In this episode, we talk with Tyson Higginbotham from Supply Source Solutions. Tyson shares tips for manufacturers to increase the ease of doing business (EODB) for their end-users and effectively implement an eCommerce model.
“We went from a manufacturing age to a digital consumer age over the course of the last 15 years…I think the big change that really happened — the hardest part for both the wholesaler as well as the manufacturer to understand — is the end user consumer is no longer calling that wholesale distributor to have a salesperson come visit them at their office or location and bring a catalog with different sell sheets to sell them on the value proposition of that manufactured good. They are now able to access all of that information at the point of their buying journey when they are at the point of awareness and then consideration and evaluation. They do that on the manufacturer’s website because they wanna go straight to the source to understand truly the value in features and benefits of what that product is.”Connect with Tyson on LinkedIn.
Announcer: Hi and welcome to Data in Depth, the podcast where we delve into advanced analytics, business intelligence and machine learning and how they’re revolutionizing the manufacturing sector. Each episode we share new ideas and best practices to help you put your business data to work from the shop floor to the back office from optimizing supply chains to customer experience. The factory of the future runs on data.
Andrew Rieser: Welcome and thanks for joining us for season two of Data in Depth, the podcast exploring data and its role in the manufacturing industry. I’m your host Andrew Rieser. Today we are joined by Tyson Higginbotham Co-Founder of Supply Source Solutions Welcome Tyson.
Tyson Higginbotham: Thank you Andrew, very much appreciate it.
Andrew: Absolutely. Great to have you. I know that we’ve crossed paths a few times, but it would be helpful for our audience if you just share a little bit about your background and your evolution in this manufacturing space and ultimately what brought you to co-founding Supply Source Solutions.
Tyson: Sure. Again thanks for having me. You’re right. We crossed paths about six years ago when I was working for a manufacturing organization. Really diving deep into their ERP and process improvement to understand data and how to effectively utilize it. I started my career, actually, jeez I’m dating myself but probably 23 years ago and I commoditize uniform textile industries, cut my teeth in sales progress through to sales management, understanding the outside side of the business and then really got into launching my own business in 2001 had a publishing company with multiple titles. Launch new products was really part of the digital evolution and how the marketing mix expanded and how the need for digital data started to become extremely important. Had the good fortune of working with several different verticals from manufacturing to automotive, financial and higher education as well as the single multifamily residential housing or construction industry. And really got to dive deep into the inner workings of each one of those business verticals and understand the challenges that they face in accessing data, aggregating data, aligning data in a meaningful way so they can ultimately utilize that data to improve their business or attract and retain customers. So you and I met about six years ago working for a large fortune 1000 manufacturer global organization and really started to dive deep into how the manufacturing industry today is struggling with really the history of how their products have been driven to market with the new digital age of eCommerce and websites and the end user’s ability to be able to go through their buying journey and make buying decisions based off of the manufacturer’s website as opposed to a wholesaler or retailer has really changed and made it extremely important for manufacturers to not only attract customers but also retain customers and be able to deploy that information that they’ve captured in a meaningful way to increase and grow their business.
Andrew: Fantastic yeah What I’ve always appreciated and enjoyed our conversations is your diverse background in touching sales, marketing, product and also the systems that come along with that. So ERP but also some of the commerce side of it. So I think you’ve got a good representative understanding of all those different swim lanes and what’s important in this space as it relates to not only the tools and technologies, but also the data that drives all of that information.
Andrew: So Tyson can you maybe just give us the quick elevator pitch on Supply Source Solutions and then we can kinda dive into some of those areas that you guys are helping solve for?
Tyson: Sure well supply Source Solutions is really four legs in a stool right? So we’ve got a design drawing technology that literally allows just for that to take a two dimensional or in some cases a flat, a PDF of a takeoff for a construction project to be able to allow our design drawing team to do a complete takeoff for the commercial construction industry. The supply source products business is a product manufacturing business and an eCommerce piece. The technology which is really the core of the Supply Source Solutions business is really a master database that is agnostic to manufacturing brand as well as product or material and allows an end user through the solutions platform to get a complete drawing and design directly out of Revit from an engineer or an owner standpoint, plug that into our platform, filter that data in a fast and meaningful way to be able to sort aggregate, compare and contrast different manufacturers with different prices, pull in the labor factor from local contractors and really put an entire quote together. And what used to take five to nine months and include everybody under the sun that was managed usually through a general contractor in a wholesale distribution arm to have that at your fingertips and collapsed that five to nine month sick cycle down to about five to seven hours.
