01 May Leveling the Playing Field in Small Business
In this episode of The Faces of Business, our guest was Andrew Johnson. Andrew is the founder and CEO of Shelf Aware LLC. Andrew Johnson is an entrepreneur and family business owner who is making his way through the business world, aiming to make a positive difference. He is fortunate to work with his talented family in their O Ring Sales & Service business. Damon and Andrew discussed Leveling the Playing Field in Small Business.
Andrew begins by talking about his small business innovation journey that started when his dad formed his company. Andrew’s father was a sales agent for another industrial distribution company. And, in 1982, he saw the writing on the wall and started his company O ring Sales & Service.
Andrew discusses his family’s entrepreneurial journey and how growing up was with his Dad’s family business.
Their innovation journey where they began learning how leveling the playing in small business could help them compete began with a former employee who helped them bring all the data from their old ERP system into the new ERP system. This person advised the family that they should value their customer and historical data and use it. They successfully transferred all their legacy data into the new system and began their journey optimizing their business operations.
Andrew and his family are growing their business based on their original idea of having a business doing $15 million in revenue with 15 people inside a single location. This idea has helped them to rethink and rebuild many of their systems and processes to be much more efficient than their larger competitors. This has resulted in many innovative solutions to challenges that give them an advantage.
Recently when a customer required them to provide vendor managed inventory or lose the business, they applied this process of developing innovative solutions to develop a better way to provide vendor managed inventory without the usual human resources and facilities requirements.
Andrew said they knew how complex and capital intensive offering VMI inventory to their customers would be if they did it like their competitors. They eventually discovered that they could use labels made with UHF RFID chips that allow tracking product consumption at the factory without human interaction.
They deployed their first system in 2015 and Shelf Aware was born. Since then, Shelf Aware has gone on to win other large contracts based on the innovative solutions. These solutions are allowing O Rin Sales & Services and their customers to become much smarter in how these products are replenished and packaged. This real time data driving additional supply chain efficiencies not originally anticipated from the system.
Andrew then shared his vision for Shelf Aware in the future enabling specialty distribution companies working together to provide vendor managed inventory to large customers through a connected Shelf Aware ecosystem.
Damon Ended this conversation by thanking Andrew. And It’s great to see how you’re using it and how it powers your real-time data, enabling you to be efficient.
At the end of the episode, Damon expressed his appreciation for Andrew’s opinions.
Andrew’s interests include speaking, teaching, and pod-casting on topics in and around business innovation by leveraging technology.
In 2008, Andrew received his Bachelor’s Degree in Accounting at Missouri State University.
He was First Runner-up in Best Manufacturing RFID Implementation in 2019. And, also, received RFID Journal Awards in 2018 for Runner-Up Best RFID implementation Supply Chain/Logistics.
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Leveling the Playing Field in Small Business
The Exit Your Way Business Round Table Live Stream
business, data, inventory, big, dad, locations, product, suppliers, started, shelf, industrial, company, customer, run, rfid, consumers, people, innovation, small business, incremental innovation
Andrew Johnson, Damon Pistulka
Damon Pistulka 00:06
All right, everyone, welcome once again to the faces of business. I’m your host, Damon Pistulka. And I see it looks like my screen is just like bright white. Can you see me there? All right. Well, today with me, I’m really excited. I’ve got Andrew Johnson. And as soon as I did that, I hit it hit a chord and shut my monitor off. So we’re gonna do this without a monitor, I guess? No, here it comes.
Alright. I’ve got Andrew Johnson today with me from shelfwear. So happy to have you here. Andrew, we’re going to be talking about leveling the playing field with small businesses and man, you are living this in run your family business and shelf aware and the other businesses that your family has. So excited talking about day. Thanks for being here, man.
Andrew Johnson 00:50
Yeah, thank you for having me on. And for the opportunity to share our story. I think it’ll be pretty inspirational. We are trying to level the playing field. And I kind of talk with my brothers all the time about small is the new big business. And I think technology has helped us level that playing field. So looking forward to sharing all the juicy details, The Good, the Bad, and The Ugly.
Damon Pistulka 01:10
Yeah, it really I mean, you’re right, though it really has its technology has allowed small businesses to do things that they weren’t able to do before. Because it’s not just available to the mega companies. It’s available to the two person companies now in a lot, a lot of cases.
Andrew Johnson 01:30
Yeah, it’s wide open. It’s the Wild West. And the advantage small businesses have that I think you’ll hear in my family business story is the ability of being so small gives us the unique ability to fail fast. And so when it comes to technology, adoption, a lot of it is about failing, implementing failing, learning from your mistakes, and then, you know, making the process better implementing it again. And we have the ability to do that and a small business environment and not just bring down like, you know, millions of dollars and in commerce. 1000s of connections depending upon your stability. So, yeah, yeah, it gives us a bit of flexibility to work. Yeah.
Damon Pistulka 02:07
So this, let’s start, let’s start back aways because you grew up in a family business and your dad started this business a number of years ago, and he started ordering sales and service. And while it was when did he actually start that? Where were you add in in school age?
Andrew Johnson 02:25
Let’s see. I wasn’t born yet. So he started good. Yeah, a couple years before I was born, I used my mom’s nursing salary. He was as capital basically seed. Yeah, mom’s hard earned paycheck. He didn’t have really anything. He was a salesman for another industrial distribution company. Yep. In a family business environment. And that family business brought on like, one of the son in law’s of the owner and sales manager came to my dad and said, Doug, I’m sorry, you’re the low man on the totem pole.
So I mean, writing’s on the wall, but a year, you’re probably out because we don’t have enough business to go round for this. Yeah, the son in law to have some accounts. And so my dad saw the writing on the wall. Thanks. The sales manager had a little bit of runway to plan his exit. And he jumped in and started his own competitors, that very same company in the O ring, and seal and gasket, industrial distribution, space, and 1982. All right. I was born a few years after that. And my whole childhood was steeped in small business ownership and helping my dad and I have three sisters.
