a FedEx, they typically know more about your business and your shipping profile than you do. Because it's not their first rodeo, and that's their core business, is to understand, you know, understanding your business is what allows them to profitably service your business. And so we really looked at the data, we looked at the cost blocks. You know, on our average shipments, where was the cost being incurred and what did our shipping profile look like? How many small parcels did we have? You know, as I mentioned, the one business had more than 50% of our parcels were less than £5. So if we're going to make inroads on our total cost profile, we have to make inroads on that parcel 100%. And so I think, generally speaking, I think it was just the data driven approach. More specifically though, in actually both of the businesses we had trouble getting the non incumbent.
Ian Hartman [00:13:11]:
So we were ups. And so we knew that in order to get the best contract out of UPS, we needed to get engagement from FedEx. And in both of the negotiations we didn't get the right level of engagement from FedEx early on, but through, you know, some coaching from your side, we were able to get in touch with the right parties inside the FedEx organization to get engagement. So I think that was also a really important part of the whole process was getting top to top engagement from the non incumbent.
Glenn Gooding [00:13:47]:
I agree that's an interesting dynamic and I want to make sure everybody kind of understands some of the critical components of that. I think what you're alluding to is credible engagement. Right. So you struggled with that with a non incumbent in both cases. I think that's a two sided coin, meaning one thing that we really advocate for as well. If you want a credible engagement with a non incumbent, you too need to be credible in the aspect. Meaning it just can't merely be an exercise of leveraging one to drive down another. There has to be a legitimate and sincere opportunity for that non incumbent to get to know that company and align for a long term partnership.
Ian Hartman [00:14:31]:
Right.
Glenn Gooding [00:14:31]:
I think that's critical. Right. We have to maintain our integrity and our brand and our credibility through that process. I think.
Ian Hartman [00:14:38]:
Absolutely. And on the other side of the coin, the incumbent has to know that you are seriously considering changing. You have to be willing to entertain the change. I think that they will sniff that out if they think that you are just in it to leverage.
Glenn Gooding [00:14:56]:
Yeah, yeah, I couldn't agree more. So how successful? Let's talk turkey. How successful were these projects, Ian? How well did we move the needle and did we meet the goal, the stated objective? Did everybody, including private equity feel like, wow, that was a worthwhile endeavor?
Ian Hartman [00:15:15]:
Yeah, I believe we hit it out of the ballpark now with the first business. We went back to the wealth twice and we should talk about that. But the numbers first. I think the first round we achieved a 14% reduction.
Glenn Gooding [00:15:29]:
Meaningful.
Ian Hartman [00:15:29]:
And we were very meaningful. That business had about a 5 or 6 million dollars spend. So 15% was impactful to the bottom line. And in my past negotiation, we had negotiated, we've negotiated a three year agreement and you know, I was thinking, okay, well I'm not going to go back and ask for something more until that three years have transpired. Well, that first round when you guys were involved, we went and got 14% and then we went back a year later. We'd done a series of acquisitions and our spend was now different, it had grown. And so it was actually your coaching of us towards me that said, hey, your spend profile is different now. It's more meaningful.
Ian Hartman [00:16:13]:
You're larger, let's go back again. And when we went back for the second time, we got another 9%. So in the two rounds, we are 23% savings. And that was only about 12 months between the two negotiating events.
Glenn Gooding [00:16:28]:
Right. So this partnership, though, it wasn't just about cost savings. Right. So we supported you in other business processes and other scenario modeling. Right?
Ian Hartman [00:16:39]:
Yeah, you certainly did. I mean, one of the things that I think you guys do really well is you have your online portal where every week you're pulling down the invoices. And then there's basically a BI tool, business intelligence tool that I can run out and I can run reports, I can automate reports. One of the things that I found very valuable there was we were able to hone in very easily on suppliers that were shipping us multiple parcels in the same day to the same destination address. And we were able to use that data, then go back to the supplier and say, hey, we need you to consolidate those shipments into fewer parcels to get efficiency there. So that was one thing that you helped us with. You helped us reduce some of the weekly service fees. You know, we had so many shippers that we.
Ian Hartman [00:17:31]:
It was opaque to us. It wasn't completely transparent how much we were paying on service fees. We also set up an automated report that would show us address corrections. You know, sometimes what happens in medium and large businesses, you know, you're not calling through your UPS bill every single week because it's just so large. You lose sight on some of those things. But once you get an address in your system wrong, every time you ship that customer, you're incurring these charges. So we were able to do some of those hygiene things by having automated reports come out and tell us, hey, you took this type of a charge. And then we had a workflow that said, okay, if that we're getting those things, then we're going to correct it internally so we don't have that charge again in the future.
Ian Hartman [00:18:15]:
So, you know, there were a series of. And that's just three examples. There were other things that we did.
