Field Notes #2: The Modern Supply Chain Team

Now that the holiday season’s dying down, I thought I’d reshare an old post I wrote a few years ago for operators as you think about your supply chain team and initiatives going into 2025.

Supply chain is boring, except for when you're out-of-stock.

As an operator for most of my career, leading supply chain teams and at times product development, I knew I was setting myself up for a career where failure of my function would mean a lot of stress, but more importantly serious implications at an early stage company.

“Hardware is hard" is what is often said when we hear the news of another physical product company going out of business because they over-invested in inventory, or because their product had major quality issues and they ran out of cash fixing them. You can argue which team planning and forecasting sit in, but at early stage startups more often than not it falls on the supply chain team to either lead or to force sales and marketing into a disciplined sales and operational planning (S&OP) habit.

When a supply chain team is operating at its best; accurate planning, on-time POs and delivery, inventory turns on target and the team is racking up miles keeping suppliers in-check, the other teams in the company at best see paint drying, I mean a dashboard that says “in-stock".

What they may not know is the company could be one blocked Suez Canal away from turning down marketing spend, killing velocity and traction, all the things that are so important at an early stage. Basically, one wrong move and you have a company scrambling:

• marketing needs to stop the marketing engine

• customer support calls and emails start to ramp up

• new email flows have to be made to explain the problem

• ..and so on.

Still think supply chain is a cost center?

I like to call supply chain at startups Product Operations. ‘Supply chain’ just doesn't describe the full spectrum of operations that fall under the organization at modern startups. It's so much more than traditional supply chain in practice. Its possible my own bias is clouding my judgement here but I believe the best supply chain teams are technical ones - consisting of people experienced in manufacturing and process engineering, hardware engineering, coding, no-coding, etc. At the early stages these technical backgrounds help the team manage a wider array of functions that are key to their success. You're not walking into a well-oiled company where SAP is managing your business for you, but you sure are expected to come in with the aim to disrupt one.

You have cost targets? Its great to negotiate but have you tried helping improve the first pass yield of your contract manufacturer's production line or by worked with engineering to redesign a part?

ERP is great (LOL) but have you ever made your own dashboards and reports using BI tools and SQL?

You get the vibe. The better you understand the value chain and supply chain the better geared you are to achieve your goals by knowing which levers you have at your disposal and going deep in to achieve your goals.

Which brings me to my next point that we need to stop looking at Supply Chain as a cost-center. At the early stages of a company, most of the margin optimization (increasing!) happens between product development and supply chain but weighted slightly more towards supply chain as the development team is focused on the new product to help drive growth. As production volumes increase, supply chain teams are able to avail volume price breaks, then as forecast accuracy increases, you're able to start ocean shipping if it makes sense and then start looking at logistics strategies to reduce cost and so on. You can keep going deeper into this but I'll write a separate post on the full and mostly gradual cost reduction strategies another time.

Where I feel the real opportunity lies for supply chain teams is to become a profit center and contribute step-function increases in revenue. This happens when the team understands the value they can unlock by utilizing innovative production and sourcing methods to help encourage brand, product and partnership teams to think outside the box.

For example, during my time at Atoms, because we carried quarter sizes our SKU count per color was higher than a comparable footwear brands, meaning more cash tied up in inventory per SKU than a brand with standard sizes. At the same time we were thinking about ways to delight current customers with product drops and other ideas.

We quickly got to thinking about both sides of the problem, cash and inventory on one side and launching new products on the other. At that early stage it would not have made sense to launch another color in quarter sizes and make further investments into inventory. When faced with a challenge I find writing helps me problem-solve and so a few days later I had written up a theoretical model that I thought would be perfect — making shoes to order for current customers. This was theoretical because I listed everything we would want and then started working backwards to see what was possible.

Understanding our manufacturer's production process we knew with reasonable certainty that if we were able to provide them a batch order above a certain number of units they would be able to manufacture them, however because it was breaking their regular process it would have likely resulted in a cost increase. It turned out exactly as we expected, plus the cost increase was marginal, and all things considered the margins were greater than before, especially considering these were pre-orders from happy customers and there was no additional cost of acquisition.

Our supply chain team was able to recognize that the supplier could be setup for this process, leading to the other team to come together and figured out a way to:

• make shoes to order and deliver them within 30-45 days customized with their initials, surprising and delighting customers and converting them to lifetime customers

• create a risk-free revenue model - customers were basically funding production

• not have to carry additional inventory

This is a single example and there are many others, but the best and modern supply chain teams are highly skilled, and more than ever before understand marketing, understand brand and recognize that they sit on top a gold mine of untapped potential that can help their startup build a true moat and competitive advantages at a time when true differentiators should be product and customer experience and not just ad creative.

We need to reframe the role of supply chain teams in this next era of early stage startups, the era of the modern supply chain team. We need add revenue driving and customer delight related goals to force supply chain teams to pro-actively be seeking advantages that give them an edge on their competition.

We can no longer be just the inventory or procurement team, but an active strategic partner supplying great ideas to marketing, growth, brand and business development, making them aware of the tools they have on-hand that they never knew existed.

If there are other topics you'd like me to consider writing about, DM me at @mirmanwar

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Appreciate you✌🏽