So four siblings, or four or four kids in our generation, the only boy, I come in the middle, some third, third oldest, I got one younger sister. And yeah, we, we lived it. And it was kind of hand to mouth for most of my childhood wasn’t until I got into middle school and high school that I kind of, you know, realized that my dad had made it to a degree he had survived, you know, the first decade of small business ownership and was one of the few that could say he had a growing, thriving business, and it was fairly self sustaining. And we weren’t worried about like it going out of business at that point in time as a stable, stable business and a good growth trajectory.
Damon Pistulka 04:15
Yeah. Yeah. So it’s a little different growing up with a family business, isn’t it?
Andrew Johnson 04:23
Oh, my gosh. Yeah. I mean, and I talked about this pretty openly. My sisters talk about it quite a bit, but it’s, it can be, it can be traumatic, and there’s plenty of trauma. There can be lots of unhealthy situations. My dad situation was, he’s a great man. But he had a bit of an unhealthy situation where he got so insular with the business he was so hyper focused, and then it had very few friends like guy friends that he could, you know, share the journey with and he’s by nature, just kind of a lone wolf. So he just went cord.
And when things would go bad, he had nobody to really vent. So like my family, my sisters and I took the brunt of it at the dinner table. I mean, that day we knew right away when he walked down, it’s like oh shoot, like, steer clear dad. And it wasn’t like he was certainly not, you know, abusive towards us or anything but yeah, the venting I mean, he would yell and like just scream used to throw things at us.
But like one time Yeah, water cooler at the house at the side of the house. Because frustrated, broke it. He threw a scoop ice cream at the sink one time just screaming about employees in the ice cream inadvertently hit my little sister in the face. So on her face, and of course, he apologized for it. But he didn’t have a lot of healthy outlets. And it is really dramatic. I mean, your whole person gets wrapped up in the success and failure the business and if it fails, you know your family’s out. It’s yeah, yeah. real visceral, nasty sometimes. Yeah. Great moments to the success and the pride and all that comes with the success eventually, but it is a grind. Yeah, get there.
Damon Pistulka 06:10
Yeah. Yeah. But you since then. And you were told me a story. When we talked before about you didn’t really think you were going to work in your dad’s business growing up for a while,
Andrew Johnson 06:22
correct? Yeah, I think the early years the grind, you know, yeah, I’ve done a number on all of us and my sisters and I walked away with plenty of battle wounds and scars and kind of new like, there’s no way I’m working with my dad, not like we usually and he’s a guy that would share mostly the negative stuff. Like when he would have successes, he wouldn’t tell us like he had an awesome day. He’d rarely, he’d come home and be in a good mood. But he wouldn’t say like, here’s why I’m in a good mood, I take a few victory laps or toot his horn, he wouldn’t do that he would just come home. And we’d always hear about the bad stuff.
So as far as I was concerned, the business was bad. And it was like a nightmare. And then when I matured and got into high school, I was looking at becoming an optometrist and start to look more closely with Mike, you know, over they call him like an advisor for college. And she was like, Well, what’s your dad do? So I started contemplating, what does my dad do? At that point, the business was pretty successful and humming along. He had good staff there, and it’s very stable, and a couple of years where he could act like a business owner and put his feet up. Yeah, take a step back.
And it wasn’t like just hand to mouth every day. And I’ve thought, man, it’s got some freedom. He’s got a lot of opportunity in front of them. He could he could be creative. And so I put some serious thought into it and approach my dad and a family in a family like function. And he had a few neighbors or friends that I remember what kind of function it was. And he was throwing his arm around me saying, Oh, here’s my son, Andrew is gonna be an optometrist. He’s gonna go to optometry school. I’m so proud of him. I said, You know what actually did? I’m not I’m gonna come work for you know why.
So that was the announcement. And I thought I was just gonna walk into the, you know, to his, his company, get a job, and he’s the nice still gotta go to college. So he made me get an accounting bachelor’s, because he said that was the one thing he really felt like he lacked was a firm understanding of his his finances, how it worked, and how the general the financial statements come together. And so I went off, got a four year degree in accounting at a state college and came back and started working for him right out of college.
Damon Pistulka 08:23
Yeah. Yeah. So your early years in the company, what were you doing?
Andrew Johnson 08:29
Well, originally, I was applying my accounting skills. So I spent one year opening and closing the books that financial year as the accountant, unique scenario with the three sisters. That’s where I started working with my brother in law’s. So my sisters were two of them are older than me. So they were already. My one sister had been married for several years. By the time I get out of college, and her husband, who was supposed to be a high school teacher and a coach, he couldn’t find a job in the school system. So he was originally packing boxes while I was in college.
And then by the time I made it to the family business, he was the accountant. And so I took over for him for a year and he kind of cross trained into customer service. And I opened it goes to books, and then we swapped back because he’s an introvert who is much happier in the accountant.
So he went back to his old job in accounting, and I went off to customer service and eventually moved into sales and eventually and outside sales and sales management. We had a small outside sales team that I I managed for several years. But it was like during that whole time that my other brother in law showed up. So my second oldest sister, she married a guy named Jay and I guess my oldest brother’s name is Adams with Adam J. And me and the three of us we’re working.
The easiest way to say this. We’re working in the business and certain roles. Yeah. But in 2012 It’s where the story takes an interesting turn and goes from every other typical family business to this crazy wild roller coaster of a ride, which is an innovation journey that starts in 2012. And it’s when we were basically up against a wall, we had to adopt new ERP system. So we’re implementing a new ERP called Epic for profit 21. It’s very common industrial distribution, ERP. And we had been on a archaic system since 1996. And that was we didn’t know at the time, but that was the start of the wild, incremental innovation journey launched by our ERP implementation.