Andrew: Very cool, So I’m sure as we continue this discussion, we’ll kind of weave in and out of that. But one thing that struck me that I think is very apparent in this ecosystem is what I like to call channel conflict. And I mean that in a good way and maybe there’s a negative connotation to it, but essentially when you think about the original equipment manufacturers and the dealer distributor networks and then all the kind of partner networks that could stem off of that, when you’re thinking about these projects and eCommerce and going direct to consumer and providing these other value add assets or solutions, I think that in some cases a rubs companies their own way. But in other cases I think it’s just filling necessary gaps and needs that are out there. So maybe you can kind of share your point of view about why manufacturers need and want to make those direct connections with customers and how you’re seeing that play out.
Tyson: Absolutely, you’re spot on right. So from an original equipment manufacturer position, the channel to market really largely hasn’t changed in the past century— a hundred years. They’re really good at doing what they’ve always done, which is manufacturer a great product. They then need a brick and mortar location in a market to allow them to sell to that brick and mortar then would carry that product. And then offer it for sale to a subcontractor or an end user to get it to market. I think the connotation has changed with the evolution and the way consumers go about their buying journey. And really what I look at is how does the consumer react? Right, So we went from a manufacturing age to a digital consumer age over the course of the last 15 years where as the manufacturer would put together the material, put together the sell sheets and price sheets and labeling and content and they would provide that to the wholesale distribution arm who would back then educate themselves on the material, on the product and act as a sales arm for that material or that product. So they were in large part facilitating the sales of that manufactured product by having a knowledgeable point of contact that could share features and benefits of that manufactured product as opposed to a competitors manufactured product that may be carried by a competitive wholesaler. I think the big change that really happened, which is the hardest part for both the wholesaler as well as the manufacturer to understand is the end user consumer is no longer calling that wholesale distributor to have a salesperson come visit them at their office or location and bring a catalog with different sell sheets to sell them on the value proposition of that manufactured good. They are now able to access all of that information at the point of their buying journey when they are at the A point of awareness and then consideration and evaluation. They do that on the manufacturer’s website because they wanna go straight to the source to understand truly the value in features and benefits of what that product is. Compare that instantaneously with the other manufactured product that they are researching and only do they pick up the phone to call the wholesale distributor or the channel to market whether that’s a wholesale distributor or a retailer to find pricing that would be extended or available to them. And now they find that as a challenge because the pricing that is extended to them is really leveraged based off of their historical buying capability with that distributor or that retailer. And they have oftentimes gone online to a channel like Amazon or different eCommerce platforms that are now pricing and publishing pricing and found that they could buy it better online than what they had been offered or price that has been extended by the retailer or wholesaler. So it’s created this mass amount of friction, to figure out how to teach the manufacturer to capture that data of the consumer when they’re at that decision making point, how to get the most aggressive and cost effective price to the end user so they can obviously maintain and sustain the growth of their business by keeping more money in their pocket. But then this friction point, that’s the historical channel to market becomes really this middleware that is in some, as you stated in some cases looked at as, jeez it’s a negative if the manufacturer is trying to go direct to consumer. But there still is a value for having brick and mortar material for cross counter sales or immediate transactions that are in a specific market. So we’re really at a critical point in this industry.
Andrew: I think you articulated that very well. The end user and consumer has all the power now by being able to research and kind of expedite that buying cycle that traditionally took place in a different format. And so now with the internet, with things like Amazon and these other eCommerce channels that are out there, it’s really causing everybody within that value chain to disrupt their own business models and figure out how they’re ultimately providing value to that end customer. So it’s been pretty fascinating to watch and see and more importantly see how the data and the technologies are evolving and changing to do this. One of the key themes that we keep coming across and hearing from our audience and our customer base is this theme around ease of doing business. And so whether you’re the end customer, whether you’re the OEM, whether you’re the wholesaler, regardless of what the processes are, if it’s not easy to do business and make those processes in the lens of value and then what’s providing the ultimate value to the consumer. And I think a lot of these companies are missing the boat .
Tyson: You’re spot on, and that’s what we see and that’s what we saw from every vantage point. And it really boils down to that ease of doing business is the effectiveness of how to utilize data to make that easy right?
Tyson: As great as our digital technology age and really giving kudos to Amazon, they have over the course of the last 10 years changed our entire societal way to which we procure and purchase goods to immediate value. If they place an order online they want it here within two days or less, if they wanna place a from a manufacturing standpoint if a wholesaler wants to place an order, then they don’t want to fax in paperwork any longer. They wanna click a couple buttons and know that the order is delivered and they wanna track that shipment to their dock. And it goes all the way through the value chain, the same exact way. So how do in today’s technology and today’s world, how do manufacturers now look at their ERP system and extrapolate the data that they need in order to properly align it for a digital space? And that’s one huge vertical that there’s an entire industry trying to align PIM and BIM data for manufacturers so they can deploy it as they see fit as opposed to really where wholesalers were attempting to do that service for them, but then they were beholden to the owner of that data or content. So if you peel the layers back, it’s really about building the content in a meaningful fashion that connects point A to point B in the most seamless manner and shortest period of time.
