Building A Supply Chain From 1 Container To Over 50k In 4 Years

Hello, everyone, and welcome to the scope supply chain virtual summit hosted on quartz network. My name is Britt Erler QN Executive correspondent, thank you so much for joining us, I would like to welcome our guest speaker here with us today, John Esborn, Director of commercial excellence for international supply chain at wayfair. Welcome. Thank you, Britt. Pleasure to have you here. And so excited to dive into your castlegate logistics program, and hear more about how it’s really revolutionized the business for not only your company, but your customers and your suppliers as well. So let’s kick it out right off the bat, what drove the decision for wayfair to develop castlegate and start moving ocean containers.

Thank you, well, our supplier success and our success go hand in hand, primarily, that’s because to a large degree, the point at which we take ownership of the goods vary in our supply chain. And so oftentimes, our suppliers might be an importer. And so with that said that, you know, when the goods are selling through our web portal, you know, we we want to take equal ownership of, of the supply chain of our destiny, it’s, um, I guess, we view it kind of as our mutual mutual supply chain. And, you know, our suppliers vary from very large companies to very tiny entrepreneurial companies and, and so their level of sophistication varies as well. And so from that standpoint, you know, supply chains in the ocean side are difficult to manage. in normal times, they’re complex, and certainly in the last year, they’ve been a challenge and add to that the rapid scale, rapid sales growth of, of wayfair. And it becomes very, very important to us to manage the supply chain in, you know, to help control our mutual destiny, if you will. And, and so, because of this, we our leadership has made a significant investment, significant play in terms of the logistics, aspects of our business. And it’s been a key part of, of our overall success. I mean, honestly, it was near Cha, it was his passion towards the whole logistics structure. Within wayfair, the whole castlegate logistics structure that made me want to sign on, he’s brilliant. in his own right, I’m always amazed how much he understands about ocean ocean supply chain, quite frankly. And, you know, we, you know, we’ve, we view our success and our ability to scale, managing supply chains critical not to be too redundant there, but it’s allowed us to react quickly. And honestly, we kind of have a motto fail fast. So we’ve been able to react, learn from our, our supply chain mistakes, and then, you know, apply those learnings to to, you know, advance ourselves move ourselves forward. So I’m not sure if that addresses the question for you. But that’s basically owning our supply chain having visibility and, and it really controls our ability to scale and grow quickly.

So absolutely, in putting a program together, like this is clearly not an overnight success. And it’s not something that you can just decide to do the very next day. So where did you start? What was your initial approach?

Yeah, so gosh, it feels like kind of like it’s an overnight access to success. But it’s been four years, we’ve grown rapidly. And, you know, when I was in the interview process, with the company, I don’t know, I’m not sure they, you know, had a clear view of what this ocean freight space looked like. But I was brought in and within two months, I was able to kind of provide my view to the Chief Operating Officer and leadership of the company and we kind of got a thumbs up to move forward. And you know, so you know, what, where do we go from there? I mean, think about it, quite frankly. We built a company we built a supply chain and when I say that, so the name of the brand that handles the ocean freight is castlegate global logistics and you were part of the Cascadia umbrella there’s castlegate fulfillment cascade, global logistics etc. category. Trade services. And because we don’t own all the goods, the in order to be able to control the supply chain and manage the containers, we’re required to become a licensed nvocc, which is interesting. There’s not too many retailers that are also licensed freight forwarders. There are others, but not too many. And so it was unique. And so I always kind of talked to our partners about us being a hybrid, because they want to look, look at us as a cargo owner. But that’s kind of down the road. So where do we start? Well, you know, if you think about it, you think about creating a company, you know, we had to get any proper licensing. And that was required, we needed a software platform, we needed an agent, network of agents and partners overseas, we needed partners to do container haulage, broke customs brokerage, ocean carrier partners. And, you know, don’t forget, oh, global trade compliance, and don’t forget, we needed people, right. And then you need to, you know, as we grew, you need a back end, like when we were small, and we first started, we were doing the billing in the pain while in the payables while eventually, quite frankly, you know, you need this big back end, billing record reconciliation team and ability to process claims. I mean, it was crazy, right? And so, but early on, you go from very general roles, to as you get bigger and bigger, you grow into much more specific roles in a broader organization. And I didn’t even get into the whole tech side in us, it being a tech company, you know, we look at ours, really, as a tech employer, and not not a retailer, necessarily. And so from there, once we had many of those aspects in place, what we did was, you know, then, you know, we kind of looked at, you know, do we just watch this whole thing end to end? Or do we start with aspects, and if you look at the life of any ocean shipment, it’s got an origin process, it’s got an ocean process, a customs brokerage in a Dre process. So we started with Dre, we started delivering containers first, and then from there, you know, we added on all the rest of the steps. So, you know, initially, I guess, I kind of view myself as kind of a startup guy, this is the third time I’ve done this in my career, each time a little bit bigger. And learning from my mistakes in the past, although I’m still, you know, still still make mistakes, as this thing gets bigger and bigger. But then as we got bigger, and we really couldn’t kind of do things as much on the fly, we need to have more structure, we brought in people that were, you know, you know, operations are engineering, industrial engineering, kind of orange people build out processes, and map out all and, you know, issue standard operating procedures to our partners and service level agreements, etc. Right. But so, just kind of thinking about all that. I mean, I rattled off, you know, ocean carriers, stray carriers, customs, brokers, partners, origin agents, I mean, just think, I think just to get the company started in all the contracts that I needed to sign, right.

