Please enjoy this transcript of my conversation with Jivko Bojinov, Co-Founder of ShipBob. We cover the challenges of a fulfillment business, ShipBob’s custom warehouse algorithms, and the importance of transparency with staff and customers alike. Transcripts for other episodes can be found here.
“Ultimately, transparency to your customers is extremely important, no matter how difficult it is to display.” – Jivko Bojinov
Jivko Bojinov played professional tennis before co-founding ShipBob with Dhruv Saxena and Divey Gulati in 2014. Jivko is currently the Senior Vice President of Strategic Projects at ShipBob. And over the last eight years, he's led the development and launch of almost every major strategic initiative at ShipBob, from their transition from owning their own fulfillment centers, to developing an asset like partner network of fulfillment centers, to the launch of affordable two day shipping for all of ShipBob's customers.
Transcript – #138 ShipBob: Building and Scaling a Fulfillment Business with Handcrafted Algorithms | Jivko Bojinov, Co-Founder
Daniel Scrivner (00:06):
Hello and welcome to another episode of Outlier Academy, where we decode what iconic founders, renowned investors, bestselling authors, and outlier thinkers have mastered, and what they've learned along the way. In each episode, we dive deep to uncover the tools, strategies, habits, routines and hacks that we can all apply in our own work and lives. I'm Daniel Scrivner, and on the show today, I'm joined by Jivko Bojinov, who played professional tennis before co-founding ShipBob with Dhruv Saxena and Divey Gulati in 2014. Jivko is currently the Senior Vice President of Strategic Projects at ShipBob. And over the last eight years, he's led the development and launch of almost every major strategic initiative at ShipBob, from their transition from owning their own fulfillment centers, to developing an asset like partner network of fulfillment centers, to the launch of affordable two day shipping for all of ShipBob's customers.
Daniel Scrivner (00:51):
Listen in as we decode how ShipBob has grown from shipping orders from the co-founders apartment ,to running a network of 30 plus fulfillment centers located around the world that over 7,000 brands use to ship orders everywhere their customers shop, including brands like 100 Thieves, Spikeball, Tom Brady's TB2, and more. You can find a searchable transcript for this episode, as well as our episode guide with ways to dive deeper, at outlieracademy.com/138. That's outlieracademy.com/138. Please enjoy my conversation with ShipBob, co-founder and SVP of Strategic Projects, Jivko Bojinov.
Daniel Scrivner (01:28):
Jivko, I'm thrilled to have you on Outlier Academy as part of our Outlier Founder Series, to profile ShipBob, which you're co-founder at, and you've been building for a number of years now. Thank you so much for joining me.
Jivko Bojinov (01:37):
Thank you so much for having me. Super excited to be here.
Daniel Scrivner (01:40):
So we're going to get into it because we have a lot of ground to cover today. As I was preparing for this interview, I have so many questions for you around logistics and fulfillment and different aspects, the physical, the digital aspects of your business. Where I wanted to start, just to give everyone a bit of background is, if you could share a quick sketch of your background, and just kind of your journey up to meeting your co-founders and founding ShipBob.
Jivko Bojinov (02:03):
Yeah, absolutely. So I was born and raised in Bulgaria, and my family immigrated to the States in the mid nineties. Did some non normal things until graduating college, but after graduating, for my first three years out of school, I moved abroad to Beijing, China, and I worked at an educational startup. And then I moved back to the States and started a startup of my own that was in the travel education space. And then realized that it was a great kind of family business, but not something that would scale and be a huge market opportunity, and wasn't really sure what to do at that state.
Jivko Bojinov (02:50):
And I went back to get my MBA, and I was hoping to find co-founders, and very lucky to make it out of the MBA program, not in consulting, but to have found co-founders, and that's where through the Illinois MBA program is how Divey and I got connected. Divey was an alum, I was halfway through, and then Divey and Dhruv, they're childhood friends, and we got connected, started talking about the idea of ShipBob, this was like pre YC at the time. And yeah, I joined them, at first, as an intern, and then spent three months, 20 hours a day building ShipBob, and then it felt like a child that I had raised, and it was difficult to let it go and I dropped out of school and joined him as a founder to build a company from there.
Daniel Scrivner (03:44):
And when... Normally I'd ask more questions to get everyone from zero to one on ShipBob, but we have so much to cover, I'm just going to try to keep this portion a little bit short. Can you just, for people listening that maybe aren't familiar, describe at a high level what ShipBob does today, and then just give a little bit of backstory, how long the business has been around, when you guys got founded, when you went through YC, and maybe some stats around customers and where you are today.
Jivko Bojinov (04:08):
Yeah. ShipBob, it is focused on e-commerce logistics for small and mid-size businesses around the globe. We own, operate and partner with fulfillment centers across the States. The number keeps increasing on a weekly basis, so I'm going to get it wrong, but it's north of 30 right now in the States.
Daniel Scrivner (04:28):
And that's warehouses? Or...
Jivko Bojinov (04:30):
Yes. Yeah, fulfillment centers. Yep. And we are at six globally. And we're helping folks that essentially need help with logistics across, primarily in the warehouse, [inaudible 00:04:46] and ship space, but logistics all across, as well. We got founded in 2014, and with the idea of helping e-commerce businesses be more successful online, or in the early days, we had a different solution to the problem than what we currently do now. But very quickly learned and evolved, and present day, we service north of 7,000 merchants, and operate globally.
Daniel Scrivner (05:18):
Fantastic overview. And I think for people listening, if maybe you knew what ShipBob was, I think the scale you guys have achieved is really impressive. And so that's what you... I think you said 30 fulfillment centers in the US, and then six outside of the US based around the world.
