61 Managing Modern E-commerce Complexities - Jared Ward Feb 15 2024

Erik Martinez: [00:00:00] Welcome to today's episode of the Digital Velocity Podcast, where we dive into the heart of direct-to-consumer business strategies and innovations. I'm Erik Martinez from Blue Tangerine with my co-host, Tim Curtis from CohereOne.

Today, we're thrilled to introduce our guest, Jared Ward, CEO of Luminous, who is a distinguished leader in the E-commerce space and a visionary in multi-channel supply chain management. Jared is the driving force behind Luminous, a company at the forefront of addressing complex challenges faced by modern E-commerce businesses. Jared, welcome to the show.

Jared Ward: Excited [00:01:00] to be here, guys. Thanks for the invite.

Tim Curtis: You bet.

Erik Martinez: So, Jared, before we dive into everything supply chain, can you give us your brief background and how you got to where you are today?

Jared Ward: Yeah, absolutely. My background is in supply chain and E-commerce. The two main relevant pieces of experience, I'd say, are under both of those. So, my supply chain background is, I speak Mandarin and Cantonese, which really led me down the path of helping people get stuff in China.

I was good at that because I had that language, and then I was able to stack that with actual experience in manufacturing. I ran a sourcing division where I just help people find stuff in China and manage that. A lot of them were E-commerce companies. That's a big piece of my experience doing that for a bunch of different companies.

Then with E-commerce, I dropped off college to start my own Etsy shop, where I handmade barn doors, barn door hardware, baby gates [00:02:00] and sold it across multiple Etsy shops and Amazon store. Then eventually, on the E-commerce experience side, I became CEO of a multi-channel E-commerce business called Qualtree. So, we did about 15 to 20 million dollars in revenue every year. The mix of those two experiences led me to start Luminous. I saw a massive gap in the market from my perspective from those two pieces of experience.

Erik Martinez: Cool. Yeah. There's some well-documented cases of people dropping out of college to start a business. College is not the only path right to success. So good for you. Entrepreneurship can be fun and daunting all at the same time, so it's exciting to see somebody who dove right in and creating a company and creating some value in the market.

So, let's talk a little bit about the complexities of modern E-commerce. You know, in your video, you spoke about the unique complexities that modern E-commerce companies [00:03:00] face, especially as they scale rapidly. Can you elaborate on what you think are the most critical complexities and how should companies strategically address those challenges?

Jared Ward: Yeah. So, there's a lot of trends in E-commerce and that's why I always say Luminous was built for the modern E-commerce company. What I mean by that is E-commerce is different than it was even back in 2012, 2015. Nowadays the specific complexities that I see, I would say are mainly through distribution. So, how many distribution points you have? And then, the second thing would just be your channels. And those are very intertwined, but they lead to a lot of unaddressed complexity in your software.

Most E-commerce companies nowadays, they outsource to a 3PL. They go to FBA without even asking any questions. They start selling FBA and a lot of times they'll even expand to big-box retail. So it's like, ah, [00:04:00] I've had good traction here. My buddy knows the Scheels buyer, or he knows the Costco buyer. He knows, insert whatever retailer, I'm going to sell to them. So, what those two pieces introduce is a complexity to your fulfillment and purchasing process that you didn't even realize.

So, I see all the time, a modern E-commerce business, they're doing 5 million in revenue, they sell on FBA, they sell to a big box retailer, they do their own E-commerce fulfillment. They could use a 3PL to outsource a portion of their fulfillment. What that introduces specifically there is I'm doing 5 million in revenue. I might have one guy or girl to run operations, but the complexities are, okay, I'm not just buying products, I have to now account for how many do I send to my 3PL. How many do I restock with FBA?

Oh, you know, because I sold the Costco, we had to do this other distribution center that handles [00:05:00] the requirements of big box retail. I have three distribution points that I have to replenish. What people don't realize is your system has to be able to handle replenishment reports by warehouse group. It's a difficult thing and there's real stakes to going out of stock. If you go out of stock on Amazon, you lose all of your traction on your listing.

