Mike Willoughby of PFS discusses his winding tech career, and how he’s seen the ecommerce market evolve since even before the internet.

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Danny:

– Well hello, and welcome to today’s IndustrialSage Executive Series. I’m joined by Mike Willoughby who is the CEO of PFS. Mike, thank you so much for joining me today on the Executive Series.

Mike:

– Oh, it’s my pleasure Danny. Thanks for having me on.

Danny:

– Well I am excited to jump into today’s episode. So you’re coming in from Dallas, Texas, and for those who are unfamiliar with the weather going on right now, we were talking about beforehand, you’ve actually got snow going on there.

Mike:

– We do. It’s unusual. Texas is not known for having a lot of snow events, but this is our second this year. We were actually talking earlier about the one we had last year, so we’re definitely not getting a repeat of that, thank goodness. Nobody wants to spend a week with spotty power and the kind of freeze that we had a year ago. So just some nice, pleasant snowflakes going on outside my window.

Danny:

– That sounds nice, not like what you guys had last year. So glad it’s—

Mike:

– Definitely not.

Danny:

– And like we were talking about here, it’s crazy because it’s 70-something degrees over here. Whatever you got’s coming over here, so we’ll see what happens.

– Have fun with that.

Danny:

– Thank you. Alright, for those who aren’t familiar with PFS, what do you guys do?

Mike:

– Well, so PFS provides order fulfillment services, to put it simply. We provide for our clients a premium order fulfillment solution, so if you think about brands that care a lot about their unboxing experience, what it really means to get, say, a Chanel health and beauty product or a high-end luxury jewelry item, you’re probably not expecting that to come in just a plain brown box with a bunch of air pillows around it. You’re probably expecting that it’s got some boutique-caliber experience. We do that for our clients. It’s a very non-Amazon kind of experience where you would equate that with, if you were going to a boutique and you were going to shop that boutique, you’re going to carry that package out. You’re probably spending a decent amount for the product itself, and the experience that you’re going to have when you actually receive that product yourself if you’re shopping in the store, you want to have as much of that as possible if you’re going to receive that package on your front door delivered by a courier.

We provide a fulfillment experience across both the way that we manage the order as it comes into our systems, the way that we process payments, ultimately the way that we take the product out of our fulfillment centers, package it appropriately for each brand that we support, and then tender it to a carrier to get it to your doorstep and then provide the customer service that goes along with that, if you have a question about your product. And we want to do that in a way that reflects the brand, that we are not in the way of that at all. You’re never going to see the words PFS on any kind of packaging, on an invoice, your interaction with a customer service agent. Our intention is to be on-brand and reflect the brand that we’ve been entrusted to support. So that’s what we do.

Danny:

– Excellent, very cool. So yeah, very different than a traditional Amazon experience where the experience is the big piece of value, right?

Mike:

– Right. Well, you know with Amazon it’s all about efficiency, and they do an amazing job of creating an efficient transaction. We want to be efficient, but at the same time we want to create that exceptional experience. It’s the mission of the company to provide exceptional experiences for our clients and their customers.

Danny:

– Very cool. Well, I’m excited to get into that a little bit more because this sounds a little bit more unique than some of the other companies that we’ve been talking to where it’s all the same sort of thing. Obviously you’ve got different packaging sizes and whatnot, but it sounds like this is very much different. So we’ll get into that here in a second. But now is the section, the time where we get to know more about you. We want to learn more about Mike, so Mike, tell me. How did you get into this space? Take me back. Did you go to college for this? Did you, as a kid, say, “This is what I want to do”? What was that?

Mike:

– Yeah, I think probably like a lot of entrepreneurs, like a lot of business leaders, my journey is a bit of a winding journey, and I certainly didn’t—was sitting in my first grade class think, supply chain, logistics, transportation, those things sound cool. I want to go do that. In fact, it wasn’t until I was actually in college, my sophomore year, that I stumbled on technology as something that I really loved and that I had an aptitude for. One of the things that I think we’ll probably talk about is influencers. Who influenced you in your life? I think about a professor who recognized something in me and said, “You’ve got a real knack for technology.” And we’re talking about early 80s when I was at university, so technology wasn’t the kind of immersive, ubiquitous sort of experience that we all have today. That’s what got me started on the current journey that I’m on is an aptitude for technology and for solving problems using technology. I went and got my degree in information systems.