Jivko Bojinov (05:33):
Daniel Scrivner (05:33):
Yeah, that's pretty incredible. And 7,000 customers. I want to start to get into some of the bases of ShipBob, and then we're going to talk about fulfillment and go into the weeds there because I think it's a super interesting area that people will like. One of the things I want to start with is just the origin story of ShipBob. And I'll try to paraphrase what I've heard, what I've gathered, and then you can maybe push back on that and help me refine it. But the origin story as I understand it is your two other co-founders had a previous business, and they were basically able to automate all other parts of the business except fulfillment. And so fulfillment was this really challenging thing, this really frustrating thing, that kept taking up all their time and that they couldn't automate. And so for their next company, they wanted to focus just on fulfillment. Do I have that story right? And is there anything else around the kind of origins that you think is interesting?
Jivko Bojinov (06:16):
You got it. Like Divey and Dhruv are both software engineers, and their startup time was their lunch hour in their jobs, and they spent that time at the post office. So, that was a pain point. And I think a lot of folks that are starting out an e-commerce would relate. It's a very obvious pain point early on in your e-commerce journey.
Daniel Scrivner (06:38):
One of the other things that I heard was that you guys ended up getting a lot of your original customers by literally just standing outside of a UPS store. And I think you had these ship captains hats in the early days as a form of gorilla marketing. Talk about that and why that made sense, why that was the right way to go about learning more.
Jivko Bojinov (06:58):
We had entered YC, and a big thing, YCombinator is coming up with a one north star metric and reporting on that weekly, and for us it was number of shipments. So week over week we had to do more shipments, whatever it took. And when week two had not been at the numbers that we needed to be, we started to brainstorm it, and at the time I was leading our sales and marketing efforts, and we're brainstorming, "We need to have packages today, right now. How do we do this?" And, "Where are the people with packages?" And we're like, "Well they're at the post office". Okay great. So we need to go through the post office and meet these people and talk to them, and literally one of the very first shipments we got was a lady who was just exiting the post office with all her stuff, and she just got rejected by a post office to ship her things because they weren't packaged.
Jivko Bojinov (07:53):
And we had just arrived there, and we're not wearing any ShipBob branding, or there's no hat at the time, t-shirt, or anything, and told her about our solution and service, and this lady, I just remember the look on her face, she thought it was a miracle that this had happened to her. And gave her all our stuff and we wrote, I think at the time, we wrote down her credit card number on a sheet of paper. It was completely very, very startup-ish.
Jivko Bojinov (08:22):
But it was just a... Talk about the problem. This person was in so much pain that willing to trust these random people that just came up to you on the street with all your stuff and your payment information. But we got a lot of our original customers standing outside the post office, and pitching them from that time of when they left their car before the post office door, and wearing our heart on our sleeve there, and taking those 30 seconds to get feedback, essentially, on our product. And so I think something cool about learning, you mentioned the ship captain hat learning, from your environment. There was a gentleman who was selling Streetwise by the post office as well, and he was really successful at getting people to come to him because he had a puppet and we're like, "Oh my goodness, we need something to get people to come talk to us". So the ship captain hats naturally evolved a real thing.
Daniel Scrivner (09:18):
I love it. What problem were you solving for those customers in those very early days? Thinking about that woman, is it basically the pitch was you never have to go and ship packages at the post office again, you... Effectively, ShipBob takes over, we'll package, we'll handle shipping. What was the value proposition? What were you selling customers on?
Jivko Bojinov (09:37):
Exactly. So the value prop was that we would come to you, and we'll pick up your items. They could be in an unpacked state, and then we would package them, take to the post office or UPS or FedEx, wherever's most cost effective, and then provide you with obviously just a much better experience. And we were looking at reviews of the worst post offices to go stand out in front of, to find that gap of [inaudible 00:10:02] ...
Daniel Scrivner (10:01):
It's not hard.
Jivko Bojinov (10:05):
I've experienced it. And that business model quickly evolved to, we were picking up from businesses, where every day the same time, 4:00 PM we'd go and have the same package and the folks started saying, "You know what? I feel like I'm wasting my time always meeting you here at 4:00 PM. Can you just take this box, when it's 4:00 PM just ship it out for me. Can you do that?" And the light bulb went off that this is a service that where warehousing and fulfillment is really that evolution of the need here. And something that also opened up our market from being just city local, to servicing companies all over the world. And we very quickly started developing our technology about operating warehouses, and inventory management, and all the things that come with running fulfillment centers.
Daniel Scrivner (10:56):
One of the things that I want to talk about for a second, because I think this is going to be a theme that we go back to throughout the episode, is that fulfillment is really challenging. For all of these customers, it's interesting to me that here you guys were looking at all of these people that were basically all suffering with the same thing, which was, God, just fulfillment takes so much work, it takes so much energy and effort, takes so much time to go and do, but it's an important part of our business. I think a lot of founders would maybe look at that problem and be like, "Whew, that seems really difficult. I don't know if I want to go tackle fulfillment." What made you guys excited to focus on that problem, and what insights do you have around why fulfillment is so hard? Why is that such a hard problem to solve for people?
Jivko Bojinov (11:38):
I guess on the part about what made us excited about it, one, I mean we felt the pain. I had felt it shipping, selling stuff on eBay, and when I met Divey and Dhruv, when we started talking about it, it was very, it resonated. And then seeing just the feedback from merchants there. So it was a big pain point, very big market opportunity, and it was a growing [inaudible 00:12:05]. If you started to... E-commerce is growing year over year, and if you drill down into where is it growing more, and even from in 2014, you would see that Shopify stores and WooCommerce stores, et cetera, are becoming a greater portion of the e-commerce market, versus Amazon, who at the time had a greater percentage of the US e-commerce share. Businesses with founders that were just starting up that were probably going through the same challenges that we were having.
Jivko Bojinov (12:35):
So the problem was there, the market was there, so it was hard to say, "Let's do something else", when we had already lived through it. And then what makes fulfillment difficult? I think Dhruv, my co-founder, in the very early days, once we went through an actual sorting center at UPS and the post office, and once you realize how many hands touch a package or a good that you buy before it makes it to your door, you will be surprised that it gets there. It's crazy how many different touchpoints and conveyor belts and whatever it goes through to get there. And for an e-commerce business, there's challenges along their life cycle of the company, first when you're doing it yourself, and when you get to a point of moving into your garage, and then outgrowing your garage, there's all different phases of growth and complexity that change. Your problems keep evolving. And your solutions start to be more efficient.