If you under purchase, because you didn't take into account your sales velocity for this one particular channel, or you over purchase because you didn't take into account an anomaly at this place. Planning, forecasting, purchasing, it becomes really difficult when you have multiple points to replenish, and operators, a lot of times they don't realize that. They just say yes to all these different revenue streams and their tech stack can't keep up. It can't do the things that it needed to do.

Erik Martinez: I've got a client who they've got something like 15, 16 channels, [00:06:00] including their own direct-to-consumer channels. Back before the pandemic, they had started going down the 3PL route. They've always done their own fulfillment and they had multiple warehouses. Then the pandemic happened and over that period of time, they've actually been consolidating back into their own warehouses.

And part of the reason for that is what you just talked about is that these multiple points made it really difficult for them to say, Hey, how do we do fulfillment out of our West Coast Fulfillment Center and our East Coast Fulfillment Center, and our one in the Chicago region, and which products do we need to stock in each one of those? And then, in what amounts? And it became very, very difficult for them, given the systems that they have for sure, I don't want to say it's a hundred percent manual, but it might as well be.

So, how do you start to unpack that problem in a digestible form? Well, here's what you really need to do. Because you're right, look at your stuff. You're like, [00:07:00] you can't just throw a new tech stack at it. That's not all of the answer. So, how do you go about doing it?

Jared Ward: It's very simple. Understand what makes you complex. A lot of times operators they'll introduce channels, they'll sell through 3PL. Oh, we want East Coast and West Coast coverage. So, they want the things and then they do the thing and it feels complex. So, a lot of people, when they feel that complexity, when it feels uncomfortable, all that means is, okay, your tech stack isn't solving the complexities you need it to solve.

A lot of times operators will just be like, that's when they make the jump to a NetSuite or an Acumenica, or it's like big ERP come solve all my problems. That normally doesn't end up working out. Understand what's going wrong, where is ShipStation failing you? Where is Shopify's order manage failing you? So, then you can actually [00:08:00] look for a system and understand the features that you need it to do. That would be number one.

That's where Luminous comes in. I'm not trying to sell Luminous to anybody and everybody. I'm only trying to understand where your tech is breaking. And then, I'll let you know if Luminous can solve it. Normally, it's very specific problems that people don't understand. Like, okay, I need a single source of truth to pull in all of my orders from my sales channels, and then I need it to route my orders to East Coast and West Coast-based on specific logic. There you go. There's a specific problem. Now you can go to tech vendors and so you can actually solve that problem.

Another specific problem that we run into all the time is for forecasting and replenishment, Understanding looks like this. My 3PL uses Extensiv for their WMS. That's a software. They use Extensiv. I have to log in manually, export my inventory numbers, put them in my Excel spreadsheet.[00:09:00] I have to go to all of my sales channels to get my historical data and then I have to embed my forecast over it.

There's a lot of problems there, but specifically on the tech side. The questions there, understanding your difficulties in forecasting and in replenishment, it's can you plug into Extensiv and pull in my inventory numbers automatically so I don't have to manually export that every time? Can you pull in all of my historical data and segment it by channel so that I can form my future forecast? And number three, can you bake in my assumptions that I use on my Excel spreadsheet to help forecast and plan for the future?

That's really specific right there. Those are problems that a tech vendor, they'll easily tell you no, we can't do that, or Yes, we can. But a lot of times, operators, they just get stuck in the complexity. And they'll just be like, NetSuite solve all my problems, and then they're surprised when NetSuite can't solve all their problems. So, [00:10:00] understand. Understand what you actually need.

Tim Curtis: Yeah, it's interesting. NetSuite's a great example. You've had discussions and you've had some information that you've done before talking about the pitfalls of implementing large ERP systems like NetSuite. I'm not exaggerating when I say I have seen companies go under because their migration to NetSuite, in particular, was such a disaster. Project timeline, et cetera, they didn't really understand the risks. They didn't necessarily understand the cost involved. But you've highlighted those risks and the cost involved as two examples, if you will, of the challenges that these brands face.