I started my career with a consulting business that I started while I was in school. I really started that business out of necessity because I was in love with my girlfriend at the time and wanted to get married while I was still in school, and the only way that was going to happen is if we could earn a living while we were actually trying to finish out our degrees. I decided I better start a business and make some money. I did that by doing some work around the oil field, helping oil and gas businesses that were in the area of Texas where I went to school, and just put that sort of expertise to work and started to help people solve technical problems doing some programming, doing systems administration, that sort of thing. That small business grew into my first business that was all around custom programming consulting, that sort of thing.

I sold that business to my partners in 1994 and started a software company that was oriented around commerce. We didn’t call it ecommerce at the time. In fact, the software that we actually created was a CD-ROM based application where you put a catalog on a CD and shipped it out, and along with that your pricing tables and everything went out for the specific customer. It was an early version of ecommerce, but it wasn’t HTML and browsers. It was based on CD and an application that we shipped. But a couple years after we started that company, it became obvious that the internet was going to take over providing content. Instead of getting a CD-ROM, you could actually just go to a browser and pull up the content. So we converted our application into an ecommerce application, and really the timing was perfect because it was the dot com boom at the end of the 90s.

And so one of my biggest customers was a company called Priority Fulfillment Services, we now refer to as PFS. They were using my software to help their clients solve ecommerce problems in the late 90s, and we were so successful that the CEO of the company at the time came to me and offered to buy my company out in order to have access, exclusive access to the software that we were providing. And in 1999 it seemed like the perfect time to join a company whose focus was on ecommerce. That’s what got me into logistics is the application of technology to this ecommerce problem. I guess the rest is history as far as PFS is concerned. The last 22 years have been an amazing journey as we participated in dot com boom and a lot of bleeding edge kind of things to what does it look like to have a mature model and to do ecommerce 22 years later when it is rapidly becoming the way that people want to interact with the brand?

Danny:

– I think that’s a fascinating story. A couple of questions that I wanted to circle up on, I think it’s very interesting about the, particularly around the dot com, the 99 boom. But there was also not just the boom; there was also the bust. We had a lot of failed dot com companies that came in. And I am curious; did PFS, when did they start?

Mike:

– Priority Fulfillment Services was actually started by a wholesale distributor called Daisytek International in 1994.

Danny:

– Okay, alright.

Mike:

– And the purpose was to provide fulfillment services to the kind of clients that Daisytek had which are IBM, Hewlett Packard, Dell, basically high-tech products and consumables. And so we provided fulfillment services, customer care, and order management back in the mid-90s. As the company grew, as the subsidiary grew, we started to have brands approach us that had an idea to sell online but had no clue how to actually deliver a product that was sold online. So they were asking us to solve those problems around actually fulfilling orders that they were taking through their websites. And so we started to have clients that have product categories that were way different than anything Daisytek had. We had investment bankers that were working with Daisytek who came to the parent company and said, “We think this subsidiary that’s doing $30 million a year is probably worth four or five times as much as the parent company,” which everybody thought was ridiculous. How is that even possible? But they were right. We did a spin-off of PFS in 1999. I joined shortly before the IPO, and they were right. This $30 million fulfillment services company that was not profitable had a billion-dollar market cap in early 2000. March of 2000 happened three months later, and just as quickly as we shot up, we shot down. But the thing that really sustained the company was the blue-chip clients that we had, the folks like IBM and Dell and Hewlett Packard. They had the staying power where some of these dot com booms that became busts were gone overnight. So we were really fortunate to have the blue-chip clients that we had.

Danny:

– That was my next question. I was curious. Hey, what was the secret sauce that kept you going? That’s pretty interesting. Obviously you had those guys in your pocket, and you were servicing them. That was helpful. Fascinating actually, really, really interesting stuff. I want to back up a second. You talked about how you started the company—I want to make sure I heard this right. Did you start—you said the first company. Were you in college when you started that? You said, “Hey, the motivation was I need to start a living.” I find that interesting because we’re talking about entrepreneurship there. Is that something that you were predisposed to? Did you come from a family of entrepreneurs? What did that look like?