Jivko Bojinov (13:39):
And then when you put that on the backdrop of what the customer wants, and then who you're competing against, which is the expectations that I have from Amazon, from Walmart now, from all these other e-commerce players, is they want things quicker and they want them cheaper. And that's going to continue happening. Over the next five to 10 years, those two trends are not going to change. People are going to want things cheaper, and they're going to want them quicker. So for small businesses to compete with that, it's really difficult. And building ShipBob into a solution where we can give small and mid-size businesses the power to leverage logistics and to tap into a network that can give their customers that experience has been phenomenal.
Daniel Scrivner (14:25):
Oh, I love that point. I mean I don't think anyone's going to argue that people are going to continually want things faster. To get to them faster, and to get to them more cheaply. What that also kind of means, I imagine if I put myself in your guys' shoes is great, that means over time no individual is going to be able to do shipping on their own and really be able to fulfill what customers are looking for. Everyone's going to need a solution like ShipBob, and then you guys can effectively build this flywheel to continue to deliver better delivery times at better prices for merchants. And so in that way, if you frame it up and just look at the data, it would seem to be almost a no brainer type business to start.
Jivko Bojinov (14:57):
Yeah, it'd be fun if all the VCs had that mindset in 2014.
Daniel Scrivner (15:04):
Well no, I think they do on the vision part, and then they learn the costs and what it takes and they're like, "Oh okay, maybe not". I wanted to ask a little bit of a question, and we talked about starting ShipBob and why you started it and why the problem was interesting. We talked about getting some of these initial customers, and you also gave the example of how, in any merchant's life, if their business continues to grow, they go through different periods where they have different challenges, which makes sense. That also immediately makes me think of ShipBob, because I imagine you guys have been through all of those progressions of starting off really small, maybe even in one of your apartments, then moving into bigger facilities over time. So one of the questions I wanted to ask is when you think back to those early years, how hard was it to scale the business? And then two, was there a tipping point when you felt like you reached escape velocity, and if so, what was that?
Jivko Bojinov (15:52):
Yeah, so building a business that, it's rooted in infrastructure and works with so many people is not easy by any means. In retrospect, it's a great mold, but also it's been a difficult journey. And we started out in an apartment on the 31st floor in a condo building in Chicago, which is not a good place to have your warehouse, and then quickly grew into proper warehouses across Chicago, New York, Los Angeles and across the country. I think that the interesting and difficult things is we're a technology company first. So we've been building tech from the start, and the way technology interacts with our merchants, and then also people inside the warehouse. And for the first four years of being in business, ShipBob owned and operated all of our facilities, and we really honed in that technology of how that works with people on the floor, how that works with middle managers, facility managers, and how all that can run really smoothly, but also can be replicated really easily, so that it becomes... You can in view more of the technology replication and scalability to the space of warehousing.
Jivko Bojinov (17:13):
So that is the biggest thing that we wrestled with the first four or five years of our journey. And then the tipping point was once we started to then build out our partner network, and we got to a point where we said, "Great, we already have all the processes in place, backed with this fantastic technology that could scale facilities". We were in a position to essentially unlock the supply side, and work with partners across the US and the globe, where we could level up their existing operations and take over unused space, and turn them into a ShipBob facility, and do so in a way that replicated the exact same merchant experience, and is tied at the backbone with [inaudible 00:17:56].
Daniel Scrivner (17:56):
All right. We're going to go in a second and talk, do a deeper dive into these partner fulfillment facilities. And not only physically what they look like, but also talk about some of the software in some of the... Software behind the scenes kind of driving everything. But I want to spend a little bit more time on what you just talked about, which is, sounds like a very big decision.
Daniel Scrivner (18:15):
So just to play it back, obviously you start with building your own warehouses, obviously it doesn't take a lot of thought to realize it's probably very expensive, it's probably very time consuming to build out one of these and get it from zero to one. You're doing this all yourselves, and then you maybe grapple with the decision of, I'm guessing it was something along the lines of, can we scale faster and would this be a better business across a number of different kind of axes if we were to not own these, rely on other people's physical buildings, and then be able to put our people and put our software in it? But I want to just ask really specifically, what were the challenges you were facing that made you think about moving to a partner shipping facility, and how much time did you spend grappling with that? Because clearly you guys made the right decision. I also don't imagine it was an easy decision, because it was a dramatic change.
Jivko Bojinov (19:00):
Yeah, for sure. So not an easy decision. I'm not sure if it was necessarily a necessary decision, but I think in retrospect, it's been the right decision. But I think the biggest thing is something that we would never sacrifice was the merchant experience. And building the company, that's what we still strive to do a better job at today. And the difficult part was when you get to this point where you are okay handing this off to somebody else in part, to be able to drive the same merchant experience, and what would you have to do together? And that was really difficult. And part of it was having the technology be to a point where it's so system driven, and there's so... In a fulfillment center, you're dealing with a lot of different, tens of towns of unique products, and there's tens of thousands of unique combinations they could be packaged so that they're in the right tape, size, all those things to be perfect to the way that somebody wants it going out the door, because you're the last hands touching that good before somebody opens it up.
Jivko Bojinov (20:10):
So you have all these different possibilities and you have to create a system that takes a lot of that, if not all the decision making out, so that it always comes out the same. And that's really difficult in the fulfillment space, especially when you're working with anything or everything under the sun in terms of products.