If you're advising a growing E-commerce brand, how do you go about setting and having that conversation with them in order for them to walk into an ERP system migration without it being a complete disaster? I've actually had conversations with some client CEOs here recently on the very subject of needing to do a [00:11:00] migration. A lot of them have picked NetSuite.

Some of the learnings that I think we're taking away is instead of critically looking at their own processes and understanding, are there ways we could simplify what we're doing? They're trying to over-customize an ERP system that doesn't work. So, I just wonder what your thoughts were on that and kind of expanding further?

Jared Ward: Yeah, 100%. That's a great question. First off, we'll only take on a company who's going to come to the table for an open conversation about their processes and what the migration to Luminous would look like. So, what I've seen happen, the migration to NetSuite or of any big ERP for E-commerce companies, it fails, like you said, when they try to over-customize. Now where does the over-customization come from? Well, normally it comes from, I am using ShipStation and Google Sheets to manage my process like this. Why can't I do it exactly like that in NetSuite?

I'll give you an example. We were [00:12:00] implementing a fulfillment center who is the same thing. They were able to batch print their shipping labels at the beginning of their process in ShipStation, and it's just because they basically built their whole process around being able to be reactive and just print out shipping labels as they come in, and that kind of dictated the whole process.

Where when you go to a bigger ERP, that might not even be possible. It might cause a bunch of issues with triggering inventory deductions, and if you're not open to doing pick and pack, where you have to go and actually, you know, scan a bin to remove the inventory. They see NetSuite as like, okay, I have problems with my inventory, my forecasting being accurate. Also over here is the reason why their inventory and forecasting is inaccurate. It's because they're doing it this way on ShipStation and Google sheets.

So, a lot of times E-commerce [00:13:00] companies and operators, they want the end game visibility and scalability, but they don't want to change the thing that's making it where they can't even scale. A lot of times they don't understand that. Where I have beef with NetSuite is, a lot of times NetSuite, will still say like, yeah, we can do all of that.

Tim Curtis: Yeah, they will.

Jared Ward: Well, NetSuite, they can do all of that, but it's going to cost a million dollars. Your unwillingness to change and come to the table, like you just want to do things how you're already doing them in ShipStation and Google Sheets, NetSuite will customize that, but it will also sink your business if you're not careful.

Tim Curtis: We're kind of back to the old adage that the biggest impediment to success when you're talking about any kind of transition, is really our own frame of mind and failing to kind of step outside of that to view something a little bit more critically. Being open, like you said to examine, can we get there via a different method, one that maybe is a bit more intuitive to the platform?

[00:14:00] You know, I've seen these ERP migrations, again, most of them NetSuite, I have seen some going for years before they finally pull the plug. They never could get there and they have wasted an extraordinary amount of money. I mean, an unbelievable amount of money. They might as well just to put it on the front stoop. It is a particularly big issue. We like to think about all the tech stacks being modern and up-to-date, and the reality is many of them are not, especially from an ERP system. Many of them are not. It's crazy to me.

Jared Ward: Yeah.

Erik Martinez: You're talking about some really important questions that people need to ask themselves. The example we're talking about, you know, just a couple of warehouses. A lot of these companies have a lot more than that, that they're in, right, and multiple partners like Amazon filtering in. Where do they start? What is the very first thing that they should do to kind of take a step back before they just throw another tech stack at it?

What are the things that they should do? What are the key [00:15:00] questions that they should ask? You touched on a couple of those, but is there a specific process that you recommend people go through to weed the complexity out of it and really get down to the essence of the core problems that they're facing?

Jared Ward: Yeah. So, there's tech and operations. Your tech problems are really straightforward if you understand what the tech is supposed to solve. Like, I need a product to pull my orders and route them to two separate facilities based on certain logic. That's an easy question to ask somebody in tech.

The operational complexities are the ones that only they can ask. So, my inventory is wildly inaccurate. This could be a question. Forget how you're keeping track of inventory on a software. It could be Google sheets for all I care. It could be SkuVault. It could be Limited. I don't really care. Why is my inventory inaccurate on these systems? The operational question is something you can always ask. That right there is just understanding and taking a look at [00:16:00] all of your processes and picking apart where the inaccuracies are coming from.