Andrew: Absolutely, So Tyson can you maybe give us a real-world example walking through some of what you described conceptually but maybe put it in the context of what you see possibly at the construction space or what have you referenced the takeoff and taking these 2D models or 2D designs and exploding those out into a real use case, maybe just walk us through an example of what you mean by that so that we can have a use case to tie this out.
Tyson: Sure so I’ll give you the abridged version right? And we at Supply Source Solutions, call it the Hill right? So at the top of the Hill, you’ve got an owner and let’s call it a large hotel chain. And they have an idea that they wanna build a 52 story building in community X right? So they then deploy or hire an architect or architectural firm they design and build this entire 52 story building in a CAD program right? A three-dimensional model CAD program, and in most cases about 95% of the architecture engineering firms use a platform called Revit. So from that Revit design then they will typically next step hire a general contractor that general contractors whose responsibility it is to take all of those mechanical components, whether it’s plumbing, fittings, electrical wire walls, sinks, toilets, faucets, fixtures, drywall, you name it, they take all of that stuff that they packed into it and then send it out for bid. That bid project goes out to all of the subcontractors that are in that geography that radius of where this 52 story building is gonna be managed. Now, unfortunately, that general contractor doesn’t always have direct access or the capability of taking that entire Revit file, which is a three-dimensional drawing file with standards, specified goods — a whole other conversation — and providing that like for like to the subcontractor. So in a lot of cases, they will print off a PDF and send that out to the subcontractor right. The subcontractor then may be competing against four other trade labor subcontractors that are in that market and are required to not only provide material cost but also provide labor costs to install it. The material cost is really aware from a manufacturing standpoint. It becomes quite interesting to see several subcontractors may be bidding in best case scenario, different wholesale distributors with different products to then apply their labor and attempt to win that bid or that order for that project. But what we found all too often is there will be three or four subcontractors that are bidding the same material at the same wholesaler and getting a different price extended to them based off of their buying power. Right So then the general contractor then has to take all of these thousands of bids, set deadlines manage them if there was a specified product, make specification changes based off of material requests that are different. And this process from the point where the owner of this building originally thought of the idea and had the design drawing with the architectural engineer to the point where they’ve approved all of the bids materials and labor costs. About seven to nine months right?
Tyson: So who’s in the middle of each part of this? Right? So the wholesale distributor at this point in time is really the friction point where each one of these process flows stop. The architect and general contractor have to reach out to the wholesale distributor to make sure that the material that they would like in this construction project is stocked and available in that market first. So it gives them the wholesaler a little bit of power and authority. They then have to, the subcontractors have to go to that wholesale distributor and then negotiate what they can buy that material at and then ultimately the wholesaler gets to set the market price to whatever they want. Now historically where we’ve talked about things changing, it hasn’t changed in a hundred years. This is the way it’s always been done. Unfortunately with the way it’s always been done, the manufacturer has been squeezed tighter and tighter and tighter to be able to make a profit, which is why a lot of the manufactured goods now have been shipped overseas because domestic labor is high. And the ability for them to realize a profit when the wholesaler is squeezing their margins down to just have the product available to the end user is really gotten so tight that it’s very difficult for them to be profitable but they don’t have an alternative. Conversely the consumer then is again paying a premium because the wholesaler’s keeping the price as high as they possibly can and negotiating it between several subcontractors to see who can buy it at the highest, where the majority of the margin then stays within the pockets of the wholesaler. What we’ve found now with this change is there is an ability to take this digital takeoff, this three dimensional takeoff drawing out of Revit, supply that directly to the end user and instead of allowing them to bid on material and labor, they have the choice if they just want to bid on labor or if they also want to bid on material. The algorithm to which we have built is not agnostic to manufacturer, meaning that we’re searching the web and I think this is the way the future, quite honestly where all the manufacturers can list their price at X, which is a profitable position for them and maybe slightly higher than what they’re selling to a wholesaler and have them in the bid selection process, which the architect and engineer in general contractor now have visibility to be able to see that, to be able to compare and contrast with which manufacturer and which price and then extend that out still through our ecosystem to the wholesaler to say would you like to adjust this price or would you like to supply this product as well as to the subcontractor to allow them to provide a material list and or a labor factor. So what we found is the subcontractor really never wanted to get into the product material pricing game. Right. There is a pretty extensive cost that’s associated with each project that they have to bid because they have to first do the takeoff, meaning they have to go through this in many cases PDF or have an engineer go through that PDF on their behalf to be able to get a complete list of items that they will purchase in order to provide or install. And there’s a cost right? There’s a cost associated with that. There’s also a time cost of the money that is carried to win that. We found that about 30% of the projects that a subcontractor bids, they get awarded with, which means there’s 70% waste in their ability to capture business on cash. That’s been outlaid just to bid the project. And then in most cases what we found the determining factor there was whether they were able to procure the material at a better price than their competitor, in which case then they’re giving, in many cases they’re giving the material away at a break even at or a loss and trying to make up their value on their labor, which is why they’re in business to begin with Which comes to a different part of our entire commercial construction industry, which is the decline of skilled labor. And that’s a 17% decline year over year in our skilled trade labor because it’s difficult to be able to find people that can A do this skilled trade and B the carrying cost to create a marginal position to hire more and more skilled trade labor while they’re giving business away on trying to represent manufactured products goods. So our platform is really to tie those two ends of this rope together with the owner or the architect and the general contractor having a meaningful communication with the end user that is installing and the skilled trade to construct this project and shorten that entire middle platform. That was the brick and mortar wholesaler to a technology platform that allows them to procure, compare, contrast price and zone and schedule so they can also then manage the delivery. Meaning that if it’s a 52 story high and maybe it has, 125 sinks in it, that all 125 sinks don’t get delivered to that job site that day on the first start of the dig that they can build zones and have all the material for floor number one delivered and then maybe 30 days later have all the material for floor number two and so forth and so on until that project is complete, which again cuts down costs to the industry.