Mike:

– Well, so I didn’t necessarily come from a family of entrepreneurs. I came from a family of people who felt like it was important to stand on your own two feet, so to speak. My grandparents were farmers and ranchers. My father grew up in the oil field while he had a technology-oriented job. It’s very much an industry, and where I grew up in west Texas is a place that inspires doing what you can to support yourself and stand on your own two feet. My parents encouraged me at a young age to try to provide for myself and the things that I wanted to have. What are you going to do to earn those things versus them being given to you? Paper route at an early age; I worked in a restaurant busing tables in order to afford my first car when I was 16. That kind of work ethic I think maybe you might describe it morphed into entrepreneurialism in college where my giftedness sort of crossed with the need to support a family, at least the two of us that were starting our family. It just seemed like the obvious thing. Here’s a passion I have. Here’s a giftedness I have. Here’s problems that need to be solved, and I really loved to solve those problems, so why not combine the thing I love with making some money?

It just lit a spark. It lit an entrepreneurial spark that has served me well, not only in the two businesses that I started, and the second one I ultimately sold to PFS to join this organization, but just thinking about how innovative this company has to be in order to thrive in such a dynamic industry. If you are an adrenaline junky like almost everybody who works at PFS is, this is a place that just feeds that because it’s always changing. There’s nothing ever status quo about this business. And if you’re going to rely on status quo, you’re going to quickly be out of business.

Danny:

– Absolutely, yeah. Yeah, those who don’t innovate, die. I think it’s fascinating on the entrepreneurial standpoint that it wasn’t something necessarily that you were predisposed to. You mentioned work ethic. How did you decide to start your first—were you just, okay, I have this problem. Alright, I need to do this. I need to make some money over here, and I want to be able to support a family. I’ve got some good skills here. What was that decision like? Obviously some opportunity presented itself, and you said “Hey, I think I can”—because not everybody just, in college, says, “Hey, I’m going to go start this business. Let me go start doing that.” What was that for you?

Mike:

– Well my story I think is probably going to be similar to a lot of people’s story which, sometimes it’s more important who you know than what you know. The way that I got started was, frankly an influencer in my life, the department chair of the information systems department at Abilene Christian University where I went saw something in me, and he actually had a friend who was working, had an oil-based business in town. He said, “My friend needs help, and I think you could help them. I know you know the programming language that he uses to run his systems, and he just needs a little bit of help, so can you go talk to him?” So we had lunch and talked about his problem and said, “Sure, I think I can help you.” I got in and made a change to a program, and anyway, he said, “Wow, really appreciate that.” He paid me $500 for two days’ work, which I thought was amazing at the time. Like, wow.

Danny:

– Yeah!

Mike:

– I’m going to get rich. But one thing led to another, and it was word of mouth that, helping him solve that problem and some more problems that he had. Then he referred me to somebody else, and pretty soon I had a business. It’s part jumping on an opportunity, but it’s also part having somebody who is connecting you with other people or somebody who has a problem that can be solved, and your talents can be put to work. I am definitely not the kind of person who says, “I am a self-made man,” or, “Pulled myself up by my bootstraps,” or anything like that. There’s a lot of people who were helping along the way to get me to where I am today.

Danny:

– That’s cool. I love hearing stories like that. I think it’s fascinating. It reminds me; you were mentioning oil in Texas. There’s a story that I heard recently, actually, of two college students in Houston—I believe they were in Houston—and they are doing bitcoin mining. They’ve created this bitcoin mining basically out of a shipping container, and they’re deploying them on oil platforms I guess because the natural gas that gets—I guess when they’re drilling for oil—I’m not super into oil. I don’t understand all of it. But what I was told is that you hit some natural gas; they have to burn it off. And so these guys said, “Hey, wait a minute. Let’s turn that into some energy. We’re burning it off,” and I think they did 4 million in bitcoin mining or something this last year. It’s opening up this whole thing. I think that’s really interesting.

