

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.<p>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.<p>Experienced purchasing professional select items we currently hold as inventory and purchase any missing items to make each gift unique if needed.<p>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&#x27;t want to buy at full price.<p>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?<p>Our skills is in software and  we feel like we aren&#x27;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...<p>Thanks for your tips,
Charles
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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.