And it never gets any, any, any simpler from the standpoint of, of, even within the United States, you have pockets and you have pockets of people, and anybody that knows the business what, what a Dre person can do, and how they approach the port in New York and New Jersey is completely different than the guy in Savannah or Houston or LA. And, and, and even the type of charges that are charged by those companies. I mean, it’s it you know, it’s, it’s, it’s really, really unique. And and so as we grew, you know, even at the beginning, I tried to bring in other people because we’re all encumbered by our past, right, and our thoughts. And so for me, personally, I’ve got four years in the business, you can tell I’m not a typical wayfarer employee, if you if you if you look at wayfair really young, surrounded by brilliant people, elites, tool, master’s degrees and undergrads and master’s degrees. And it’s a pleasure to be to be working with them. At the same time, I have a different thing. I have my PhD in freight when I was in college, I had to pay for school and I started driving a delivery route, you know, and here I am 40 plus years later, and you know, in a whole different aspect and but I love the startup game, kind of kind of view myself as a startup guy. But with all these people with no background in freight, one of the things that when you do a company like this is I always wanted to try to make sure that my answer to them was because it’s always been done that way. I you want you want to foster this creativity while guiding them in other ways. What I mean by that is, hey, new country, new regulations. So we’d go from, you know, the UK to Germany or Canada, you know, or an origins we come throughout Asia to, you know, China or Vietnam or Thailand, Malaysia, it’s like, hang on, hang on new country, new new regulations, new practices, and even the ocean carriers from country to country behave differently. So it’s very complex. And, and so, from that standpoint, you know, we had to build this company, and even operationally and even as we expand Now, when we go to, you know, you have to kind of remember those learnings. And so I guess, one one other last aspect that that I personally had a lot of fun with, in was meeting with these vendors back before we even started in trying to, to, to, to posture with them, or negotiate with them from a perspective of having zero business, and future promises. You know, and, and, and fortunately, for me, I look like I’m brilliant, because pretty much all the things that we would tell these partners were going to happen and how it was going to come along, have come along. And so from that standpoint, it’s it’s, it’s been a lot of a lot of fun. Right. So I guess, other other than that, you know, I mean, like, in terms of, you know, how we scale. I, constantly encouraging people to build a network on our team. And whether it be a network for our cause, or quite frankly, I have a lot of young people early out of college and, you know, build your network for your own career path, quite frankly, right. And so, I’ve always been if there was something that I think for me personally, not to get off on john Osborne too much is I’ve always been good at networking and building my network and, and, you know, kind of building credibility with people and helping them when they have a time that they might need something, and then you know, kind of, kind of, you know, calling that in when I need it. So network network network, we found a lot of our partners through networking. Some folks I’ve known for a long time, I always tell people I know a lot of people in the business, some I would love to go have dinner with and enjoy a nice meal with, but others, but but I might not trust them with any of my business, whereas others I know why I could count on right. And beyond that, I even back in when I was, you know, first meeting, Mr. shod, you know, I, I pretty confident My advice to him was start at the top. So I’ve been at all levels and companies, I’ve been at that a couple stints of Chief Operating Officer along the way.