Andrew: Sure now I really appreciate you walking through the example. I think that helps put it into context, these different items that you’re talking about. So the last question that I always like to ask is what’s on the horizon? So where do you see the trends continuing to evolve as it relates to everything that we’ve been talking about today?
Tyson: I think that the horizon looks very similar in the sense that the technology and the alignment of data is going to continue to change the way manufacturers go to market. It’s gonna continue to change the way the consumers can procure and price material goods. I think there’s quite a few businesses in this, specifically the manufacturer and wholesale space that are trying to establish and figure out this middle channel now that can make it more efficient and more simple to do business with each other. And ultimately that’s the goal, right? What is very lumpy right now from the start of the idea to the delivery of the end good It hasn’t changed. And it’s very lumpy it’s very clunky and as much as it, I boiled it down into maybe a five-minute dialogue of how the whole process works. There is a myriad of outlier components that go into this entire evolution of a project and that’s where I think the data becomes more aligned. I think collaboration becomes more key to facilitate speed, but ultimately it’s how easily we can align systems. As you know Andrew with your organization if you can align your ERP system and your back office with your middle office management and your outbound action, then you’re more vertically integrated in a digital standpoint, which is really I would say from a manufacturing standpoint where we are in our society today the same way, call it 60 years ago, people wanted to be vertically integrated manufacturing and have everything from drawing their own raw material through the process to a finished good. Now we’re trying to figure out how we get all of that data in a format that does the same and vertically integrated within an organization without fragmenting it right. I think that’s where some of the trials and tribulations have happened and really where you and I became engaged because the organization to which we were working with mutually was attempting in small bits and small chunks in small pieces to align to this future state. But it was so fragmented that the lift becomes more costly and delayed based off of a multitude of starts and stops. And I think that happens because again change is not easy. It doesn’t matter what industry or what vertical or what we’re talking about change for the way we’ve always done it is hard. So from a manufacturing standpoint, when they make widgets and they make the best darn widgets in the world, and everybody’s extremely proud of the widgets that they make, it’s very difficult to say that we need to invest X or X plus plus to make sure that our widgets can get to the hands of the end user. And if we don’t then the channel is going to start to close on the amount of widgets that we can sell to our end user. But the return on that investment is a slow long, you have to stay focused on the end goal or you end up with a lot of different fragmented ends of afraid rope that somebody eventually has to come in and tie back together, which is twice as costly and usually twice as long.
Andrew: I think you’re exactly right. So Tyson I really appreciate you spending the time today and enjoying the podcast to talk more about your company and the channels and the descriptions that you’ve outlined. Hopefully the listeners will get value out of the discussion topics because I think you’re spot on with where these trends currently are and how they’re going to continue to evolve. And we see it every day. So I mean if you look at new manufacturers that are standing up and disrupting this model, I mean the big boys that you can point to are like Tesla. So disrupting the whole dealership model. I think it’s just gonna become more and more prevalent across all industries and not just manufacturing.
Tyson: Completely agree, and I think it’s a great space right? It’s a great time to be here where we are. We’re a part of the change and we’re a part of the catalyst to the evolution and the revolution. And I think it’s a good thing and I’m happy to be a part of your podcast today.
Andrew: Awesome Well thanks for joining us Tyson. And for those listening, if you’d like to learn more about Tyson and Supply Source Solutions, we’ll provide links and more information with our show notes. And if you enjoyed this episode, please take a moment to rate the episode and subscribe to Data in Depth available on iTunes, Google, Spotify, Stitcher and pretty much anywhere else you might consume your podcasts. Thanks again for joining us today.
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