Mike:

– Yeah, and how somebody would take an old-world industry like oil and gas production and the most high-tech industry you could think of, bitcoin mining, and somehow create some combination that makes sense. I’ve often looked at the flare on an oil platform and thought the same thing. Why are they wasting all of that natural gas just burning it off? Somebody saw the same thing and did something about it, so congrats to them.

Danny:

– Yeah, it’s interesting. That’s a whole other conversation we could have. You have a crypto-currency that is actually really expensive to produce. You’re like, wait, what? Anyway, so that’s a whole other thing. We could go into a big rabbit hole there, but I’ll bring it back. Okay, so really interesting story. Obviously you were talking about a pretty big influence there in terms of getting things going, somebody who said, “Hey, I see something in you,” and you take it, and you ran with it. You guys were able to sell that first company and then the second company into PFS, from what I understand, and then you guys were able to navigate the whole dot com bust issue and then continue to innovate and grow from there. You said that you have to innovate, and that’s constantly what you’re doing there right now. What has that change looked like over the last several years? 99 to 22, obviously there’s been a lot of change, even from 2019, but then obviously we had a lot of change in the last two years. What does that look like?

Mike:

– Yeah, well it’s a fascinating story, and I could take several hours to tell the whole story. Let me condense it for you. So this is what it looks like. Coming out of the dot com boom, as I’ve mentioned before we had the benefit of blue-chip clients that we were able to rely on when some of these other fly-by-night, as it turns out, ideas came and went. But we also discovered, I would say around the 2004, 2005 time frame, that we were really good at taking care of some complicated order fulfillment problems. We had some early clients that were asking us to do difficult things that you just didn’t see in a typical third-party logistics kind of situation, and especially the fact that we were bringing technology to bear to solve problems. It wasn’t just, “Well we put your stuff in a warehouse, and we’ll pick it and put it in a box and ship it.” We were actually solving some pretty complicated technology problems. So we decided that it would be in our best interest, and it would be a great commercial value to try to do as much as we possibly could around ecommerce and create what we called an end-to-end solution where we could take care of creating your website, designing your website, deploying your website on top of a platform, do all the order processing and the fulfillment, and that way if you had a brand and you wanted to come to us and say, “Look, I want you to just take care of all of this stuff. I’m going to do all of the advertising and manufacturing of this product. But then you take it, and help me put up a website and sell and deliver and all these things.” And so we built our company from 2005 to 2020 around this notion that we could help a client completely with their ecommerce problem. And we built the company that way.

We built a professional services subsidiary called LiveArea that was built to design, deploy, help to manage the technology associated with selling online and were very successful doing that. But we also recognized that the trends that were happening in our industry, say five to seven years ago, were driving clients to start to really look at best-of-breed solutions and have multiple partners in an ecosystem to help them out. We started to run into headwinds associated with this bigger, diverse kind of strategy that we had, and we also recognized within our business that the better that we got at these professional services and at this kind of order fulfillment, the more different the two sides of the business became. As we were looking at what investment we want to make and what innovation has to happen in the two parts of our business, we decided that we really wanted to take advantage of tailwinds in our industry and specialize. So we went from diversification to feeling like it was in our best interest to specialize in some areas where there really were some very strong tailwinds. So we sold the LiveArea business last year, very successful transaction for $250 million. It was about a $90 million business, so that’s three times revenue.

Danny:

– Congratulations. That’s a great multiplier.

Mike:

– Pulled off a really good transaction for our shareholders, but what it allowed us to do was to really focus on the area where I feel the most growth potential is. One of the things that’s happened over the past two years that you’re aware of is that everybody really doubled down on ecommerce as the best way to deliver product to a consumer when that consumer didn’t want to get in their car and drive to a store or weren’t able to get in a car and drive to a store because the stores were closed or they were locked down. So we saw a massive increase in the growth of ecommerce just in a one-year period as retailers, by necessity, pivoted to ecommerce and as consumers, by necessity and then by choice pivoted to ecommerce. And we found ourselves where we have a premier order fulfillment company that has all the capabilities that we do with great technology and an amazing experience and an amazing set of clients to refer to and amazing tailwinds. We’re, I feel, perfectly positioned to take advantage of this evolution in ecommerce and to drive a lot of growth from just the opportunity that we see. Expansion, diversity, and then coming back to really focusing on the thing that we think has the most potential to drive growth which is this order fulfillment and just all the changes that are happening in our industry around how you actually get product to a consumer’s hands in an amazing way.