And you have to recognize that if you’re going to really truly scale and look to embrace people and get them to embrace you and your and your success, because they’ve got a lot of customers out there, you got to start at the top and work your way down. So when we would meet somebody new, I would, we would always say, well, we expect you to bring your executives to the meeting, just flat out expected to bring your executives, if you want to do business with us, you need to bring at least a vice president, if not a C suite or an owner. Right from that standpoint. And not be bashful about it. I always kind of give people the analogy, I feel like the little brother busted into his big brother’s room and just, you know, demanding attention, right? And so we now are engaged CEO to CEO with some companies, it helps us move the needle in and if you think about it, you know what, in your own relationship, you have a boss and you go to him and her who and it might be the kind of thing where, you know, you have three priorities, and we might be one of them. And you go to to the next level up and that person may have six priorities, maybe they don’t, maybe they don’t. And you only get to make one of your three a real focus priority for that person. Right? So if I’m lucky, I’m that person. Well, now that person goes up to their their next level up, right? I might not be on the list anymore. So well, you know, I learned that a long time ago, always want to start at the top and and quite frankly, it helps enable the the the people that really are working for us in the day to day basis. It’s not a disrespect to them at all. We want to enable them for their their success and quite frankly, our success. So that’s been a huge, huge deliverable for us. And it’s been very, very, very successful for us.

Absolutely. I’m really moving the business along and I think it also shows companies how serious you are about this program that you have in place. And as you kind of mentioned, you know, obviously, a lot of times these programs come with mistakes and learning from them and really helping build it but you yourself are somewhat of a genius because How you laid out this program and what you’ve expected to happen did end up happening for you and your team, which is so fantastic. And you have a product that works. But it’s not hurdles, right?

Yeah, sure. Sure. Sure. Sure. No, thank you, I’d love to, to kind of tell you some of the hurdles. And, of course, if you look at anybody that looks back at maybe our wall street releases, or whatever, you look at the growth that wayfarer has been through. So, you know, it’s it’s been a great success story from that standpoint in the growth. And that’s really as much as that’s driven our growth. And then, as we’ve convinced more and more suppliers to trust our management of the, what I said earlier, was our mutual supply chain. But that said, Yes, absolutely. hurdles and unexpected challenges, right, you know, and so probably, we could have used back early on a few more people from within the industry. I said earlier, I loved being able to collaborate with people that weren’t encumbered by history or knowledge of the business. At the same time, we probably could have benefited early on by maybe one or two more people that could have maybe made things go go a little bit more smoothly. Not that, that they went terribly, quite, quite frankly. And we’ve got a good mix of people that are from the business now. Versus earlier on. And I will say from the business, but from some of the new age aspects of the business, we have folks that have moved to us from some of the newer brands out there tech brands. And so that’s kind of cool. So they kind of bring in these reference points of Okay, I know freight and I know tech, and those those I’ve known for a long time, those people are ones that are really dangerous, and I mean, dangerous, and in a positive powerful way. Right. So So anyway, um, but uh, you know, I had mentioned earlier not not that they weren’t familiar with the complexity, or that from one country to another, it was different or appreciated that even in the Dre world, you know, what a person can do and in in, in LA is different than New York, or that they’re all in different tech platforms. And, you know, just kind of, kind of challenging from from from that standpoint, right. And even ports vary. And culture, culture, that’s, of course, that’s why I’ve always loved the international business and being a part of it is, you know, you’re working with people from all over the world and, and at the end of the day, you find out, you know, what, you’re all pretty much similar. But in some ways, you’re, you’re a little different. But but a lot, a lot of ways you’re you’re, you know, y’all y’all know how to laugh and smile and enjoy a moment together this the same way, right? So what were the biggest hurdles, I mean, I’m putting putting aside for the moment, the tariffs and the damage that they did to everyone and then COVID, and the damage it did, you know, you got to be challenged to kind of constantly think ahead. And what I mean by that is, you know, how you’re going to handle 1000 containers versus 5000 versus 10, or 20,000 containers, it just changes. And you might have a really great process for handling 5000 containers, and you might be extremely successful at that. But you’re just not going to do it the same way when you’re doing 20,000 containers, or 50,000 containers or, you know, whatever. And so, um, you know, sometimes I would look back and go cheese, I really wish we had anticipated this better. So that we could have been building this out, but in some ways, I’m not sure you have the luxury of being able to look forward at it, you know. And so I mean, even with the tech we’ve built, and we’re really a tech driven company, but even the tech, well, we built this, and then the next year, the next year is contracts come around, you negotiate them differently. And, and now you have this different thing. And your tech people are like, for the billing and rec side are like, but look at this way, you know, and and so finally, in the end, I just basically said to him, Look, if there’s one thing you can count on, from me, and my team is that, you know what, we’re gonna break whatever you built, and, you know, to try to build some flexibility in there. But we’re, we’re going to break what you’ve built, you’re going to need to build it again. And it’s just going to look differently. So that’s kind of, you know, the expectations that that I guess I gave, I give to the technique and I love tech, I love the ability to scale and increased productivity.