So, if I'm doing an audit on my inventory, then what I can do as an operator is just on a sheet of paper, pencil, and paper, just list out. Physically, where are all of my inventory? Where's the inventory going in? Where's it coming out? How does it get received? Listed all out. How's it going out? That's everything from Billy Bob Joe potentially stealing it, or the defective that somebody finds in picking and just throws in the trash, an employee, like sending it to an event. The obvious answers are like, Oh, people, they pull it down and they ship it out.

I guarantee you when you list out all the things that are physically happening, and then you try to match it to your software, that's the part that an operator can always control. It doesn't matter. Even if you're using Google Sheets, for crying out loud. It doesn't matter. Do a process on it. The whole point of [00:17:00] software is to match, and in many cases, automate. what is happening physically, electronically. It takes, Oh, this defective thing. It would be nice if the software would auto-deduct that, or checking out inventory for a trade show. Now that you understand that, ah, there's probably a lot of breakage there. There's issues happening. Nobody's checking that out.

Software, it's going to keep track of all of those things that you're physically listing out, and hopefully, it will automate a lot of them. That's a deeper part of what I said before, just understanding your processes. But that is something that any operator can do right now. And they can do it in different buckets. You can do it in your manufacturing process. You could do your purchasing process. You could do your fulfillment flow. List out all the physical things that actually happen and match them to your software.

Erik Martinez: When a client comes to you at Luminous and says, Hey, Jared, I've got this problem. Where did you guys go about helping them solve for their real-world problems? What do you guys [00:18:00] do specifically, and how does your technology help them improve their processes?

Jared Ward: Yeah. So, before we even sign on a client, we do really deep discovery. So, we are going through that. We're listening to them talk about their problems and how they relate to them. Within that, we're listening and understanding what their real problems are. So, like I said, it's either a software problem, meaning, the software they're using needs to do this one specific thing, and it's not. Like, they need to pull in WooCommerce orders, and that system can't. It's dead simple.

We're also listening for the operational things. An operator complaining about inventory being incorrect, and then asking him a bunch of pointed questions, like, okay, well, here your inventory is inaccurate. Let's dive in. Let's see. So, how do you guys keep track of this? And we go through, we help them audit their processes and we listen to the operators and how they relate to it.

[00:19:00] It's actually a big red flag for us if the operator is blaming the system and they don't even know what is wrong with the system. It's just like, ah, SkuVault sucks or NetSuite sucks. Like, okay, why does it suck? What's going on? The inventory numbers are always inaccurate. Okay. And we'll go through that checklist of items. Like, so how are you doing this? Are you doing this? Are you doing this?

We just skip over the noise and we get to the root of the problems. We're either identifying very specific technology problems or very specific problems in operations. And we're only going to move forward if that operator understands his or her contribution to the operational inefficiencies. We'll call out where this isn't NetSuite's fault, actually. That's actually your fault.

We can help out with that. Luminous can help out with superior training and superior SOPs. We're more hands-on. But to be clear, that's actually an operational issue. You need to pick and pack right here instead of right here. It's just really diving in, listening through [00:20:00] the noise, and trying to find the real issues. Once we find the real issues, that's when we start implementation.

Tim Curtis: Kind of pivoting a little bit. I want to talk let's continue in the E-commerce sense here. A lot of brands, I mentioned this earlier, have legacy systems and those legacy systems tend to be decades old. I've seen AS400 still running. I can't tell you how many brands are still operating on eCometry. It's kind of astonishing when you take a look and see what's out there.

But all of those legacy platforms have had to do a lot of iterations and growth, custom programming to incorporate elements of different types of new channels. So, a multi-channel environment that went from just a few channels now to multiple types of channels coming into that. Multi-channel expansion, its implications, you talked about that, how you can get into the rapid ability of these companies to go multi-channel. But then there's all these associated challenges with it.

So, E-commerce brands that are going into all these different channels, they're leaning in. They've got maybe more sophisticated in [00:21:00] TikTok or Snap. And each one of those are bringing in basically new order streams that are going to come into the website and then, kind of get synced up with the ERP system.

