Growth is a challenge for a small business, especially when it comes to warehouse real estate. You don't want to carry costs for more space than you need. But if you are just starting, or if you are expanding into new products, how much space will you need to receive your deliveries and ship? Do you build to the maximum capacity for the Christmas season?
Kickstarter (for more: Using Kickstarter To Launch a Business ) is a site that lets people fund creative projects with an all-or-nothing funding method. People propose projects and the community bids in advance to buy a product or support a project. One challenge – not knowing the demand till the project is over. Studio Neat had a recent success with the Gilf, a small tripod for iPhone users that allows them to take better pictures. Dan Provost and his partner Tom Gerhardt told me that they expected to sell 500, but instead sold 5,000. 'We produced the first 500 from Kickstarter and shipped them ourselves. It was a very telling indicator that we needed a service to do this. We were coming into [business] with no order fulfillment. We were totally new to the idea of SKUs, inventory, etc.'
One set of entrepreneurs saw a hole in the market for outsourced warehouse and shipping for small businesses, and Shipwire was born. 'Our CEO is a serial entrepreneur, he wrote a book about logistics, and had created a lot of software company solutions,' said Nate Gilmore, VP of Marketing and Business Development for Shipwire, Inc. While talking with the chief logistics officer at Costco, he asked about the entrepreneurial opportunity, and he was told to bring the operational logistics of a Costco to the small business.' The idea grew out of that seed.
'As a large company you get benefits when you ship a lot and for renting warehouse space, since they like larger businesses with large volumes. Small businesses end up using smaller warehouses with fewer services. We thought, if we can aggregate a lot of small businesses, and we can have volume, then we can aggregate the benefits of large companies. We can get them enterprise level muscle – physical facilities on a 'software as a service' type model.'
Shipwire is providing outsourced physical hands to receive and send packages on demand. They have service guarantees and service levels that you would hear about at a large company level. They provide these services in the US, Canada and Europe. 'Startups can get global on demand and tap into a team of logistics experts. They can outsource the problems to us, and we give them a single neck to choke,' said Gilmore.
For Studio Neat, Dan looked at Shipwire, Amazon and others, but in the end they got a software toolkit from Shipwire that let them manage their inventory and shipping. 'We shipped them about 10,000 Glifs in bulk, in boxes and uploaded an order spreadsheet from Kickstarter with names and addresses. They shipped 7,000 units in 24 hours. We had trapped ourselves right before holidays, so we made it clear to them that it would be awesome if they could help, but we didn't think they could turn it around that quickly. They busted their a**es and their turn around was really impressive.'
From Shipwire's side, Gilmore told me that the management team hadn't heard about Studio Neat's situation until after it was done. 'One of our sales guys just made it happen.' Now Studio Neat is just selling through. Dan said 'We have a Shopify ecommerce store. Our orders get placed, the order goes right to Shipwire, and we monitor inventory on the software.' Shipwire told me they now integrate with over 50 online shopping cart systems.
Gilmore told me for a startup manufacturer or direct to consumer company in the $1MM to $5MM product range, 'This is a point where if a small business doesn't invest capital wisely they won't reach the next level. We allow them to keep money in their inventory and marketing and just pay for the shipping and storage (usually 10% of a business). This helps them keep shipping at a variable basis. When investing in warehouse space as a leased facility, if I know I'm going to have 2 containers at holiday time but usually only a few palates at a time, I still need to lease or rent for the most space, secure it, have software, labeling, and employees, and ramp up during busy times. So I'm carrying the cost to have to have a facility to fit holiday volume all year long. With us the company won't spend leasing money, it doesn't build out a facility, hire employees, buy trucks, or insurance. If one month you store a palate you pay for that, in another month if you have multiple containers, you pay for that.'
Shipwire is allowing companies to scale in a friction-free manner, locally and globally. How have you solved scale, shipping and logistics issues? Let us know in the comments.
Last updated: Jun 8, 2011
HOWARD GREENSTEIN is a social media strategist and evangelist, and president of the Harbrooke Group, which specializes in helping companies communicate with their customers using the latest Web technologies. @HowardGr