Damon Pistulka 10:37
So you could you can take your innovation journey back to when you implemented that ERP system.
Andrew Johnson 10:43
Oh, yeah, yeah, fundamental. And all of us talk about it, we had. So my, we had a former employee, his name’s Brett burger, great dude, and just salt of the earth. And my dad hired him right out of college. And he was the accountant for many, many years until they got bored. He was a bachelor had lots of hobbies, and got bored with opening and closing the books of a small business.
And so he wandered off into a fascinating career of software programming and data architecture. But we stay connected, because he trained my brother Adam, and they became pretty good friends. And so Adam took over for him and accounting. And then I came along and did the accounting. And we were about to implement this new ERP system. And Epicor had brought in a bunch of consultants and said, you know, here’s how we do it. We have these data guys come in, and they Data Merge a couple years of your, you know, your business data, and voice and data, and we’ll bring all your item data and inventory data over for the last, you know, three, six years, maybe.
And it’s cost, you know, XYZ, which was a lot of money cost a lot of money to do the transition. And these guys don’t. They’re good. They do it all the time. Don’t worry. Anyway, we talked to Brett about it. He’s like, don’t let don’t touch your data, like the data you have is the most valuable asset in your entire company. Right? Baloney, baloney. Brett, we don’t believe you. You’re full of shit. And he said, No, no, no, I am not. I can tell you for a fact that data is the most important thing. Here’s what we’re going to tell the poor guys to buzz off.
I’m going to come in since I’m a bachelor, a lots of time you buy me beer and pizza. We’ll meet after hours every night during the weekdays. So we would meet him every evening, we’d have dinner, carryout and some beer. And he helped us build basically a series of SQL code that would help us bring all of our data from 1996 Every piece of invoice line data, every invoice line detail. All item metric data from 96 Everything, every piece of data, we scrubbed it, we cleaned it, we organized it in SQL and brought it over on in basically in one day.
But it took months to get there. So the code to clean scrub and organize them we imported at all and like basically 24 hour, very stressful, 24 hours, but it went off perfectly. And after that three to six month period of transition to this new ERP system and was Brett’s help, we really did thoroughly understand that wow, the data we have is extremely valuable, runs everything we do. And we also got our feet wet. And in software programming did architecture, we better understood where our little industrial distribution company data tables lived, breathed, how they interact with each other, how we could Interplay different datasets to drive business analytics.
And we started. I mean, it launched us into this incredible journey of how we could automate our small business make it more efficient. And during one of those beer and pizza sessions we were sitting around, it was just Jamie Adam. And we were talking about where we wanted to take my dad’s business. I think everybody has these kind of visionary conversations. And it’s funny because at the time were like, we want this business to be when we’re 50, you know, and I was in my mid 20s, or whatever.
So I was like, man, by the time I’m, I’m 50. If lowering sales is doing $15 million in revenue, like that was a huge number. Get to 15 million in revenue. That’d be great. You know, and then Jay chimes in he, I don’t know, I don’t know who chimed in with what but we, we all try and deal with different aspects of what we really wanted. And we coalesced around this idea of growing the business to we call it the 15 1515 plan, but growing the business to 15 million doing it with 15 people and keeping it inside a single location at 15,000 square feet.
We thought if we could build industrial distribution business around this 15 1515 plan, which at the time I think Herman Cain was running for president and he had like this Nein planted come out with I think the whole idea from him for three, three metrics, but the revenue model, I mean, everybody has that. I want to get to be x big. Yeah. But the other two pieces were all about efficiency and operational excellence. We didn’t we didn’t. We knew it. We didn’t have words for it yet. We just knew that we wanted to grow a bigger company but without the bigger company. headaches? Yeah, yeah, yeah.
So that 1515 plan 50 5050 Plan launched this on this hyperfocus of operational excellence, where we’re looking for any constraints inside our business that held us back and made our employees less efficient or unhappy, or just generally pissed off. And then we would tackle those small projects of innovation, excellence, or operational excellence, with some sort of an innovation in and around, usually software. So we’d, we’d look at like, Epicor, and how Epicor handled transactions, and then we would write software to try and make it better outside of them. Yeah, yeah.
Damon Pistulka 15:40
So that. So that’s, it’s interesting, as you say this, because what we’re talking about is leveling the playing field with small business. So in 2012, when you did this epic wire transfer really started your journey. Did you understand at that point, what you really were doing as far as laying the ground to be able to groundwork to be able to compete with very large companies.
Andrew Johnson 16:03
No, no, the honest answer is no. I think a lot of people that are successful in innovation say oh, yeah, we had some like masterplan. Like when people say that, to me, it’s the BS meter goes off, because typically, it starts with nothing more than passion, and a desire to optimize. And guts.
Yeah, and, and, like, not much of a plan. I mean, we didn’t bring in a consultant. We I mean, there’s no, I’m not. I don’t have I, sometimes people say like, you hate consultants, I don’t, I don’t hate consultants. I just yeah, sometimes people use them as a crutch. Yeah. And it honestly just comes down to the what’s inside of you, and the hard work and your attitude and your passions and what you’re willing to sacrifice to get there personally.
And without the business owners on board, I mean, consultants, hands are tied, so they can come with all the energy and the great ideas. But if the folks don’t, don’t really want to do it, that are running the company, nothing’s ever gonna happen. So most of the ownership or most of the responsibility lies within with you, the owner display does, yeah, it does. And we really wanted to do it. And we had a really general plan. And we didn’t really have like a detailed roadmap on how to get there. We just viewed it as well, we viewed it as a series of innovations that we’re going to make is just generally more efficient.