Jivko Bojinov (20:31):
If you're only shipping, I don't know, T-shirts, or only shifting vitamins, that's not too hard to figure out. But when you're doing anything everything under the sun, it's a really difficult problem to solve. And then once we got to a state of we were really confident in technology, it was building the processes that can make sure that runs that technology as well, from a management standpoint and how much ShipBob is tapped into it. So that was the big barrier there. And then it was a no brainer once we started to test it out and it made it work, because from one end, we were unlocking just the supply side of our equation. And just as there's a need on the merchant side of having a solution, there's a need on the supply side as well.
Jivko Bojinov (21:19):
There are companies going through this phase of, they used to be in more old school distribution, and they're catching up in the e-commerce space, and there's a sweet spot there as well.
Daniel Scrivner (21:31):
Yeah. I want to talk about those warehouses and take people into them, and partly this is to scratch my own itch. I've never operated a warehouse, I have observed them, I maybe have some superficial idea of what they're like, but I want to talk about that model. And then I want to talk about the physical, the atoms piece of the equation of ShipBob, so the physical warehouses themselves. And then I also want to talk about the bits, which is your warehouse management system, and get into some of how that works. On the physical side, is there, so just to maybe tee up an example and push back if this is not right, but let's say you guys are opening up a new warehouse, you find a building that has excess space, and you want to put a ShipBob facility inside there. Do you take that real estate as is? And if so, what do you come in and what do you do with it? How do you transform the physical side of the space to make it work within ShipBob's warehouse system?
Jivko Bojinov (22:24):
Yeah, if you were to walk into a ShipBob owned facility versus a partner facility, you probably want to know the difference. It's not quite like going from McDonald's to McDonald's, but it's close to it. And the model is such that we can launch one of these buildings, with minimal investment from our partners in terms of infrastructure. And then we have a playbook that is the design of how exactly is the rack laid out, how much spacing, what's the specific space, the packing stations, how should those be? There's a pretty extensive playbook that we go through, and we do so in a really quick timeframe. If everything's successful, it's a 90 day cycle from start to finish. That's basically, literally sometimes we're just going into a bare bones, there's nothing there, we're starting out and building out the racking infrastructure and putting in WiFi. And when I say we... This is the partner doing so through the playbook, and on another phase, that stuff is there, and we're more so reconfiguring it to the fit the model.
Daniel Scrivner (23:36):
I want to ask two questions about that playbook for the physical warehouses themselves. One is how much of that is just industry standard, and how much of that has been iterated on just by your team from learnings that you've had by running so many warehouses at this point in time?
Jivko Bojinov (23:52):
For sure, yeah. It's a combination but a lot of it is based off of just data of the products that we've shipped out, a lot of metrics around efficiencies in where things should be in the warehouse, and how they should be set up. So I would say 60% of it is our internal data, and then 40% is probably industry kind of best practices. We do a really good job of capturing data of what happens in the fulfillment center and drawing conclusions, and that's still evolving, but I would say we're probably around 80% there of it being consistent for what happens every day.
Daniel Scrivner (24:28):
I want to ask this question really quickly and we're going to come back to it a little bit later and talk about a little bit more. But one of the things I was interested is this concept of e-mote, and we've talked about it before, you touched on it a little bit. One of the things I wanted to ask was we're going to talk about the warehouse management system, which is the software side of this in a second. When you think about the warehouse management system and your physical warehouses in this playbook and the way they're laid out, which one is more important when it comes to a moat? Is that mostly on the software side? Is that mote mostly on the physical side? And then how do you think that will evolve and change over time?
Jivko Bojinov (25:00):
It's a hundred percent on the software side, to be honest. On the physical side, you might not figure it out on day one, but it's not rocket science. You might need some of the data and stuff like that, but even... It's a hundred percent on the software side. And that is having things just be system driven, taking out decision making process for anyone, and as high up in the management level as you can, so that you create a replica, a complicated, customized experience that e-commerce merchants is selling that you could replicate over and over and over. So, that's there... So there's warehouse management system there, there's actual space, and the third part that of tech is the merchant facing dashboard, and then having that tie between the [inaudible 00:25:52] physical action, the way it's driven to the WMS, to then the way it's displayed on the front end, to then essentially give that information to the customer who could make decisions, report to whatever they need to do, at a much greater level, almost as if they were running the operations themselves.
Daniel Scrivner (26:09):
That's very cool. We're going to talk about the software side in a second. I want to talk about the connective tissue for a moment though and touch on it. Which is, when we say that the warehouse is run via software, it's not like the robots are doing all of the work, there are humans doing the work. And so I think it'd be important for a second to talk about what the employees, what the team looks like that works inside of the warehouse, and then how they interact with the software. And talking with someone on your team kind of preparing for this interview, it sounds like almost everyone that works on the warehouse floor has an iPod, some sort of device with a screen on it, likely a camera, that can read barcodes and stuff, on their person all the time, that is obviously their way of interacting with the software, scanning, tracking, everything that's happening. Talk about the human component and then how that works with software when it comes to inside the warehouses.
Jivko Bojinov (26:56):
It's a lot of fun. I love the warehouse environment. I love spending time on the floor. My favorite function in the warehouse space is packing. It's almost like arts and crafts to me, in a way. Yeah, so physically in the warehouse, we think about it from two types of activities. One is that stationary where you might be, for example, like counting goods as they're coming through, and scanning them through to make sure you have the right product. And then there're mobile functions, where you would go and pick an item, or you would go and do a cycle count or something of that sort. So anything mobile, you have an iPod or some device, generally set up in a way that you're almost hands free, and then you have a scanner. And then on the software side, it's very driven to the point where you start and finish everything almost with a scan.
Jivko Bojinov (27:50):
So there is no, if you started doing something and halfway through somebody else bumped into you and asked you for help, and you went back to the screen, there is no way for you to forget what you were doing. You have to do the right thing to continue, which gives an error free process. I think for those folks that are in the warehouse because they're the last hands that touch a product and they get to work with those goods, it's also about making it fun. And there's some gamifications, I think the first time, whenever you finish your picking route, you got a cool screen, with a goofy gif. People were like, "What? How did they get this image?" It's just a lot of fun, some of the functions that what the things that you can do there.