Glenn Gooding [00:18:19]:
Yeah, I remember. I thought there was a scenario that you had us map out one time where you're considering consolidating the majority of your lightweight SKUs in a kiosk environment in one location.
Ian Hartman [00:18:31]:
Yep, we did.
Glenn Gooding [00:18:32]:
And then what would the material impact to your supply chain be from a customer experience as well as a cost perspective if we were to consolidate those shipments into larger packaging and things like that?
Ian Hartman [00:18:42]:
Right, right. And the thing from that, what I'm thinking about right now is when we did that, I didn't understand at that point in time how UPS thinks about the cost of servicing an account between the inbound, you know, getting it to their hub versus the delivery side of, you know, you guys helped me understand that if we get it closer to where they inject the parcel into their network, that you can save on the inbound logistics costs and negotiate for those savings. I say it out loud, it sounds obvious, but it wasn't obvious to me at that time that we should go and negotiate that way.
Glenn Gooding [00:19:17]:
Yeah. So it's really having an intimate understanding of how a supply chain aligns with the carrier network, what those efficiencies are, and ensuring that. That you as the customer really appropriate your share of those efficiencies. Right. Yeah.
Ian Hartman [00:19:31]:
And the other thing to mention is we were in a very acquisitive situation with that private equity portfolio business. And you guys have a tool that allows you to put a contract in your system and then compare it to another contract and analyze the savings. And I don't know how many times I leaned on you for that when we were doing acquisitions and we were able to say, okay, during the due diligence process, we believe that we're going to get this synergy by doing this acquisition just on the freight side alone. So that was also a nice service you guys provided.
Glenn Gooding [00:20:04]:
Yeah, it was great. It also was a nice confirmation that we had pretty good rates, wasn't it?
Ian Hartman [00:20:08]:
Yeah, absolutely.
Glenn Gooding [00:20:09]:
Yeah.
Ian Hartman [00:20:10]:
In every single acquisition, we had savings just by virtue of acquiring the business and moving them onto our freight program.
Glenn Gooding [00:20:17]:
Absolutely. I guess reflecting on the process, you've gone through the meat grinder, I would say, at least four times now with two companies.
Ian Hartman [00:20:25]:
Yeah.
Glenn Gooding [00:20:26]:
With us.
Ian Hartman [00:20:27]:
Yep.
Glenn Gooding [00:20:28]:
How would you describe the impact of actual consulting of having a Glenn Gooding or a Mike Johnson involved directly or Michael Gooding supporting the strategy, the analytics, the approach, you know, toward adding, making you more effective in your role as a VP of supply chain or as a CEO.
Ian Hartman [00:20:45]:
Yeah, I mean, particularly my experience is in the private equity space. And prior to being in private equity, I was working for a company that had, you know, about 2 billion in top line revenue. And we had a lot more resources on staff. We could have a freight specialist. Then I pivoted over to the private equity space and we were extremely lean compared to what I had experienced in those larger businesses. And so going back to my analogy of a fractional CFO bringing in the consultant was like having a fractional expert. But just like I could email somebody on my team and say, hey, this is important. We need to look at this.
Ian Hartman [00:21:25]:
Can you give me this feedback? I could email Michael and I did a lot. I mean, Michael was a great resource to me during this period of time where I would say, hey Michael, I'm thinking about this. What do you think? And always same day I'd get something back from Michael. So it was like having somebody, an expert on my staff.
Glenn Gooding [00:21:42]:
Awesome. You know, if we were to have closing thoughts here, advice for someone considering heading down this path, now that you've experienced kind of the benefits, the experience of consulting firsthand, what kind of advice or things would you say to a business considering a similar partnership?
Ian Hartman [00:21:59]:
Well, in my experience, hindsight's 2020 and I was able to get further in the negotiating process with the insights and coaching you guys provided than I would have been able to do on my own. And so I think what folks have to consider is, is that extra optimization worth what they're going to spend to bring in a consultant? Because obviously you bring a consultant, you're going to have some expense. But so you have to consider is, is that extra optimization, will it pay for the expense of the consultant? And I could tell you, Glenn, you guys provided value in both of the businesses and you were a big part of the success that we saw on driving our logistics expense down.
Glenn Gooding [00:22:41]:
Well, I appreciate that.
Ian Hartman [00:22:42]:
And you know, if we had all the time in the world to do the analysis, I'd say we had the competence internally to do a lot of the analysis, but we didn't necessarily have time to invent the models and the tools to do it. And that's what you guys brought to the table. And I think because a lot of businesses consider that they are going to negotiate their freight every couple of years. And so you get rusty if you're not doing it all the time.
Glenn Gooding [00:23:07]:
Yes, you do.
Ian Hartman [00:23:08]:
And that's your guys core business, your core competence. Your tools aren't rusty. You're using them every day. So you keep them sharp.