Danny:

– Yeah, absolutely. Quite the journey in the story there, and obviously there’s a lot with technology and how things have changed over those periods of time to make it easier. It’s kind of funny; when you were talking about it a little bit earlier when you guys were a little bit more diversified, it made me think of Tim Ferris and the whole four-hour work week, the premise being drop shipping. I remember that was a huge—it’s still very big. You see the evolution of Shopify and all these different things that are happening. Right now, the types of companies that you engage with: what do they look like in terms of size and volume? You were mentioning some brands specifically before that were a lot more specialty brands. Is there a particular sweet-sized company that you deal with?

Mike:

– It’s not necessarily a size from a revenue perspective or something. What’s going to be indicative of a really good relationship for us with a client and a true partnership is where that client really has a passion for the experience that the consumer’s going to have. I mentioned earlier, this unboxing experience. That’s usually how it’s expressed for us is, what is it going to look like when that person receives their package and opens it up in the way that the product is packaged, presented, potentially even the way that an assortment might be put together? There’s something about that experience that they care a lot about, and so what that does is, it creates difficulty in how you actually fulfill an order as compared to what you might see in a typical sort of warehouse.

You’re having to gift wrap boxes. You’re having to personalize products. You’re having to work to make sure that that brand experience is what the consumer’s going to experience just like if they were shopping in the boutique. So that’s the common thread that you’re going to see through all of our clients is that they are passionate about the experience, and they are looking for something that’s differentiated compared to a typical just general merchandise retailer or Amazon, who I mentioned earlier. That could be across product categories like jewelry, especially luxury jewelry, accessories, luxury fashion, whether it’s handbags, footwear, apparel items, but particularly the more high-end luxury type brands. Our biggest product segment is health and beauty, so if you’re going to buy a beauty product you probably care about how it shows up. You probably want to have some samples that come along for the ride that invite you to experience the brand in a new and different way. You may even want to be able to choose the products that go into the pallet that you’re going to receive. Those are all difficult fulfillment challenges. They are difficult order management challenges.

You may want to pay with PayPal; you may want to pay with Apple Pay. You may want to pay with a traditional credit card. So there’s complexity around how you manage the order from that perspective. But the biggest thing is going to be when it actually arrives on the customer’s porch, that she’s going to be able to have an amazing unboxing experience, and if there’s any question whatsoever she’s able to get on the phone with a real person that’s in her cultural context that she can talk to to say, “Look, I got a question about this, and I know that you’re going to relate to me, and you’re going to relate to my product. You’re going to relate to my experience, and you’re going to be able to help me solve my problem in the same way that if I was walking into a boutique. I expect the person behind the counter’s going to be able to help me with that problem.” So that’s what we do, and if you look at it across our entire client portfolio, you’re going to see that in every single client, that that’s their expectation for that kind of experience with their customer.

Danny:

– That sounds very cool. I like the value proposition, and you talked about the unboxing experience. Do you guys get involved from a design standpoint? Or is it, okay, so it’s, hey, this is what it needs to look like so we can create that feeling, and then here’s how we’re actually going to be able to deliver that experience and all the technical nuances there. That sounds like fun challenges. I totally see how you’re saying that things are not the same because it’s not a set it and forget it, here’s the template; here’s A, B, C. It’s A through Z plus whatever, right?

Mike:

– That’s right.

Danny:

– That sounds super interesting. As far as industry challenges that are going on, obviously with the pandemic, everyone—you were referencing a lot of customer changes and whatnot. How has that impacted you guys? I imagine it would impact you guys in a little bit different manner, maybe, than those who are specifically pushing out the same boxes or same sort of sizes. I know I’m generalizing here a little bit. What was that impact for you?