Now was about looking back what is this incremental innovation journeys. It’s a marathon sprint, it’s not going to be something you can’t do this IT transformation or digital transformation. Really quickly, I mean, you can do it quickly, but it’s still gonna take you years instead of a company setting like this to get it done. But you can move quick. So we’ve kind of viewed it as a marathon as a series of Sprint’s. And so we knew that with each project, we wanted to move really quick. So we would we see a bottleneck, that was the easiest way to put it, we’d see something that was a time suck, or a bottleneck or a constraint, we would burn it down.
That was my brother Jay. He’s the optimizer down. He’s the Pyro, he’d like to match and just like, burn it. And then Adam and I would freak out and say, like, well, what are we going to do to replace it? And he like, I don’t know, but we’re never doing that again. And so that was our process. And it was clumsy. At times, it was brutal. At times, we were brutal in our kind of cold hearted in our, our optimization efforts. My probably my greatest regret in the whole process was just moving that fast. And we really didn’t care about the collateral damage in our people department.
And so like, our employees, at first thought this was insane. And we drug A lot of people like kicking and screaming, yeah, into the future. And there’s gonna be some of that. But if we could have gone, if we could go back into time machine and do it all over again, we would have been more graceful, we would have given the vision to the whole team and said, Hey, this is where we’re going. This is why we’re doing what we’re doing. And we would have made a bigger deal about our early wins, you know? Because I think if you do a few quick wins, you can get everybody on board with the con. Yeah. We did a pretty good job of that.
Damon Pistulka 19:18
Well, you know, you’re not going to be perfect. But you’ve gotten where you gotten. And that’s and that’s good. That’s good. Because the interesting thing is you guys are competing with some fairly large companies. And that is that’s not something you see every day, that’s for sure. No, yeah. And like you said, you’re competing against multi location companies with a single location. So you have to do things a bit differently.
Andrew Johnson 19:47
We do. Yeah, it started with operational excellence. And then our increment, incremental innovation journey went from being internal focus, just making our company hyper, hyper efficient to this external focus. because we’re okay, we’re going to take the skills, and software and hardware deployments and the skills we’ve learned. And some of the connections we’ve made. And mobile app developers and database guys and UI guys and UX guys, and we’re going to figure out how to put something together externally. So an innovation that we can drive value to our customer base.
And that was the genesis for shelf aware. And it’s, it’s the my primary focus now, it’s what I do on a percent of my time is dedicated to seeing shelfware move forward. And it came about three years into our innovation journey.
So we spent three long years just doing the hard and nasty work of operational excellence, making the company hyper efficient, solving all of our headaches, putting out small fires and making sure they wouldn’t pop up again, because we had a new process in place. And that gave us the experience we needed, the expertise we needed, and the confidence we needed. And the time I think that’s what a lot of business owners tell me is, hey, how do we do something really cool. It’s like, Well, you do all the uncool stuff first. And the reason you have to do all the uncle stuff is because you have to free yourself of the daily burden and fires.
And if you don’t, if you don’t put all those out and keep them from cropping up, you’ll never find the whitespace to do something really cool. You have to be able to just lock yourself in a room say, nobody’s knocking, like the three of us could lock ourselves and in my brother’s office, and nobody came to the door and said, Hey, this is broken. Hey, we need help with this. Hey, can you help us here? Hey, can you tell us how to do this. And that’s where we’d gotten the company in 2015, which gave us the whitespace or the margin in our day to dream up shuffler.
Damon Pistulka 21:40
Yeah, but that’s that. That point, I want to re emphasize that, again, doing the uncool stuff first. So you’re not continuously putting out fires, and you can kind of sit back and watch the business run. And think about the next thing you’re going to do because that uncool stuff is the only way like you said to get to the point to where you can actually think about put the thinking time into what’s really going to build your future. Yeah, what’s gonna continue to build your future? Yeah,
Andrew Johnson 22:13
I tell folks today, and if they want to get in the innovation game, you need to have a team of people that are innovating. In our case, it was my brothers and I which is unique situation. But a team of people, you know, the know the business really well. And they need to be given a really large budget, but not of money of time. That’s why this organic incremental innovation just takes a ton of time. It’s not really expensive, the tools are fairly inexpensive, and the cloud atmosphere ecosystem that we’ve developed from a tech stack basis, is really equipping.
And so it’s not very expensive, and there’s lots of plug and play pieces to it. It just takes a ton of time to figure out how you’re gonna make it work for your nuanced business. And that’s what every business is, it’s very nuanced. And when you get into them, and you peel back the layers, whoa, why didn’t know, you know, oh, rings can be this complex. And selling them could be this, you know, intricate, and it is. So you have to make these customized innovation solutions work for you. And it just takes a ton of time.
Damon Pistulka 23:17
Yeah, yeah, good, good stuff. Because it is, as you are going through this. Now, you talked about this, you don’t have a huge budget. I mean, so how do you think that really helped when you looked at solutions you did. Not having tons of money to be able to spend on these things?
Andrew Johnson 23:38
I don’t know. Would have been nice? It certainly made us come up with solutions that were based in reality, and practical. And it also made us implement things quickly. So I think like, I’ve seen it a lot in the industrial space, you’ll have tech companies enter the space and come up with solutions for the industrial space that are too high tech, too sexy. And typically, like what it looks like that is there.
The solutions themselves are too expensive, too complicated, too hard to deploy, you know, whatever, just the list of prerequisites is way too long. In our scenario, since we’re bootstrapping everything, like if we couldn’t prop it up in you know, a couple days like we weren’t doing it. Yeah, wouldn’t you know, go to my dad in like 30 seconds explain to him why we needed to spend two or three grand then forget it had to be real, you know, quick ROI. That’s where we’re looking for.
Damon Pistulka 24:38
Yeah. Then you make great points there because in the smaller business, you have to get that ROI going faster. You don’t have six months to just kind of just hang out and work through it. Do what you want to because you got to see what is going to do and get quickly. and move on to the next project.