Glenn Gooding [00:23:15]:
You bet. In your opinion, are all consultants out there in the space created equal?
Ian Hartman [00:23:20]:
You know, I feel like I'm big glazing you a little bit. All I have is positive things to say. But it's true. And what I'll tell you is you established good rapport with me early on just by your pedigree. Right. So. And I don't know if your viewers know your pedigree or not. You could probably do a better job sharing it with you.
Ian Hartman [00:23:37]:
But I'll tell you just what sticks in my mind is what you stood that you had had a career at UPS and worked on the contracting desk, the sales desk, and understood over years, you know, decade. I don't know. How long were you there, Glenn?
Glenn Gooding [00:23:55]:
21 years.
Ian Hartman [00:23:56]:
21 years. So more than two decades. Understanding the inner workings of the largest parcel carrier in the US and then when you would bring into our conversations, well, here's how UPS is going to think about it. That was invaluable. So I don't think all consultants are created equal. There's a lot of consultants that can do really fancy business intelligence. They can look at what you're spending, how you're spending it, and that's good and great and valuable. But it's the understanding the human element of how the negotiation is going to work and how the other party is going to react that really adds a lot of value.
Glenn Gooding [00:24:30]:
Great. So it sounds, if I'm read between the lines, it sounds like you kind of got to look under the hood and, and peek at the pedigree of the consultant. Are they someone that just claims to have good benchmarking data or a feel for what they think a good discount is, or is their pedigree a little deeper than that or they have a foundation of really understanding intimately a carrier network, revenue management practices and cost structures?
Ian Hartman [00:24:55]:
Absolutely right.
Glenn Gooding [00:24:56]:
So I guess as a close, and I really appreciate your time and your candor through this, any final piece of advice you might give to companies navigating similar supply chain challenges, you know, if you give one, what would it be?
Ian Hartman [00:25:10]:
I think, you know, human nature is to procrastinate and by bringing in a consultant, you can get more done. You can keep doing the things that, you know. Every business has fires and different priorities. But you guys opened up my bandwidth and you were proactive about scheduling some touch points with me. Actually, the QBRs that you guys conducted were hugely helpful. They weren't a waste of time, they weren't a big investment, but it helped me keep my finger on where things were. So I think the biggest advice is don't procrastinate. You can get at savings most assuredly on your contract if you bring somebody up in it to look at it.
Ian Hartman [00:25:49]:
So don't procrastinate.
Glenn Gooding [00:25:51]:
Great. Well, I appreciate it, Ian. So speaking with Ian Hartman, CEO of Right Manufacturing. I'm excited for the path you're on now, Ian. It sounds like things are going great. Yeah, I'm looking forward to the next time we get together and have lunch or dinner together.
Ian Hartman [00:26:06]:
Yeah, me too.
Glenn Gooding [00:26:07]:
As far as takeaways for the listener, I think we were to recap here, sounds like consulting can be a great asset if it's the right consultant in the right company. I think so. It's important to look under the hood, really understand the pedigree of the consultant. Do they stand on a deep foundation of understanding of the small parts of the market? And do you have access to the right type of analytics and ability to really dive into the details of your spend and identify areas of opportunity and have the requisite experience on how do we move the needle towards improvement? Right.
Ian Hartman [00:26:47]:
Yep. If I can add to that, it's the analytics are somewhat table stakes. You gotta have the analytics and what really differentiates is I think it's the interpersonal side of understanding. That's the other thing. I learned a lot, Glenn, from the interaction or the engagement with you guys was just even negotiating tactics and how to shape things. So I think analytics is table stakes. You gotta have analytics. But then having the soft skills, that's probably the best way to say it.
Ian Hartman [00:27:17]:
The soft skills in how you negotiate with these parcel carriers is what really I think set you guys apart in my mind.
Glenn Gooding [00:27:25]:
Great. Very much appreciate the business. If I had only one selfish downside of your right manufacturers. You don't ship any small personal anymore.
Ian Hartman [00:27:34]:
No, we don't.
Glenn Gooding [00:27:36]:
I mean that in jest. I hope everyone enjoyed this edition of Parcel Perspectives. I look forward to seeing you and speaking with you on the next episode. Take care.
Glenn Gooding [00:27:51]:
Thanks for listening to Parcel Perspectives, hosted.
Glenn Gooding [00:27:54]:
By me, Glenn Gridding.
Glenn Gooding [00:27:55]:
I've been in the small parcel space for 37 years, starting with a deep and broad background, working for one of the major carriers as an operator and industrial engineer, later managing pricing at the highest level for the lower, largest, most complex shippers in the world. Since then, I've been a national thought leader and worked to help drive strategy for clients from Fortune 50 companies to startup e commerce businesses, helping them more competitively align in this complex and expensive market. If you enjoyed the show, please subscribe and share with friends. Join us next time for more expert advice and strategies to stay ahead of the shipping game.
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