Daniel Scrivner (28:38):
Yeah, it's cool. It's cool you've been able to do with software on that side. So in a second we're going to talk about some of the algorithms that make up this warehouse management system, and these control things, like stowing, packing, batching, just because I think they're super interesting and we can zoom into them in a second.
Daniel Scrivner (28:54):
But I want to start out just at a super high level talking about what the warehouse management system is. So we've talked about the physical piece, there's obviously a physical component, there's a physical warehouse with goods stored in different areas, there's a team, but then there's an operating system. And just to frame it up, as you said, in my mind it almost feels like this is the operating system that control how goods come in, how goods leave, how goods are processed within the center, and who works on them and how that all works. And it has a bunch of algorithmic components to it, that try to optimize different things that you need to be really good at. Talk just about, at a high level, why an operating system for the warehouse was important and how that came about.
Jivko Bojinov (29:30):
Absolutely. Even at a really high level, we have facilities all over the world, so when you have an order and you have product that might be in different parts of the world, that decision of which warehouse ships that order is a really key decision, and when do you do it if you can have different rules of thinking about simply just cost, or your time in transit, or whatever it might be. So I think that, first, is the very key decision that gets made, and is super important. And you're always thinking about how do you get this quicker to your customer, and how do you do it for a lower cost? So, that is the first key decision. And then once it's in the warehouse and in our environment where you have hundreds of people in a facility, it's really important for everybody to know what is the most important thing to do, and what do you do next, so that you don't have this position or situation where somebody is waiting for an answer, or waiting for a manager, or waiting for something. You could just keep going.
Jivko Bojinov (30:35):
Yeah, so the warehouse management system, then, is central to, just from a management standpoint, understanding what needs to be done. And on our internal management screens, it's really clear to know what you've done today, what's in progress, who's doing it, and as you have X amount of hours left in the day, are you going to be able to finish or not? Which is the key, which you have to make sure that you ship out all your orders out today. Yeah. And that then drills down into, everything else is directed by work, which is more on the individual picking packing functions. But it's super interesting, and there's a lot of room for innovation there. It's something that I think I can geek out a little too much on.
Daniel Scrivner (31:23):
I want to ask one more question. So it sounds like maybe the genesis of this software was once you guys moved from having one facility to having multiple. Because as you alluded to there, just to underscore it, cause I think it's really important, now that you guys have 36 warehouses, six outside of the US, 30 inside the US, stuff can be stored at a number of these facilities. So at a high level, there's a really important decision which is just, one, where do we store our customer's goods? And then if we're storing at multiple places, where does it kind of go, or where do we ship it from? Am I getting that right? Did you guys start working on this in the very early days? Or did this really come about once you guys had multiple warehouses and you had to solve a different problem?
Jivko Bojinov (32:02):
The very first thing that came about was just inventory management. How do we recognize, do we have goods in, and then how do we account for them properly and display that to the merchant? So that was the origin just in one warehouse, which was a garage, of making sure that we could do that efficiently. And then as that grew, then it became about efficiency. Not only how do you store the product and account for it properly, but how do you get it out the door efficiently, and know who did what?
Jivko Bojinov (32:34):
And then that evolved into then the decision of which facility, and then building logic into time and transit, the cost, building logic about inbound costs, and the full landed cost of a good, and a lot of the decision making process there. And then as the facilities grew and as companies go through different phases, and if they were doing this on their own, this is the challenges they face, you get to a point where you've outgrown this space, which is maybe 20,000 square feet or so, where you can stand on the floor and see everyone and what they're doing, then how do you manage all of that from your computer screen? And then that becomes a much more in depth logic that you need to build out of running a facility.
Daniel Scrivner (33:18):
Yeah, it sounds like a massive challenge. I want to talk for a second about some of the algorithms that are a part of this warehouse management system, because I think it's fascinating. I think it kind of underscores two things. One, how difficult, again, fulfillment is, going back to that theme, because there's just so many things that have to be done well to be able to fulfill a customer's promise. One of the things maybe we can start with is the stowing algorithm. For someone who's never operated a warehouse, what is stowing? Why is there a stowing algorithm? What does it do?
Jivko Bojinov (33:48):
Yeah, so stowing is the function where after you've acknowledged the goods are in your facility, and you've counted them, then now you're going to put them on a shelf, and the next process is that somebody will pick it from there. What you're facing with is knowing where to put it in the facility, so that you're, for example, if you had a pallet of products, that pallet fits in that rack, or if you have a couple of boxes, that they fit in that shelf.
Jivko Bojinov (34:13):
So that's the first part of that decision making algorithm. And then the second piece is, how quickly is that product moving and where the other products that ship with it, or for that client, et cetera, so that it's in the same relative facility of the warehouse, so that for the next step where somebody is going to go and pick that item, they don't have to walk very far to be able to combine one of that item plus another item into the order. So there's a lot of different decision criteria there, but it's a fun problem to have. And then what you're looking at, and not so on the inbound side of things, the efficiency is obviously, it's measured, but it's probably not as scrutinized as well as the effectiveness, versus there's probably a little more focus on the efficiency of the outbound side of operations, because the opportunity for an error there is almost impossible.
Daniel Scrivner (35:10):
Yeah, you're more time compressed and obviously that's the thing you need to deliver on. I want to talk about two more examples, and then if there's another, we can go onto that. But you talked about picking, is there a picking algorithm? What is picking, what's entailed there, and what does the algorithm handle?
Jivko Bojinov (35:25):
Yeah, picking is when our team is essentially assembling that order, and putting it in some sort of tote or bin for it to be transferred to a station where it will be packaged. And the algorithm there is looking for efficiency, looking at all the orders that you have in that facility, for that day, and prioritizing them based on delivery. If there's a certain cutoff, if some orders need to be out the door quicker than others based on a certain cutoff. And then the second piece that it's looking at, is the algorithm is trying to optimize for efficiency for visiting the least amount of locations, to be able to complete, for example, like a set of 50 orders, which as that facility grows, and you go from 50 to 300,000 to millions of square feet, that walking time could be a dramatic walk. So trying to minimize those steps are all things that the picking algorithm touches on. And yeah, it's pretty fascinating.