So, ideally, yeah. So now you’re sitting here and you’re a little different place. We’ll talk about shelfwear. Because I think is super cool innovation. What’s it like for you working in the family businesses now? I mean, what? What’s the mean? Because you’ve been in a while now, what do you? What do you like about it? What were some of the other things that are frustrating about it? But first of all, what do you really enjoy about it?
Andrew Johnson 25:30
Well, it’s the same thing I enjoyed. About like, looking at my dad, it’s the opportunity. I love the risk. I do. I love risking stuff. I love I love winning. Yeah, so I love competing and winning. I love doing new things, obviously, plowing new ground, and I do love. And it’s an overused term now. But I do love disrupting marketplaces and putting people on their heels. And it’s certainly not what I think. Like, there wasn’t an AR 15 1515 plan. We didn’t say like 15 1515 and rec market, you know, with some, some cool system.
Yeah, what happened, but where I’m at now is a really fun, fun space where we can rethink, like, go to markets, rethink market strategies, and design, competitive advantages, you know, through collaboration with other businesses. So that’s, that’s fun. The position I’m in now shelfware allows me to work with lots of other small businesses and lots of other industry sectors. So learning about their nuanced businesses, always fascinating. So yeah, that aspect of it.
Damon Pistulka 26:53
So let’s, let’s start talking a little bit about shelfwear. Because it’s really interesting. So you’re getting the O ring sales and service, you’re getting that rolling, things are going really well for you there. And you get presented with an opportunity, this talk about the kind of the Nemesis that really created shelfware.
Andrew Johnson 27:14
Sure. And the Industrial Marketplace for a long, long time, there’s been a growing need desire demand for a service called vendor managed inventory. And it’s this whole idea of, of really large consumers, typically manufacturers, you know, think like Caterpillar or John Deere, the big boys, when you get to a certain level in manufacturing, your raw material input supply chain just gets huge.
And you need just so many different product verticals, and a lot of them, most of them have a segment of that product vertical that’s highly engineered. And so it’s not just managing commodity inputs, it’s managing highly engineered product inputs, which have a whole host of Oh, hurdles, you gotta jump like, you know, lead times and custom tooling and custom materials, and it’s a nightmare. So the need continued to build and build and build for large consumers to offload the burden of that management on the supply chain to the supply base.
So vendor managed inventory, or supplier managed inventory, just grew and grew and grew. Now, historically, it’s been heavy and consignment. So like a lot of suppliers would agree to run the inventory for the manufacturer at their facilities, they’re managing inventory values, and the shelf contents at the customer’s facility. So it’s in folks on site. And when they went that far, they’d go ahead and say, and we’ll run it on consignment, so we won’t charge you until you take it off the shelf. And so, really, a consignment piece is what kept my dad from ever offering vendor managed inventory service in our business.
Until he basically just got he got forced, we had some long term customers that were great, and we loved them, we didn’t want to lose their business. And they had kind of come to us with that attitude of hey, management ownership, corporate executives are saying we must offload the burden of supply chain management to you our valued supplier. And if you’re not willing to run a BMI program for us, we’re gonna have to go to a new supplier. So that was probably around like 2014 We were put up against a wall basically and said, Do this or you’re out. And you know, a couple years of our innovation journey undressed.
And so we knew, hey, we can, we can quickly put out a BMI program that’s better than anybody else’s. And the way we’re going to do it is by monitoring product consumption without people so that was big. One of the big reasons behind consignment and my dad didn’t want to commit to do it was it takes human capital and branch locations. So if you’re going to run vendor manage inventories, the historic model is people all over the country. You have to have branch locations, so sent like you know centralized hubs where you store localized info Don’t worry for these large manufacturing customers.
So in every kind of city that you wanted to do it, and because you had networks of dudes and trucks driving around from those branch locations, servicing those customers, it was just a capital intensive game that we never really felt like playing. And we had that 15 1515 plan in the back of our mind if we’re gonna grow our business, but keep it single location, 15,000 square feet. So we kind of locked ourselves in a room like we usually do, and went to the whiteboard and started coming up with ideas around how we could collect inventory consumption, remotely.
And we all coalesced around the idea of using RFID. Radio Frequency Identification is what RFID stands for. It’s a technology that’s been around a really long time people use it all the time, they just don’t really understand, you know, what it entails. But that’s Bluetooth is wrapped up in that. So any Bluetooth audio, that’s a version of RF, frequency bandwidth. And then you have NFC, which is near field communication, that’s what you use, like Google pay Apple Pay, Samsung Pay on your tapping credit cards, your hotel, room key card. Now, most elevator key cards, those are all kind of near field.
So those are RFID. So it’s transmitting data, using radio waves, sometimes over short distances and payment applications. And sometimes over long distances. Historically, in the industrial space, you’ve seen RFID deployed and asset management. So they were putting very expensive, you know, five, $10 RFID tags on very expensive assets. And that would allow them the ability to track the assets Entry Exit out of locations, track where it’s at, potentially even track, you know, when the last time it was used, and repaired or maintained.
And so we just looked at that technology as hey, this is the time to deploy a vendor managed inventory system utilizing RFID. We had the luxury of not being in the space yet, and had the experience of developing several different technologies in and around counting scales. So we had looked at, there were several different solutions already deployed that we looked at closely and said, like, you know, none of the solutions pull out enough cost enough complexity and enough human capital to make us want to develop a better version of current solutions.
So we just scrapped everything. So did we want barcode scanners? No. Okay, still doesn’t really solve any problems. Did we want way nodes underneath all the product bins? No, because we played around a lot with way nodes and admitted a account smart counting scale, and we you know how complex and capital intensive that would be mistake written. So no. So we picked up RFID. And then we had to decide when and how we’re going to collect data of, of customer consumption. So we applied the RFID to the packaging.