A lot of the old legacy systems over the years, they've had patchwork. They've had custom development still in order to be able to take orders from these new marketing channels. The speed of the introduction of those marketing channels has just increased. How do you approach, specifically, that aspect of the channel side when you're working with a client who you're trying to get all these things to come in? What does that look like for Luminous? How do you do that without messing up your inventory or your supply chain?

Jared Ward: E-commerce has an ever-evolving landscape. There's order management systems, there's connection partners, there's so many different facets that go into an ERP like purchasing channels, carrier relations. We can't do everything perfectly, and we can't stay up-to-date on everything. So, what we do [00:22:00] instead is we link into channel partners. A good example, like API2Cart or CartRover. I think they were acquired by Extensiv.

There's a bunch of software companies who literally do that. It's their job to just stay up-to-date with all of the most recent, trendy channels. It's a one-to-many integration channel So, rather than Luminous having to code a new integration every time something comes out, we pay API2Cart or CartRover or somebody else to upkeep those integrations and we get the same value.

That's how we stay on top because you can't do that. Even like, we have an integrations partner, it's the same thing one-to-many, WMS to WMS connection. We couldn't possibly maintain all of that unless we had raised a hundred million dollars.

Tim Curtis: I think some of the internal teams actually do try to take that on, and I think that's maybe where things begin to break down. I don't know that you can possibly be staffed enough to do all of that without outsourcing those [00:23:00] functions.

Jared Ward: Totally agree.

Tim Curtis: Call me crazy. The reality of it is, gone are the days where you are able to have all your development in-house for everything that you're doing. There's simply too many vocational specialty areas now. Even in programming side, you have to find ways to work with people who have domain expertise in certain areas. If you don't, you're operating on a business model that is long since been swept away.

The new business models, in the post-COVID age especially, require a much higher degree of agility. And core focus on what you can control and those things that you can't, and you wouldn't be able to keep up with, finding those partners like you did, to manage that, that resounds with me because that's the piece that I see constantly brands getting themselves into trouble.

Jared Ward: You know, who does this well, in my opinion, is a company, again, this is the challenge of building an all-in-one, like a system that does a lot in a specific vertical, HubSpot. So, they have to have a [00:24:00] core foundational product that does all the things that you need a CRM to do, but they build a really flexible product. It's not rigid. They have like a third-party app marketplace, and they just have a bunch of native integrations to the hot piece of tech coming out. Obviously, we're not HubSpot size, but that's who we aspire to be for E-commerce.

At the beginning, we can't build every single one of these integrations. Eventually, we will one day. Eventually, I'd hope to be like HubSpot where we have people utilize Luminus so much that people can build apps on top of us and other companies will build the integration to us because we have that big of a presence. Like Intercom will build an integration with HubSpot because everybody uses HubSpot. So, it's definitely interesting how that can evolve, but that's how we're managing it right now. It's it's through integration partners that do that well, but eventually, we hope to become like a HubSpot.

Tim Curtis: Yeah. Have your own marketplace at marketplace. Yep. It's a good model. They've done it well. You think about HubSpot and you think about how [00:25:00] they really modernized and brought initially that marketing automation forward, and they have just kept on with the pace that they've been on. They've not ever slowed down. It's impressive. It really is.

Jared Ward: A hundred percent.

Erik Martinez: It's very cool. If we look to the future, E-commerce, and supply chain management, this stuff is ever evolving, right? E-commerce businesses are changing. You know, I hate to date myself, but 20 years ago, you had a business that did everything a hundred percent in-house.

It's migrated to this really wide network of the partner companies that are doing specialized functions. And that's not only happening on the E-commerce operations and supply chain side, right? It's happening in your technology. We just talked about some ways that you guys are doing that. What do you think is the next evolution for E-commerce supply chain management? What do you see coming down the pike that people need to start preparing [00:26:00] for now?

Jared Ward: That's a great question.

Tim Curtis: Just consult your crystal ball there.