Daniel Scrivner (36:30):
Talk about one more, I'm going to try to combine these two. You talked a little bit before, there's a packaging algorithm and obviously I think everyone kind of understand what that is. You're looking for the right size package for whatever you want to have. But another one that sounded related that was interesting is a batching algorithm. And I think you just touched on that a little bit. Can you talk about those two components, what they do and why those are important?
Jivko Bojinov (36:49):
Yeah, so the way we think about batching is if you were to have a flash sale today, and sold, I don't know, a thousand orders, maybe 200 of those orders, the exact same makeup of order, going to 200 different... A hundred people ordered the same type of t-shirt. And for us, there is an efficiency algorithm that looks at organizing these orders in a way that, it's not simply just like, it's everybody ordered a t-shirt, let's get them all, and get them out at the same time.
Jivko Bojinov (37:22):
You're looking at things as well as those cutoff times, and availability of where those goods are on the shelf. For example, you might not have a pickable position that has all those units together, and you might have a more efficient way to do it, but ultimately if you had 200 orders of one product, and you're able to go to one location and pick 200 of those items and then label those, and pack them all, it is one of the most efficient processing paths. And there's a pretty complex algorithm looking at all those orders and then creating a workflow. So that eliminates decision making of, "do I group these together or not?" Or, "Do I ship them now or later?" So those are things that we geek out on all the time.
Daniel Scrivner (38:06):
Yeah, I mean think that's fascinating just to get a little bit of a deeper dive into some of these... These are clearly very hyper specific areas, but they're also areas where they have enormous amount of value to optimize it. And so having one, an algorithm, just for that thing, but then having all of these algorithms that work together in an operating system, I think it's just a really powerful concept.
Jivko Bojinov (38:27):
I think it's super interesting from an engineering standpoint, because a lot of what you do in engineering environment is not always physically applicable, but in a warehouse environment, you're tangibly affecting somebody's life of what they have to do every single day by that line of code, and that logic that you're writing. So yeah, it's super interesting.
Daniel Scrivner (38:48):
I want to ask maybe two final questions when it comes to the software side, and the first one is, thinking about this, and this is just going to be a guess, so if I'm wrong, please correct me. But one of my guesses is that today, one of the reasons that ShipBob does really well, is if I'm a merchant and say I go and ship with UPS, we're all familiar with trying to track a package, it's not very granular, and you often have no idea what's happening with that package. One of the things I would guess from you guys owning, you guys have full stack built, not only the warehouses where you store everything, you've built the software, and then this warehouse software links with obviously the merchant dashboard. Talk a little bit about that loop, because I'm guessing that for merchants, they have much more granular data, it's probably a much better experience. Am I right, there? And what do you hear from merchants about why ShipBob is such a better experience?
Jivko Bojinov (39:39):
For sure. Yeah, that's actually... You tapped on one of the key things there, is a difference maker for e-commerce merchants who use ShipBob. And it is that level of tracking. And it starts, you mentioned that handoff with UPS, but it starts even earlier. From the moment where inventory is dropped off by a UPS or a 53 foot truck to our facility, you get an update, essentially almost like a tracking number, this has arrived, that these products are counted that they've been put in a certain location. And then as that, when you get an order, we're pulling that order from your WooCommerce Shopify store, and then when it's going through the fulfillment steps of being picked, packed and shipped, you can get those status updates. You can even push those back to your end customer, and say, "Hey, John, just pick this order. It's not too late to add something to your order. It's about to ship out."
Jivko Bojinov (40:38):
Some folks have gone really deep into customize my experience, but all those points are available in our tech and our API. And then it goes further into that handoff with the carrier, which is a big event where we're going through several scans to make sure that this package is in the right gaylord to go with that carrier, that gaylord is the right [inaudible 00:41:01] to be picked up with that carrier. That carrier picked it up. And when a carrier comes and picks up tens of thousand shipments at our facilities, or at our fulfillment center, they're unable to scan every single one, and give you that active, "It's been picked up", but we have these three series of events that ensures that we gave it to the right carrier, and at the right time.
Daniel Scrivner (41:23):
Very cool. I'm going to ask one more question, which is around software development. This one might be harder for you to answer because you're not an engineer overseeing the development of the software, but one of the questions that I had there was, I imagine that you have a team of engineers that's working on this warehouse management system, that's probably pushing out changes and updates every single day. Are they shipping in real time? Are they more batching and releasing these updates? Because obviously there's a human component, you might need to retrain people. How does this software interact with kind of a human?
Jivko Bojinov (41:50):
It's evolved over time, and we're at a state where it's weekly that the products are being shipped, and obviously for things that affect the warehouse operation are changing somebody's daily workflow, that there's an entire team that has this go to market strategy essentially for that. But yeah, it greatly evolved. In the early days, we would have a Wednesday stand up where the engineers would demo stuff, and then Thursday they'll deploy things or Friday or whenever they thought their [inaudible 00:42:22] was bug free. So greatly, greatly evolved. Hats off to our entire technology group and the things they've developed, to ensure that we're still developing new things and pushing new things out, and able to service tremendous volume, and things like even through cyber [inaudible 00:42:44] and stuff like that. Which is a big engineering feat. So hats off to them.
Daniel Scrivner (42:48):
Yeah, well and to your point, I mean imagine one of the worst things that could happen would be to push a bug that then disables all of your warehouses, or slows them down or introduces issues. So it's a very high bar. I want to wrap up by talking about two things. We'll talk in a moment about lessons learned, I always like to end with that.