Mike:

– Well, so I do believe that everybody experienced some of the same kind of things from the last two years, one of them being, how do you respond to completely-unexpected scale? That happened for us in March through July of 2020. We actually have a graph that shows what happened to our order volumes coming in from our clients during that time period compared to the previous year which was a typical year. If you look at it, there’s this mountain that happens in Q2 and early Q3 of 2020 where we saw an exponential increase in orders coming in to our platform from our clients because they were shifting all of their orders to their ecommerce platform when the stores were closed. So one of the things that happened across our industry was surprise scale. Some providers, some retailers, some businesses were able to respond to that in a way that captured that demand, but many found themselves at the mercy of that demand and disappointing clients, unable to fulfill orders, unable to respond to that unexpected increase.

We built a company, as I said earlier, that is able to provide that kind of premium experience and scale the business which is, it’s pretty unique in my opinion. The fact that we were able to turn that on at a moment’s notice in March of 2020 and say, “Okay, here’s unexpected demand, but we know how to do this. We do this every, single year during the holiday season.” And able to scale to that unexpected demand I think is different than a lot of people. And even somebody like Amazon who you would think would scale to be able to scale at a moment’s notice, you saw them saying, “Well we’re going to have to not take certain product into our facilities. We’re going to prefer other types of product. We’re going to potentially put our finger on the scale when it comes to which providers we’re going to support and which ones we’re not going to support as an indication that they even had trouble scaling to unexpected demand.”

And then I think more recently one of the things that you’ve seen is our industry is reliant on the human factor. You’ve got people that are working in facilities that help make things happen, that are picking product and packing product and shipping products. You’ve got the—not that we do this, but in our industry you’ve got people driving trucks to deliver product to people’s doorsteps. There are humans involved in the entire supply chain. And as labor has become constrained as we’ve seen wages increase, you’ve seen a lot of business really struggle with, how do you adapt to that very rapid change in the availability and the cost associated with the human factor? We’ve always had an automation philosophy that says, “How do you help people be successful with automation versus coming in and trying to completely replace the human factor with automation?” We feel like augmenting the workplace and our people with effective automation is the best way because it’s really impossible for a robot to package a Chanel package in the way that Chanel would want. You have to have, in my opinion, people that are surrounding this experience that you’re creating, but you also want to help them to be as effective as they can.

So our automation and our philosophy is that we want to own the most important automation where it’s the most differentiating was a key part of our ability to scale quickly and still provide that experience. We’ve learned how to quickly expand, quickly launch a new facility, and enable our people with the kind of technology required to be successful and in the process help our people to feel like they’re really contributing to supporting the brand that they’re working with in a way that doesn’t make them feel like a robot. They’re not showing up to a facility, and they just see product going by, and they’re basically just acting like a robot. They’re actually contributing to an experience that they can see and maybe even envision somebody’s going to actually have when the box arrives on the doorstep. And I personally think it elevates the human factor which is an important thing for us. We’re not looking to replace people with robots. We’re looking to help them be more successful with the right kind of automation.

Danny:

– Yeah, absolutely. That’s one of the really big talking points is, as a lot of companies have been looking at automation before, then pandemic, it was we have to automate because the labor is simply not there for multiple reasons. Obviously now there’s a lot of challenges with that. However, some of the stigma with it being that, are these replacing people’s jobs? Actually I read a very interesting survey that Accenture came out with when they were talking to specifically warehouse workers about their sentiments towards automation, robotics. What I found very interesting is that they reported that 60% had a positive outlook on it, which I found interesting. Then there was a 40% negative sentiment towards it. I thought that would’ve been higher, to be honest with you. But I think one of the really interesting things, and maybe you can expand on this a little bit. I’d be curious about your philosophy on this, but one of the negative areas was certainly, I’m worried about losing my job. I think that’s kind of a given. Number two, though, was concerns about training and being able to help onboard somebody who, this is normally a very manual process, and I’m picking this, I’m doing whatever, but now I’m interacting with some type of automation whether it’s an AMR or some sort of robotic arm or what have you. What are your thoughts on that?