The tariffs cause problems for us because the back in 2018 because it literally was when we launched. Literally we launched in August, and by mid August, we had challenges because of lack of space. And that was difficult early on because people didn’t really appreciate that we were going to truly deliver on what we said we were. Fast forward, you know, two years and a couple of the partners we Been with for a while there, they get it, right. So we bring in maybe a new ocean carrier, we got to go through all that learning with them. But the folks that have been with us for a couple of years, they get it. They know when we say, Hey, this is going to happen, and we’re going to grow, or it’s going to be different. We’re No, we’re going to expand, you know, we’re going into Europe now, whatever. They get what it’s going to look like and that and that the the volume is going to grow. So COVID, though, obviously caught everyone off guard. And you know, people use the phrase Black Swan, well, I kind of like think of this fall as a flock of black swans. You know, every time you think you solved for the problem. And you did solve for it. It just changed. Like if you went back to the very first week of September, and you spoke to ocean carriers about when things were going to slow down, they would say, and a September, you know, I could read and you read industry, plenty of things in trade journals about that. And then, you know, you get to mid September, it’s like, Yeah, I don’t really slow it, see it slowing down. What do you think now you think what do you think will happen? And they’re like, right, right after Golden Week, which is the first week of July, which base, excuse me of October, which is a holiday week in China. And basically, there’s not much that happens during that week, and then all of a sudden bump, the bottom typically drops out maybe then right. And, and so by the time we got to the end of September, the carriers and the Indian, the trade journals are saying, Yeah, we don’t really think this thing’s going to slow down by the end of the year. And December is really usually a soft period, you know that the rush is over. And spot pricing drops down in the market. And if you look at Ocean spot rates, they never dropped, they kept going up in December, they’re now to the west coast at 4000. East Coast is over 5000. And you know, if you really want to get your container on a vessel, you got to pay some sort of a premium favorite customer fee. And and now it all the trade journals are talking about, yeah, h1, first half of the year, things aren’t gonna slow down until the first half of the year. And I I agree to that talk back to my network. Right? Talk to a lot of people, you know, in the business port operators, ocean carriers, a lot of other companies that we know and that I know. And pretty much it’s, it’s through h1. So now the question broke isn’t, you know, you can check back in with me to see who’s who’s who’s who got it right is, is everybody finally re inventoried by the end of the first half of the year, and therefore there’s not going to be a peak, right? Or they’re re inventoried, but there still is going to be a peak. And of course, people hope we’re out of COVID by that. And so people are going to travel, they’re not going to buy things for home as much, which was a big driver for us. It benefited us in a large way. But I’m not sure sure I know that answer either. I tend to think that the peak next year is going to be softer. If COVID truly finally, finally, is under control. I think there’s going to be a peak, but it’s not going to be anything like last year’s peak. And anyway, so those are some of the challenges, I’m sorry, maybe got off track there a little bit. But some of the things that we dealt with. And as fast as we came up with the answers throughout the fall, there was a new challenge or an extended period.

And I think most companies went through the same, you know, they they tried to make predictions that they thought were going to happen, but like yourself, you all of a sudden something new would occur. And they’d be like, Okay, we got to scratch that start from the beginning. So and I think it’s gonna be that same way this year until we, you know, pick up our feet a little bit again, hopefully once COVID eventually passes. But based on all this information that you’ve provided me at the end of the day, how would you get great, excuse me, how would you grade your castle gate logistics program?

Yeah, I think that’s I think that’s an interesting question. You know, like, so how did we do? How have we done? And maybe I’m a tough grader, I would say it’d be, I think we’re better than a C, we’ve been able to grow in scale and support it. And we’ve been able to get our hands around that mutual supply chain with our suppliers maybe, you know, control some costs, which have always been a goal of, of, of the whole castlegate program, or at least provide predictable costs. So I mean, our supply chain didn’t fall apart. I mean, think about it, we’re scaling through all this mass, right. And, and I think the second thing that really to me is is is that we’ve built some really strong relationships, strong relationships that hopefully will result in us, you know, being placed a priority on us and our goals you know, as typically what happens in environment. Like this, whether it be a strike, maybe have a big operator in it, you know, that kind of screws up the supply chain stalls a supply chain or, or an event like this is the service providers fall back on their existing customers know, like they don’t have capacity. So who are they going to look out? For first, they’re going to look out for the people that have been there for them all along, and not their new best friends. Hey, hey, I’ve got some business for you. Can you help me out? Right. And so I kind of always refer to those, you know, I have an extensive background, you know, with my sales in sales with my sales team of, yeah, there’s your new best friend, right. But they need help? And are they going to be there for you in the long run? But I think we’ve built some strong relationships that even in our short life, because quite frankly, I mean, look, I mean, the the ocean program is only really, really started in 2018. So it’s really only three, maybe four years old now coming into our fourth year. And those that networking and those relationships are are going to are what’s going to carry us through quite frankly, you know that in, you know, the story, I think I always tell people that kind of, you know, my ADHD thrives in the environment of telling this exciting story, you know, I kind of get all fired up, if you ask ask the folks at Savannah, Georgia, Georgia Port Authority, because I’ll get going with them sometimes and telling them the story. And it’s, it’s really, I think, I think we score to be I think the relationships we’ve built are really key. And we’ve been able to scale throughout this thing in spite of COVID. So and I think to come out with a program in the midst of COVID and graded as B and scale as much as you have is an achievement in itself. And I see it eventually, in this next year of being able to now having more options. Now having a better idea of how supply chain has changed within this crazy time, you’ll eventually be able to make that to an A plus, I have an extreme faith and you and your your team can tell me now, you know, based on what you’ve seen, based on the experience you’ve now had with this program, and what your company foresees, in the coming years, where do you go from here.