Daniel Scrivner (43:06):
What I want to kind of transition to now, is talking about your role at ShipBob. And at ShipBob, for a number of years now, you've been responsible for strategic projects. And we're going to go through one of those projects in a moment, and I want to talk about the kind of physical implications, the software implications, and how that ended up getting shipped. But one of the things I wanted to start with is, your title is Strategic Projects. Talk a little bit about how you think about strategy. And how you think about strategy in a tangible way. Obviously you and your team are responsible for moving the strategic objectives forward. Not many people are in that role. How do you think about strategy maybe differently, than most of us do?
Jivko Bojinov (43:42):
I'm not sure if I can speak about the difference, but I could tell you how I think about it. But yeah, in an organization like ours, there's a lot of different business units at this scale, and a lot of different cool, exciting initiatives that are happening all the time. So what our department, and what I try to do, is to focus on bigger, long term initiatives where we would develop something that is a course of a year, multiple years, that becomes a business unit or becomes absorbs into the company, that dramatically changes the company. So originally, this department started out as the idea of having a startup within our startup, because there're companies starting out today that are looking at ShipBob or somebody like ShipBob, and saying "They're doing something inefficient, I could disrupt them." So we have to compete, and stay ahead of those folks, and it's something that I'm just frankly really passionate about.
Jivko Bojinov (44:40):
So what I think about is just the overall e-commerce space and what's going on, and where markets and opportunities, where we have strengths from all the things that we've developed. The warehouse management system, the networker facilities, all the partners, all the relationships, all those things that have been built out over the past eight years, and how does that now overlap or change the game for what we could do into the future? And then also where's that gap? So recently, we've been thinking about an underserved segment, essentially, in the e-commerce space. It is folks that are doing self fulfillment, but they would like to potentially be able to outsource fulfillment, but they're kind of stuck. They're in a warehouse [inaudible 00:45:26] to have staff, and whether some of those folks love doing that, some of them may not, but how do you help those people level up their game? How do you help them get to the next level of logistics in the e-commerce space? And the most recent project that we worked on has been tapped into solving that.
Daniel Scrivner (45:46):
Fascinating. I want to talk about one of those examples, one of those example projects that you worked on, which is cost effective two day fulfillment. You talked at the beginning of the episode about people are always going to want things faster, people are always going to want things cheaper. I don't think anyone's going to disagree with that.
Daniel Scrivner (46:02):
And also this idea of how do you help merchants be able to compete with that, because it's very hard to do on your own. So it sounds like maybe that didn't used to exist with ShipBob, you saw that as an opportunity. So maybe I'll just stop there. Talk about that project, the origins of it, and then I would love to know, just walk us through the development and execution, and if you could touch on anything that changed about how you handled warehouses, and anything that changed out of that about the software side of the equation, just to thread that needle all the way for people listening.
Jivko Bojinov (46:33):
Yeah, that was one of the first projects that we tackled, and those two facts is what rooted that causing problem. And that's something that's going to continue going forward, and it's something that our industry and ShipBob is focused on continuously improving. But in the origin frame, we were, I think, at a position of four facilities at the time, and we were looking at... And folks were coming to us for, they would like to be in a position to distribute their inventory across the US to achieve that, to essentially be able to ship your goods from the closest location possible to that consumer, which would get there quicker, and also be more cost effective. But they didn't know how to do it. So the solution is if you're ordering in Milwaukee that hopefully were shipping it from somewhere close to you in Wisconsin, and then that's going to be able to get there, super low cost.
Jivko Bojinov (47:37):
And I guess the way to think about this, and in the broader space in logistics, is you have three miles of the logistics process. The first mile is getting that shipment picked up into a sortation hub, and it's from that sortation hub to the delivery hub is the second mile, the middle mile, and then the final mile is from that hub to your front door. And the closer that you can optimize that experience just to be like that final mile is the big threshold, then delivery becomes significantly less expensive, and quicker. So folks were in a space and working with ShipBob, and they wanted to take advantage of our multiple facilities, but they didn't know how to do so. And it's a difficult problem to solve when you have a lot of different products, because you have to manage your inventory levels and position them, and make sure that your lead times are sufficient to have [inaudible 00:48:34].
Jivko Bojinov (48:34):
But ultimately, the problem was there, and the need was there, and we started to brainstorm, how do we execute on this internally? And came up with several different strategies, and the most basic we're like, "What if we just shipped everything to the air? And what if we could just negotiate super low rates or something with that?" And that didn't really work out, but we tried it, and then we got into a position of being able to distribute inventory for clients, and to start to manage that for them. And we started out with a super small project, we had six merchants that signed up, and we're able to do this proof concept where they would send us their product to the east or west coast, and then we'd place it in facilities, and then we tracked over time that our predictions of how you'd sell through this, and this all work out.
Jivko Bojinov (49:27):
And that ended up growing over time and becoming the ShipBob Express product offering. And then over time, that then involved from like, okay, great, now we could achieve this piece of quicker delivery. How do you communicate this up funnel? How do you get this to the person buying, to know that they could get this in two days, and that it will be low cost? And then that was the kind of evolution from it. It's a piece of ShipBob that's still evolving and growing, but the origins were simply by having folks figure out how to distribute their inventory across the country.
Daniel Scrivner (50:06):
And just one more question, because you guys as a business have this really fascinating footprint where you might have to, to roll out something like this, I don't know if it's true, it sounds like maybe part of the strategy was, "Cool, we have enough warehouses, we have east and west coast, now from here we can just add more density and it's just going to improve and shipping's going to get better." But I guess the question I want to ask is, did that work? So saying, "Okay, we're going to go and do this, we're going to go two day shipping." Did you then have to go and figure out how does this show up or how does this change the warehouse management system, and how does this change the physical warehouse, and what does that process look like? Maybe just work with those engineering teams. But I'd be curious for a little bit of...
Jivko Bojinov (50:43):
The approach that I took at the time was, how do we do this in a way that minimizes any change? At first, we did things manual, but then it needs to be in a way where the warehouse associate has no idea that anything changed. They just went about and picked another order, and it might have been a ShipBob two day express order, but that order had to go out the door a certain timeframe, and had to be a specific carrier, and all those things.