So we, we have product labels that are made smart with UHF RFID chips, that allows us to track product consumption at the factory without any people involved. So somebody at the factory level grabs a box of fasteners and walks away. We know in real time that they took the fasteners off the shelf, and they walked back to the civilization so as a supplier, we can ship them more fasteners. O rings, we were applying RFID smart labels to polybags class plastic bags full of all rings, and tracking package quantities at consumer locations deployed the first system in 2015.
Like really quick, we had three months went from like whiteboard to software and, and deployment and maybe three months, six months, six months top, I’d have to go back and like look at all my email chains to figure out the timing, but three to six months, we had the thing out in the field and deployed at a real customers location tracking actual money, volumes of inventory for a gearbox manufacturer. The whole deal was done with like, lunch beer and a handshake. And then yeah, system and told him if it didn’t work, we’d come back and fix it all, you know, clean it all out. Yeah. Yeah. Yeah. So now, now, you know, it’s
Damon Pistulka 34:11
quite it’s quite a great example of what we’re talking about leveling the playing field, a small business, you’re at a crossroads where you’re going to lose a customer or you’re going to come up with a solution. Yeah. And when you apply the same kind of innovative solution or problem solving that you did throughout the business, you just took it. This is just another problem. We’re going to solve like we have before, and we’re going to be more efficient and better than anyone else. And we’re going to do it quick. Because man six months to go out with a product to test is this pretty aggressive?
Andrew Johnson 34:49
Yeah, that’s what we’re all about is progressive, and we’re fast. And we’re fast too. So
Damon Pistulka 34:55
yeah, yeah. Jared. Jared says speedy implementation. I used to work yeah. That’s for sure. Because, I mean, that’s really when we talk about and what it’s I love hearing the story and understanding how you did this was shelfware.
Because this is something that you’ve competed against some of the biggest people in MRO types of pies and one. And because they are stuck with legacy systems that can’t adapt as easily will this say because you’re moving a fleet of boats rather than a single boat that is made to turn quickly. So the as you did this, what are some of the things that became apparent to you is like, I never thought of this. But this is another application or some things that have really kind of started to open up as you. Yeah, use this a little more.
Andrew Johnson 35:50
Great question. Originally, we, we knew we had to offer that first customer could enrich inventory system. And we knew we wanted to do it, or we wouldn’t do it without eliminating a lot of the human capital. So we had very few people in a very efficient company. And we knew if we let one of them out to drive around a truck, go on site and monitor inventory values, the traditional way, we would hate it, and there’s going to be soft costs wrapped up in that and our cost to serve that customer would skyrocket know, destroy everything we were trying to build and eventually lead to a branch location, we’d hate that too.
So that was our like, original, just selfish ambition, in and around cost to serve like we weren’t going to do it. But we’re going to do it efficiently. What we didn’t anticipate was once we started putting smart labels on all the product packaging, the amount of data we gleaned from basically having eyes on the customers inventory 24/7 was incredible.
So six months into the deployment. It was working, like the basic function was working, they would remove the back from the shelf, and we would be packing the bag in our warehouse, you know, yeah, from the deployment. And just minutes later, so blue collar folks at the manufacturing facility almost as fast as they can consume it, we were packing it right, getting ready to rebuild them. And that was great. And we were kind of patting ourselves on the back. And we pulled down all the data from all the inventory consumption over the first six months, we brought the manufacturing consumer into our conference room.
And we said Alright, so obviously, we’ve not run out of any parts in six months. And I said, Yes, you have not. So that’s the primary objective of vendor management, Tori’s don’t run out of inventory. But we’re here to tell you that we’ve looked at all the data analytics. And because we’re tracking package consumption on a per item basis, we can tell you that your inventory is 55% too heavy, we could reduce it 55% and cut your on hand inventory value in more than half.
And that’ll save you cash on hand. That was our big like, announcement, you know, so we dropped that bomb on them thinking they were just going to fall out of their chairs. And then there they were, they were impressed. But the primary gentleman involved it from the customer’s location, the manager, the plant manager, the supply chain manager, he was staring at the data because we had all the data up on the screen to illustrate our point. Yeah, yeah. Gearing up the projector screen. And he was like, that’s, that’s great. Good. That’s a lot of money. We’re happy. Just go ahead. Yeah, cut the inventory by 55%. It’d be great.
We’re like, Richard, what are you? What are you staring at he goes, I’m just noticing that a lot of the high volume inventory, we’re not turning it first in. First out, we’re not, it’s not fresh. And there’s date codes and lock codes and heat codes we need to be paying attention to in this data. We have old inventory, we have stale inventory, I need to tell my inventory manager to go back there and move some of the inventory to the front and make sure that gets picked before the stuff that’s coming in gets picked. Or like what and he’s like, You need to make me a fresh report can make me a fresh report.
Sure. Well, we’ll make you a fresh report. We hadn’t even thought about that. Yeah. So that was our first revelation, you know, by the user. And then staring up the data. My brother in law, Adam, who’s kind of our data man, he says, you know, Richard, another thing I want to talk to you about was we’ve looked at all the timestamps of when you pull parts and what you pull together, because we can look at the timestamps and say, Okay, you always pull these seven items inside the same five minute window. So clearly, they must go on the same assembly.
So we think that these are your top five bills of material. And he was like, Whoa, you know, my bill of materials were like, Yeah, I mean, for all your builds from that product vertical. Anyway, we can tell you exactly what goes into each gearbox. He’s like, Well, that’s crazy. Kind of creepy. Like, yeah, it’s, it’s interesting. But the point I want to make with it is how about we co locate those items from a physical location and Bin location standpoint?
