We Almost Just Lost $300k & Our 2 Biggest Clients 😱

Good morning!

This is the first time I’m sending this newsletter in the morning so we’ll see how it does for you early birds.

The last five months have been some of the most stressful and aggravating months of my life.

I won’t name-drop, but we moved to two separate 3PLs (third-party logistics warehouse partner) earlier this year, one for CROSSNET & one for Good Sport, and they both ended up becoming some of the worst decisions we have ever made.

They almost bankrupted us and led us to lose our biggest clients.

For the past few months I had been preaching to you about how us moving to a 3PL from our own warehouse was going to save us the monthly rent overhead, the headcount and access to better rates. We should have saved $10,000+ a month.

In theory, this all works, but it doesn’t when your 3PL takes three weeks to ship B2B orders, doesn’t have phone or email access to any team members working at the facility that has your inventory, and worst of all can’t track inventory if their life depended on it.

I’m sending this a few days later than normal but am thankfully in a much better headspace because my old friend Joe Spisak saved the day and found us the most hands-on, helpful, and amazing 3PL that specializes in big-box retail orders. These guys just shipped nearly 10,000 packages in the past 48 hours.

Walmart picking up our SmashNet orders and heading to a store near you!

Long story short for those that don’t know Joe, he created this card game Dicey that we used to fulfill back in the day at the old warehouse we used to run. He went on to build his own 3PL called Shipdaddy and then graduated to build Fulfill.com.

It’s the sickest business model but essentially they match make you with one of 600 vetted 3PL’s based on your requirements and industry. They then take a cut of each order shipped from the 3PL (no extra cost out of our pocket). I wish we would have worked with them because it was completely free and when we tried to play matchmaker we screwed ourselves by picking one of the big, established 3PL’s that legit just treated us like another number and gave us a hotline number that led to somewhere in Pakistan.

You will never know my frustration when I’m trying to route a $250,000 order that is going to be canceled in 24 hours if I can’t orchestrate a miracle.

So what exactly happened?

In November of 2022 when we decided to shut down the warehouse and outsource that part of our business we decided to field quotes from all the big dogs. We did what we did best and had them negotiate against each other and get the best pricing.

However we got too preoccupied with getting our costs down and we totally forgot about more important things like communication, access to people who are actually with the products, and experience shipping retail orders.

Our busiest season at CROSSNET is between March and May when we will ship tens of thousands of boxes to retailers to get them stocked up for the summer. There are two styles of ordering:

  • Pre-Buys: Customers submit twelve months worth of purchase orders close to a year in advance. These orders are meant to be estimates and allows our team to plan inventory and not bring in more than we need.

  • Traditional Ordering: Big-box retailer places one large order and then sends down replenishment orders when they are running low. Typically you will need to ship these orders within a 5 day window of receiving them.

Problem 1:

The 3PL we decided to work with needs nearly 14 days to complete and prepare a B2B order. If the customer is expecting their order to be shipped within 5 and their standard practice is 14 things will never align.

This led to dozens of orders being shipped weeks late. Even worse several of our largest orders canceled orders or charged us a hefty late fee for shipping so late into the year, erasing any savings we had.

Worst of all - they delayed cash flow when we desperately needed it! Sad to say but there were a few times over the past few months when CROSSNET’s twelve-week cash flow was looking very bad. We needed money and we needed money badly. Our 3PL who was supposed to be our partner was delaying nearly $500,000 worth of orders.

Since our retail partners work on net terms, we get paid 30, 60, or 90 days after the inventory is shipped. If we were expecting to ship $200,000 worth of inventory on February 5th and be paid on April 5th, we didn’t end up shipping things until March 15th and got paid on April 15th. This disturbance in cash flow is detrimental for a business of our size and led us to be late for payments across the board.

We had endcaps across the country that we were two months late for due to “delayed shipping”

Problem 2:

Most 3PLs are terrible at inventory management. They either don’t properly scan in inventory when it’s received or numbers get out of whack when they start shipping units.

Either way, not knowing your numbers is unacceptable especially when you’re spending thousands of dollars a month.

It should be pretty simple. If you have 1000 CROSSNETS and you ship 200 units, there should be 800 left. Somehow there would always be random shit happening like only having 428 left.

One time we have a customer come to pick up 850 units. We had 1400 units in stock so there should be no problem! We got written confirmation that the inventory was packaged and ready for pick up. When the retailer got there there was only 600 units and we were short 250!

“Where did my 1400 units go and how am I short?” - Chris

“We will investigate and get back to you in a week.” - Them

Check out these fresh pallets. Smack dab in the middle of your local Walmart.

The Solution:

If I could go back in time I would have done a million things differently. Here’s some advice:

  • Pick a partner that excels in communication. You want direct access to the warehouse, you want an account rep, and you want a Slack group to make requests.

  • Pick a partner that understands your routing & packaging requirements. If I was a food & bev company, the 3PL I’m with now may or may not be the best choice (I have no idea), but each 3PL specializes in different things. Ours are expert at big-box retail and that’s what ultimately mattered the most to us

  • Get very detailed SLAs (service level agreements) that break down what happens in each situation and the timing & costs of everything. You need to be able to cover your ass when shit hits the fan.

  • Chose somebody you like working with and can grow with your needs. Sadly, picking a 3PL is like picking a spouse. The relationship we just got out of was like getting married to a girl that you thought wanted to have kids, have a house, and a dog and instead she hated children & dogs and wanted to live in an RV for the rest of her life.

  • Read the reviews online! Why did we not do this? Read the online reviews and contact these people. They’d be happy to share their war stories. Take customer referrals from any service provider with a grain of salt, they are always going to have their shining star give you the best feedback. Why wouldn’t they? This would be like you going on a job interview and giving a list of three referrals that hated you, you wouldn’t do it.

Outside of all that, I would have worked with the guys over at Fulfill.com from the start. They saved our ass at a crucial time for Crossnet. Without this new warehouse move we were on the brink of losing two of our biggest customers because they were simply that pissed off at us. Sure shipping things a week or so late doesn’t seem like a big deal, but when you do it consistently month over month those upset clients turned to lost revenue.

Whether it’s saving on fulfillment costs, working with tenured operators, accessing niche capabilities, or most likely - a combination of many factors - Fulfill.com works to understand your specific needs and introduce you to the fulfillment center best positioned to serve you.

Avoid becoming another victim on the long list of 3PL horror stories, instead use Fulfill.com to pick your next fulfillment center with confidence and for free.

Enjoy the Long Weekend

I hope you found this week’s send extremely helpful. Picking a warehouse partner is a massive decision and not one that should be taken lightly. The goal of this newsletter continues to be if I can help just one person, once a week, whether its one sentence or with a ton of knowledge then writing this is worth my time.

Enjoy the long weekend. Get outside with friends. Disconnect. Whatever you’re dealing with I promise you your problems will be there Tuesday. Go have some fun you deserve it.

Also if you want to pick up a copy for the summer, grab SmashNet here and use code CHRIS for 20% off.

Have a great long weekend,

CM