So, you know, really, it’s, it’s kind of doubling down, our volume is still going to continue to grow. And when you grow, then you know, like say, you double your business and you had 2000 containers, and they have for you, that’s pretty easy to absorb. But if you have 10,000 containers and go to 20 or 20,000 containers and go to 40 and that’s, that’s, you know, if you go from 20 to 40, and you had 20 that’s, that’s a whole nother company, you know, in a way, right? I mean, that’s, that’s a lot of volume to hang in. And so you know, making sure that we have the structure in place to to absorb that, again, are constantly referring to our network and our relationships and that that we’ve built, but now you need in some ways you need to bring in new partners, because you may start to hit the upper limits of what a partner can can provide for you. Or, you know, as you grow, you have some new needs that maybe open up different trade lanes, and maybe the partners that are Asia’s trade LNG transpac successful, maybe they’re not the same partner, you know, on a different trade line. And and so, um, you know, what we really do is we make sure we can, you know, really double down on what we’ve got, now, we’re building out a, an origin consolidation program that, you know, Mr. Shaw has talked about, from time to time, and publicly, and, and so we’re building that out where we can get goods, faster, faster speed to our warehouses and more direct to our warehouses rather than cross docking or whatever. And ultimately, that’ll help us on the cost side too, but speed to market, getting closer to market where orders can be filled faster, and, you know, make us competitive from that standpoint. So, you know, supporting that Asia consolidation network or at origin, which is, which is going to be different, adding maybe customs brokers, partners, maybe becoming a broker ourselves, do some self filing. And also what other markets. So the tariffs, we saw that the whole industry and the carriers will tell you about this, you can read about it. What shifted heavily from China to Southeast Asia, but now some have shifted from Southeast Asia to other countries. And so as those new origins emerge, we want to certainly be able to make sure we’re able to control that supply chain where it matters anywhere in the world. So that’s an important aspect for us, even if there are small lean as you go from 20,000 to 40,000, containers, small leads become big, right? They’d be impactful. And so from that standpoint, identify where else and then honestly, more tech more Tech or tech, build out more tech, that’s really, really critical to us to support our scale. And also to, you know, also give us better visibility, right and a better forecast view of what’s of what’s coming. And so we can stay ahead of, of changes that we see coming. So I pretty much just have more and more and more lockdown, stability and more tech, more, more visibility and maybe validate where there are merging lanes late, you know, globally. So

Absolutely. Well, it sounds like you and your team have fantastic plan set in place. And I want to say congratulations, truly on this castle gate program. It sounds like what you’ve implemented has been extremely helpful, and really paved the way for you other companies, I think, to do the same to do something similar for them in their company. So thank you so much, john, for joining us. It’s been an absolute pleasure to have you here. And I’m interested to check in with you, you know, in six months to a year down the road to really see how this program has grown. And thank you to everyone. Oh, yeah, go ahead. I’m sorry.

No, it’s been fun. It’s been fun. You are surrounded by some great, great, great people. And it’s certainly fun, you know, been doing this for a long time. It’s certainly fun to grab onto the tail of the Tiger that’s going up. So absolutely.

Absolutely. And I think I can speak for audience when I say you know, you provided some really great insights today that’s really going to kick start them and selves as leaders for them in their team. So thank you again, if you have any further questions for john about the Castlebay program that they have in place. There will be a discussion forum underneath this presentation, so be sure to check in throughout the rest of the summit. Please enjoy, stay safe and stay healthy. Thanks