So when your folks walk into the inventory, or they can get in and out faster? Because yeah, oh, yeah, that’d be great. If we could rearrange pick sequencing. That would be really helpful as well. We’d love to just have the folks get in and out in a convenient fashion. Then, from there, we move to like, Hey, you always take two bags of this. But one bag of that. Why is that? Oh, it’s because your bill assembly quantities 10? Why don’t we just package all the sub components and packages of 10? So they can just grab one of each? Oh, yeah, let’s match the package quantities to your consumption habits, or your build metrics.
So we started doing stuff like that. Another thing that blew us away was, so we, we had a lot of success with the first user. And that’s, you know, when my wheels is the kind of the entrepreneurial, the dude is always way, way out in front of folks. I’m not even on I wouldn’t call myself the cutting edge, because a lot of times I find myself on the bleeding edge where, yeah, you know, I come up with stupid ideas like, Hey, we should do this. And we’re like, no, it’s awful idea. And I was way out there on the bleeding edge thinking about, Okay, this is where we’re gonna take this thing.
And I, as I was moving on, I was moving on to the next hill that we’re going to climb with this system was shelfware. And what customer we could go take. And so we latched on to another really, really big account. And so just to put things in perspective, when I started with my dad, and out of college, we were like three and a half million in revenue. And we had come up with this big 15 1515 plan.
And a few years into our innovation journey in 2012, we were adding million dollar accounts. Once a year, twice a year, huge growth chunks. So I latched on to one of these big accounts, and we were using shelfwear to do it. So I pitched off word to another big user. And they were I mean, it was much bigger than the gearbox manufacturer implemented with this user used uses still does. Still on the platform, nobody’s ever unplugged software. But they were using or consuming almost a million dollars and O rings and gaskets a year. And it’s a big number.
And it’s a kind of a big OE original equipment account, big manufacturer. And my dad, I told him I was like, that would be a great fit for you know, XYZ reasons. For shelfware. My dad and one of our oldest sales guys, Dennis basically just laughed me out of the room. They said, Yeah, what bathroom and account, you do not want that business we were in there 20 years ago, and my dad always told the story of basically those kinds of accounts when you win them, it’s like winning a bar fight. If you’re the guy that wins the bar fight, you know, your eyes gonna be like fall out your socket and your arms. One victory, okay, it’s not a fight, you want to win.
Because if you get market share, they’re gonna bloody you, as you’ll be left with like nothing, no meat on the bones, your margins will be very slim. I said, I get that. And they had 15. So 15 or so suppliers. We put shelf or to him, the plant manager who was new at the time, he had tons of problems and supply chain on this one product vertical seals. And he said, I believe that Jeff will give you the whole package. So he kicked out I stopped the letter in my office, wrote a letter to all 15 suppliers and said thanks for your years and years of service. But we’re going to this value added Supply Chain system.
And why yes, throughout this form letter to all of his suppliers and we set an aggressive install date installed the platform and my family business went from $0 of sales at this customer to almost a million dollars. So big volumes. In the first week we looked at the shelf or data or like after we installed which the install was a whole nother story that was a huge elephant we had to eat very quickly. You know, they say one bite at a time Well, we were shoving bites in our face like before we issued the first bite trying to form this massive manufacturer. And get back after the install.
We’re like ragged from the install and the data starts pouring in. Because of course as soon as we install the thing, they’re not stopping consuming. Yeah, packages are flying off the shelf couple states away and we’re watching the data in real time stack up in the shelf or system. Our first order gets spit out of shelf where we’re like holy cow we have like I think it was over 1000 PICC lines we had to do and we had agreed to consolidate a ship date of like a Friday and so we were trying to pull down 1000 lines in one day and we had everybody like all hands on deck we only have like at the time we had like 15 employees tops so me I was in there all the brothers
Yeah, they’re everybody family yeah it’s grandpa
Andrew Johnson 44:31
realize was the you know again going back to the things we never realized was we had just deployed a real time data system we were we were watching our inventory move out of the system Monday through Friday or sometimes Saturday Sunday. why would why did we wait till Friday to pick and pull the order as a supplier we should be picking packing pulling staging the order and then ship it Friday?
Yeah, so like it took us like three or four weeks have realized, hey, we can streamline our shipping process. Yeah, Monday we’ll pull a small order pick a pack bullet stage it Tuesday, we’ll pull a small order based on what they’ve pulled that day. Yeah, staging. And then by Friday, Friday comes around. We won’t have 1000 line pick ticket, Morehouse. Yeah. Idiots sounds stupid. But you know, that’s what happens when you’re out there plowing the ground in an alarming rate you do get so far ahead of yourself sometimes.
Damon Pistulka 45:23
But the real time data, I mean, the real time, you’re still just what you talked about by you enabling real time data from your customers on a daily basis or hourly, or whenever it happens, right? What you’ve done is you’ve allowed the entire supply chain become more efficient, because you’re not queuing, and then a big dump, not queuing and a big dump. Just like you said, you can probably with one or two people take care of something like that. Whereas if you’re gonna do it once a week, it’s like seven people.
Andrew Johnson 45:56
Yeah, so to your point, we have one shipper, the family business still only has one shipper. And they do when I started with my dad, you know, three and a half million, they just eclipsed 12 are on the way to 12 and a half million, same staff, same headcount. Just yeah, you know, four times the business.
Damon Pistulka 46:15
That’s awesome. That’s awesome. So we’re getting close to time here, I want to just get a couple more things for wrap up, because Andrew is awesome talking about it. Because a RFID. Man we talked about when before I mean, I was back in the early 2000s, we were talking about this in the grocery industry and talking about how that could change the way groceries are purchased. And, and as I was running, the company that made checkout counters for grocery stores, and we’re talking about those things.