Jivko Bojinov (51:09):
So from the tech standpoint, the first gap was making sure that we have that [inaudible 00:51:14] of where an order flows into. And then that the second piece was to make sure it's mapped, and minimized in the same way to the associate. Behind the scenes, I had random dashboards to make sure that all this is working, and the red flag reports and emails going out, but for the folks actually using it, it had to be a really seamless experience where they didn't know anything changed pretty much.
Daniel Scrivner (51:42):
Yeah, no, well said. I think it clearly makes sense. It sounds like the change, at the time, you were trying to do almost minimum viable, or minimum effective dose of change. So it's like, "How do we ship this but not actually change a lot of what we do?"
Daniel Scrivner (51:53):
I could ask a million more questions, because I think that what you're building is super fascinating and it's a fascinating business. But I want to close out by asking about lessons learned. And I think that the question that I want to start with there is, you've been building ShipBob for eight years now. In startup years, eight years is somewhat of an eternity. And I imagine you've gone through a lot of periods and chapters and growth curves during that time. I think it'd be interesting if you could start with just talking about one or two big lessons that you've taken away over the last eight years, and if there's a story you can share about a really positive moment, or a really difficult moment in that eight year journey. And I'm sure there's a lot to choose from.
Jivko Bojinov (52:34):
Yeah, there's been a lot of lessons along the way. I think one of the key lessons has been to have utmost transparency with your team and your clients. And it's a difficult thing to do sometimes because of, I don't know, you don't want your client to know what's going on in [inaudible 00:53:00] and especially in the early day. You just want to make sure that they get what you promised them, but not necessarily how it happened. But ultimately, transparency to your customers is extremely important, no matter how difficult it's to display. And even if the information is bad, I think it's super important. So one of the ways that we've publicized that, is at ShipBob, we have DataShipBob.com, or [inaudible 00:53:29], and they're public. So you could see our performance, good or bad, how it is through the network. And internally, doing the same thing with your staff. As you're going through difficult times and evolutions in the company, being brutally honest about financials or what's going on.
Jivko Bojinov (53:44):
And sometimes it's difficult to share difficult information, and it might be in some cases, demoralizing. It might seem that way, but at the end of the day, I think if your staff has the same information that you have when you're making a decision, they're going to be significantly more comfortable with the decision made, and after the fact, if you have to course correct, or whatever it may be.
Jivko Bojinov (54:07):
So that's been a key lesson through, I think, the journey. And then in terms of... I'll start with a low moment, and then maybe I'll hit some highs. But in a low moment, when we were raising our series A, it was a really difficult time, and it was before e-commerce really had the wave, or even... This is a time when if you were to talk about Shopify, people would be like, "When does Spotify do store?" It was a weird time, and we had pitched in front of a lot of folks for funds, and we were towards the end of the runway for ShipBob, and we're doing a lot of difficult things inside to make sure that we are, essentially, we got to become profitable, or raise funds, so then we ended up doing both.
Jivko Bojinov (55:08):
But the path to get there was really difficult, and I have the fondest memories with teammates during that time that went through it, and that did all the hard work and late nights and sacrifice things to make sure that the company survives, and the vision survives.
Jivko Bojinov (55:27):
On the high note, I mean this for me is every day. And the high note is in two parts. One is I have the coolest job, I think, by being able to send to these strategic initiatives, but talking to our merchants and talking to entrepreneurs literally every single day, and hearing their stories of how they got founded, about their company, and how people on their last funds that they saved for X amount of years, about this cool idea, and it started and they were sleeping on top of their inventory in their bed, and they started out fulfillment, and their business grew, and now they're bringing commerce to somewhere in North Dakota that they don't really have much commerce [inaudible 00:56:10].
Jivko Bojinov (56:09):
These stories are just so humbling and so empowering and being able to help these entrepreneurs, and be a part of their growth is just absolutely, it's the highlight of this job, and this journey all the time. And the second one, in a same similar vein, is employees and staff that we've gotten to work with. And the warehouse and e-commerce environment, the warehouse environment is a place where you could not have any education, show up to work, work hard, be consistent, and you will quickly get promoted in this space. So seeing people that have joined our team, that folks that, an individual that started as a janitor in our LA fulfillment center, and then became an associate and then a manager, and now they're a regional manager now, that journey for someone that is just, it's incredible. And being at a part of a company and a mission to be able to create that opportunity, is just, yeah. It's the highest of my days.
Daniel Scrivner (57:11):
Yeah. So cool. Well, it sounds like eight years in, you're still just as excited as you were in the earliest days, which is good. Which is a good sign.
Jivko Bojinov (57:17):
We're just getting started.
Daniel Scrivner (57:19):
Well, thank you so much for the time, Jivko. This has been one of my favorite conversations. Thanks for making time to join.
Jivko Bojinov (57:24):
Really enjoyed it. Thank you so much.
Daniel Scrivner (57:28):
Thank you so much for listening. You can learn more about ShipBob, including their global omni fulfillment solution that's trusted by over 7,000 brands who use it to ship orders everywhere their customers shop, at shipbob.com.
Daniel Scrivner (57:40):
You can find a searchable transcript to this episode, as well as our episode guide with ways to dive deeper, at outlieracademy.com/138. That's outlieracademy.com/138. For more from Outlier Academy, follow us on Twitter, LinkedIn, Instagram and TikTok, subscribe to our YouTube channel at youtube.com/outlieracademy, or visit outlieracademy.com for more incredible Outlier founder episodes, profiling incredible companies like Forward, 8 Sleep, Common Stock, Varda Space Industries, Superhuman, Primal Kitchen, 1-800-GOT-JUNK and many, many more. In every interview, we deconstruct the ideas, frameworks, and strategies they use to build these incredible companies. We'll see you right here with a brand new episode of Outlier Academy next Wednesday.
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