Mike:

– I think that the application of technology to the workplace has the same pros and cons across a lot of different industries. And it’s the same factors are in place in a logistics facility which is that when you can use technology and automation to help people be successful, when you can help to alleviate the negative aspects of their job, like anything that we require that would create repetitive stress injury, where you’re lifting heavy things, how can you help somebody to do their job when you can take away that necessity for them to lift a heavy object or transport it from one place to another? That’s a job that automation can do and not only be more effective, but also to take that danger away from someone. You mentioned repetition. One of the things that is the most demoralizing about a job is meaningless repetition where you’re doing the same things over and over and over again in a way that you’re not really adding value other than the fact that you’re just accomplishing a task. Where that happens, you actually want to apply technology because if you’ve got a human that’s doing that same thing over and over and over again, it becomes demoralizing. And you’ll probably be able to be more effective with some sort of automation.

You can also take the task that would otherwise be repetitive and actually provide a positive experience by adding gamification, for example, where if you’re going to be picking products and putting it on a cart, you’re able to see your statistics. You may get points for your productivity. The automation you’re interacting with maybe feels like a video game. It’s got some graphical experience that’s more than just “pick a product and stick it in a box.” There’s something about that process that actually appeals to your creativity and to your desire to have a richer experience. If you can provide that at the same time that you’re accomplishing the task, then it’s a win-win. You’ve got people who say, “”I actually kind of enjoy this. It’s like playing a video game, and I actually see how the more successful I am, that I can see that in my statistics right here on my little dashboard. And oh, by the way, somebody’s able to come along and give me a pat on the back and say, ‘Wow, you did a great job today’.” How does that maybe translate into value that I may be receiving, even if it’s as simple as the kind of value that you get from a video game when you collect a certain amount of points for achieving an objective.

So there are ways, as I said gamification, just thinking about mixing it up, having people working on different clients and different products, not necessarily being always in the same, exact spot. What’s their upward mobility? How do they traverse the organization and move up and take the skills that they’ve learned and apply that to a new situation? It’s the same thing we all want. You’re working in a workplace where you can apply your giftedness, you can be rewarded, and you can take advantage of opportunities to manage your career. It’s not any different from somebody who’s working an hourly job in a warehouse facility as it is working a corporate job in a marketing department.

Danny:

– Yeah, absolutely. I love it, specifically on the gamification. I really like that. We’re seeing a lot of applications with that, and I think it’s pretty cool. It’s fascinating. So one last sort of industry question, and that’s I’m going to ask you to take out your crystal ball and look into it a little bit. Where do you see the future of the industry going?

Mike:

– Well one of the ways I think it’s actually really easy doesn’t take much of a crystal ball to predict, is inventory everywhere. If you’re going to be responsive to a modern consumer’s expectations, you’re going to deliver product same-day, next-day. That’s really the standard. Amazon has created that expectation. If you’re going to do that, you really have to have inventory that is in a lot of locations. It needs to be really close to the consumers, so it’s going to have to be in the region or the metro area in order to satisfy that. That is a huge change for anybody who’s operating a fulfillment network where you’re thinking about, I’m going to have a multi-node network. I’m going to have a lot of smaller locations that are probably distributed. And for us it looks like, how do you enable these kind of fulfillment experiences without necessarily having to always have the people in the buildings?

So one of the things we’re working on is this idea that our clients are going to want to do some of these things themselves, and so how do we use our technology, our business processes, the knowledge that we have in creating these kind of experiences in our facilities and help our clients do that where it might make sense? For instance, turning a store stockroom into a little fulfillment location. Over the past two years retailers have learned that they really need to think about their stores as inventory locations for curbside delivery, for local delivery, somebody who wants to order online, pick up in store. They want to get in and get out really fast. Well to do that cost-effectively, you need to be able to run the back room of the store as a little, mini warehouse. How can we apply our technology and our knowledge to solve that problem? How could we put a small, metro fulfillment location up for a client or for multiple clients where you’re serving the Dallas/Ft. Worth area or you’re serving the Metro Atlanta area or you’re serving the Chicago metro area from a location where you’ve got inventory that’s there. That’s a change that Amazon introduced on a massive scale. Retailers need to figure out how to replicate that same scale without all the investment and all the overhead. And I think we have something really unique to offer in that scenario.