And so it’s really cool to see that you’re using it the way you are and how it’s powering the real time data that allows you to be much more efficient, then than other VMI methods are. But I was wondering what do you see for the future of this kind of application? What what’s really you’re gonna eat because you’re out there ways, and you say that I’m out? Kind of, yeah, yeah, you’re in the bleeding edge. What are some of the things you go holy cow, this would be really neat if we did that. Okay. All
Andrew Johnson 47:13
right. This is this is a mind dump from the bleeding edge.
Damon Pistulka 47:18
So okay, mine don’t free bleeding edge. Here.
Andrew Johnson 47:20
We go crazy wrong on this. But we’re shelfware is heading the bleeding edge where my mindset is. After the success of shelf where the consumers came back and said, This is a sixth system, we want you offering sales and service to sell us everything. My dad’s generation was, that’s how he was thinking, great, we’ll do it because that’s how industrial distributors get bigger. My brothers and I said, we have a new business model, we call it cloud sourcing. So what we did is we took the shelfwear platform. So it’s software and hardware that we licensed to other industrial distribution, or industrial suppliers, who are niche in their own product verticals.
And so what we’re doing is through collaboration, allowing everybody on the platform, its token, anybody can hop on licenses. So for system, we’re giving really large consumers the ability to put their favorite suppliers together on one slick inventory supply platform that’s flexible enough to go across product verticals, so small parts to large parts of the floor stock items, you can apply the same platform. So consumers get the omni channel, they want one set of rules across multiple suppliers.
But the suppliers stay independent, super hyper focused on the product vertical, which means best in class product pricing, r&d, best support, sales support, it’s like best of all worlds. And so together the shelf we’re platform is going to have a collective of hyper specialized suppliers that can serve as the largest consumers in the industry, we can all do it from our single locations, if we want, you can have multiple branches, but you don’t certainly have to have 2000 branches, like our competitors, which would be the giants like Fastenal Granger, and I really, Amazon business in the future is going to be a huge competitor for suppliers.
And so that’s gonna give us the small independence, the ability to compete against the Giants. By using technology to put us everywhere, we’re gonna use the power of the internet, the power of data to be omnipresent omni channel and consumers will benefit from it. So that’s the bleeding edge brain dump. It’s going to be a collaborative approach to industrial supply called Cloud sourcing. And that’s, that’s the competitive advantage for the small guy.
Damon Pistulka 49:35
Man, that that that’s super cool because what you will enable is true Small Business Innovation at a level that these large companies aren’t able to really understand now because they’ve got to go with I gotta buy it from everybody. I can’t buy it from the best, best of the best, because I gotta buy I found somebody that sells me way more skews on that because I can’t do that. Yeah, what you’re saying is you give Damon who makes really good whatever the opportunity to be like, like, the biggest in the industry supplying the biggest in the industry,
Andrew Johnson 50:15
correct? Yeah, yeah, I want the little guys to be able to go to John Deere and collectively say, Hey, John Deere, we know you have, you know, 15 operating companies in the in North America, we can service all of them, the 20 or so shelfwear suppliers. And we can cover all your product verticals from hardhats, all the way to O rings and seals and gaskets and everything in between. And you’ll get all the data in one spot as a consumer, that’s what they want. And what I think the weakness we’re going after is the competitive advantage of the big guys are trying to flip that.
So their advantages, their footprint, their advantages, Apple, and you’re looking at companies like Fastenal, they have 2000 plus branch locations, all the human capital, that’s their advantage. If we can flip it with technology and turn that into their disadvantage, their bigness is now their weakness. And the way we make it the weakness is by being nimble and doing all of the service and value add that they do but without the need for people in branch locations. Yeah. So all of a sudden, their capital investments become just weights around their ankles, and it just sinks them.
They don’t have the product expertise either. And that’s kind of the dirty secret. Well, yeah, I as a lot of the companies like my family business supply a lot of product to the big guys like Fastenal and Granger and MSc. We’re behind the scenes. We’re the experts. We know everything about O rings. Yeah, gaskets, and we’ve been doing our whole lives. And if we could just get the service level offering, but without the branch locations needed. We can like, you know, make a huge leap forward and competing with these guys. Yeah, yeah, we have gone head to head with them, and knock them out at big names. Big Nice.
Damon Pistulka 51:51
Nice. Well, that’s awesome. It’s awesome talking to you, Andrew, because it’s so using technology to flip the script, you’re just turning it upside down and making what is was once a strength, a weakness, and allowing the biggest companies in the world to get the absolute best product. And I
Andrew Johnson 52:15
I think that’s cool. And that’s and that is disruption. So yes, it is. That’s an all the next blockbuster. You know,
Damon Pistulka 52:24
You never know, you never know. I just want to say thanks, cya for being here. And Jared had a question too. I was wondering if you’re active outside of the US? Well,
Andrew Johnson 52:34
We couldn’t be because it’s the internet. But yeah, currently not with shelfwear. So you know, somebody outside the US will do it.
Damon Pistulka 52:41
Yeah. So, Jared, go ahead and connect with Andrew, on LinkedIn there. And you guys can talk about that. But, Andrew, thanks so much for being here today. This is such an exciting technology you guys have delivered or developed and watching it get deployed. And I think it’s ultra cool too, because you’re allowing small businesses to compete with the largest in the world. And your idea about the shelf aware cloud sourcing ecosystem is just incredible. I think it’s really going to be fun to see how that evolves. So, thanks so much for being here today.
Andrew Johnson 53:14
Thank you. Thank you. Well, I have to have a follow up and see if we fall off the bleeding edge. You know, yeah, come the bloody of the bleeding edge or if we, you know if we make it so. Oh, yeah,
Damon Pistulka 53:24
definitely. Definitely. Definitely. Sounds good. Thanks everyone else for listening. Thanks for the comments. Jared saya everyone else has been around listening today. So happy to have you. We’ll be back again Thursday. Thanks a lot.