Jared Ward: This is just personal belief, and this is kind of where Luminous is building for the future. AI is such a buzzword and who knows the actual adoption that will happen. ChatGPT revolutionized how so many people do their jobs. There's all this speculation about AI and people generally think like, oh, it's going to take over all these jobs. You never know what actually is going to get adopted by an industry or by a specific vertical. For E-commerce, I think that AI will be running a lot of the critical operations that have to reference data.

So, at an E-commerce company, I will most likely outsource my fulfillment to a 3PL. I think the future E-commerce company doing say like five, 10 million is going to look like founder used a 3PL, used an outsourced marketing agency, used an outsourced accounting firm. And I have AI doing the purchasing, [00:27:00] replenishment, price adjustments to my channel to optimize for either profitability or to not go out of stock.

I legitimately think AI will eventually be able to do those things. And that's what Luminous is building and architecting our system for is we're really watching how people do purchasing, how people do replenishment. What data are they referencing? What are the levers you can pull if something's delayed? What are the levers you can pull if something really pops off and you need to slow it down?

I think those are all things that AI one day can do. I actually don't think we're that far away from it. The problem that brands will run into is for AI to actually work, you have to prioritize the cleanliness of your data.

Erik Martinez: I think that's an amazing insight. I was just having this conversation a day or two ago with a friend about where I started my career. I started my career a long time ago, and my very first project was a neural network [00:28:00] project in like an early, early, early version of AI. The goal of this particular company, they were an advertising firm and they were just trying to get some consistency on our forecasts. That's really the problem that they were trying to solve.

This was in the mid-nineties, believe it or not. The number one problem that they had was the fact that their data, the data that the system spit out, was horrendous. It was absolutely terrible. To Tim's point, a lot of E-commerce brands, even on quote some of the newer systems or the more popular systems, their data structures do not support what you're talking about yet.

I've had conversations with CFOs who are like, NetSuite is the bomb. It's the most modern thing out there. And I sit there and go, yeah, but it's based on 20-something-year-old technology and the data structures that are behind it, they're not all 20-year-old technology, but you know [00:29:00] how these systems get built, right? Everything gets bolted on later. And so, re-architecting your technology and your base data structures is a hugely important thing.

Jared Ward: So, I did a video about this where I talked in depth about how I think AI will be used in E-commerce. And I give an example how ChatGPT has emerged and it's a cultural phenomenon. Like everybody knows about it. What E-commerce operators don't understand is like, if you had AI reference your data set and you asked like, how much did I purchase of this product?

It would respond, like, what are you talking about? Like, your data is so dirty, I don't even know. You have a bunch of SKUs that aren't being mapped to your inventory units. You have channels that aren't accounted for. It's not mapping. You haven't segmented your data to different warehouses. So, how is AI going to tell you what to replenish from Amazon if you haven't even mapped your SKUs correctly?

AI isn't just going to be this thing like [00:30:00] ChatGPT, where you can just ask it random thing and it just references all the information on Google. Like, no. Your data that you don't care to upkeep right now, it matters. When you want to do that cool thing, when Luminous comes out with a really cool AI tool, you won't even be able to use it if your data is not clean. You've got to start doing little things and start caring about it. So, I think there will be a massive shift.

Once that supply chain tool does emerge, like Luminous, as like the forefront in AI, I think the first thing it'll be a wake-up call to brands like, wow, my data and my structure is so bad, I can't even use this tool. Brands can get ahead of it. Start caring about your data. Start asking the questions of like, if I did want AI to automate this, how do I have to segment my data? Is there an introductory system that I could implement that will help me do that? I think those are very, very good questions for brand owners to be asking.

Tim Curtis: Well, Jared, as we move to close, is there a great way for people to reach out to you directly?

Jared Ward: [00:31:00] Yes. I would reach out to Jared at joinluminous. com. You can find me on Instagram, Jared_Ward, or just on LinkedIn, Jared Ward. You can follow me. I post content every single week.

Tim Curtis: Good. Easy enough. All right. Well, thank you again for coming on the show. And as we close out here, I want to thank all the listeners for listening to today's episode of the Digital Velocity Podcast. I'm your cohost, Tim Curtis from CohereOne.

Erik Martinez: And I'm Erik Martinez from Blue Tangerine. [00:32:00]