The second thing that I would point to is the sustainability and resilience aspect. We have to do this in a way that’s sustainable. We have to figure out how to do these things in a way that is good for our planet and is good for people. Taking mileage out of delivering a package is one way to do that where you’re not putting it on a truck, then on an airplane, then on a final delivery truck. The closer you get your product to the consumer, the less carbon footprint you should have across that experience. We also need to be thinking about how we can create resilience. You look at supply chain disruptions that happened last year. You look at the impact of the pandemic on just the whole industry and the supply chain. We’ve learned a lot about where we don’t have resilience, and I think that there’s an opportunity for us all to look at, how do we create more resilient systems that are going to withstand some of these things that just happen unexpectedly, and do it in a sustainable way that’s good for everybody and the planet, which leads me to the third thing which is, stakeholder equity is going to be more and more important as we look in the future.

How are we doing things in a way that creates win-win-win scenarios where you’ve got shareholders, you’ve got your employees, and you’ve got your customer and their customers that you’re taking into account all of their interests and needs when you’re designing a solution to a problem. That looks like to me equity when you’re thinking about your stakeholders in a business, not just your shareholders. Who all is relying on that business in order to make the world a better place? I think that’s going to drive more and more investment and focus for all of us, but when we think about our business, that’s a traditional—maybe not as focused traditionally on sustainability and stakeholder equity. How do we do the things that we’re doing that drive for those objectives?

Danny:

– There you go, awesome. No, I appreciate. Hey look, a lot of opportunities, a lot of challenges ahead to solve some of these issues and to really adjust to it. I think what you guys are doing over there is pretty cool. You guys got some really interesting, very interesting value proposition. I imagine you guys have—and imagine a lot of challenges in terms of how to fulfill orders that are very custom and still to do it at a faster, have that expectation of next-day—dare I say same-day—or two-day delivery. That certainly is a big challenge. Listen Mike, I really appreciate the time that you’ve spent with me and our audience here on IndustrialSage. I’ve really enjoyed it. I really, really enjoyed hearing your story. I think it’s fascinating hearing these entrepreneurial spirits and where it came from. You just solve problems, and it sounds like you’re still really passionate about it, just a little bit.

Mike:

– I think you’re right.

Danny:

– Anyways, for those who’d like to learn more about you guys, I’ve got pfscommerce.com. They can go check you out there. And Mike, thank you so much for your time.

Mike:

– Thanks Danny, really appreciate it. It’s been a lot of fun over the last hour just to talk about all of these things, so thanks for allowing me to share.

Danny:

– Oh, I appreciate it. And we’ll schedule maybe two hours next time so we can keep going. I had to hold myself back from really getting into these rabbit holes, but I really enjoyed it.

Mike:

– Thanks Danny, I appreciate it.

Danny:

– Excellent, thank you. Alright, well that wraps up today’s IndustrialSage Executive Series with Mike Willoughby who’s the CEO of PFS. You can check them out at pfscommerce.com. They got some fascinating technology and solutions, really interesting value proposition. I love talking about the unboxing experience and what that is. Obviously it’s very different than your traditional Amazon experience that you get with a package. What I think is interesting, and I didn’t bring this up in the episode, but I’m willing to bet you’re going to see more of that as you remember—I remember certainly as a kid, getting boxes, getting shipments was a big deal because they didn’t happen a whole lot. Now I look at my kids; they’re like, oh, it’s another box, whatever. I think that experience of actually unboxing and seeing things, I think it’s going to become more of a thing. Hey, but that’s my two cents.

Hey, thanks so much for watching. Listen, if you’re not subscribed, I highly recommend. Go to IndustrialSage.com if you’re not there right now and subscribe because you’re missing out on great episodes like this, great content, great insights from guests like Mike who was talking about solutions and insights and challenges that can help you in your business, whether it’s in the same vertical or something different in the industrial space. You’re missing out, so subscribe. Alright, that’s all I’ve got for you today. I’ll be back next week with another episode on IndustrialSage.

 

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