Aaron Conant  0:18

Everybody, we're gonna go ahead and kick this off. And in these are now as we're moving forward a lot more like 30 minute power sessions, just over the course of the pandemic. A lot of we push these up to an hour. And I had a lot of requests for that, because I think people had a lot of men and say extra time in their hands, but just time to learn. And now, all the organizations are like, hey, you've had two years to learn. Now go, go as fast as you can. So we're trying to squeeze in a lot of these. So just know upcoming events, a lot of them will be 30 minutes, there'll be some longer ones, you know, as we get into q4, you know, around an hour or so. But just in the interest of time, and respectful of everybody's time, and the requests that have been come in 30 minutes is going to be a timeframe, we shoot for housekeeping items really quick shoot any questions in along the way the chat the q&a, or email them into me, Aaron aaron@bwgconnect.com. We're all going to try to end this right on time right at 2pm. Eastern. And with that, I'm going to start just you know, kind of laying the groundwork for the call today in the session, which is around micro fulfillment. And so a lot of questions have been popping up over and over again. Corey has been a good friend for a while now. Davinci has come up multiple times and brand calls that I'm having a lot of people using him. And then all of a sudden he started showing up quite a bit in LinkedIn and just thought, you know, as people were peppering me with questions around micro fulfillment, and you know, how to grow your brand online and everything that goes along with it. Better than me answering them, let's just bring in Corey. And so, you know, Corey, if you want to do a brief intro on yourself, and Davinci that would be awesome. And then we can kind of jump into the slide deck today. And if you want to drop off camera when that happens, that's fine.

Corey Apirian  2:03

That sounds great. Thanks for having me, Aaron. Great to be here. Nice to meet everybody virtually. Davinci Micro Fulfillment is a service solution logistics company focused on providing fast forward fulfillment in hyperlocal areas around the US. We combine and aggregate services that allow agility and proximity to the end customer including front end merchandising, network optimization and the MFC operation itself to enable same day and one day fulfillment across any channel and a category and channel agnostic environment from Wholesale dropship marketplace and DTC channels. We have been operating out of six micro fulfillment centers. Today, we hit over 85% of the US next day, excuse me next day, myself and my team have been in the industry for a very long time understanding the pain points and opportunities. I myself was one of Amazon's first dropship partners in 2004, among many other major retailers. And these are some of the pain points that we have seen across the past two decades. And we're trying to give tools back to the brands and retailers so that they can enable this really seamless customer experience utilizing data and execution to their benefit. While they can figure out their their strategy using their own core competencies. The awesome

Aaron Conant  3:23

and I think a real cool part of that is and just reminder, send questions in the chat the q&a or email them to me Aaron aaron@bwgconnect.com. One of the cool things I think where you're coming up a lot is it's not just you know, Amazon or a lot of people want to have it in FBA, or they're on the vendor side. And you're kind of like overflow, but it's also from the standpoint of any other marketplace or direct to consumer site. Like once you've figured out individual pick Pack Ship, relieving inventory individually, even on the finance side, why not go everywhere. And one of the biggest drawbacks to that is just being able to ship right and getting the product there is with in customer expectation. So anyways, yeah, I'm going to I'll drop off camera here too. Again, people just dropping questions in the chat the q&a or email them to me. But yeah, Cory, I'll kick it over to you.

Corey Apirian  4:09

Great, thanks. Yeah. And that's a great segue in. You know, I think that fulfillment is certainly in my opinion, 1/3 of it. Our company is Davinci Micro Fulfillment. So of course, that having that infrastructure across the US and these hyperlocal areas is really critical. You could take this model and place it anywhere in the world, but we're focused on the US today. So I'll stick with that as kind of the use case here. But in order to make sure you're providing the most efficient fulfillment network, you need to understand where you're selling, and what products you're catering to across that DTC marketplace and wholesale channel for dropship. And also, of course, integrating that whole entire holistic strategy with with your company's ecosystem, including brick and mortar, because everything's connected, and that's a theme that you'll see here. And then once You can kind of understand where you're selling and what you're selling and have differentiated assortments and be able to plan and drive using your forward deployed inventory. That's when you can start organizing and curating your inventories through our network optimization or in general, and then being able to place product in the US in the appropriate MFC. As availability is your best ability, and you need to be able to have it in the right zone so that it can be delivered in same day, one day two day.

Aaron Conant  5:28

I just wrote this down. Availability is is your best ability.

Corey Apirian  5:33

Best ability? Yes. I didn't make that up. That's, that's, that's been out there for a little bit. But yeah, I subscribe to that thought, microfilm and though enables growth. And how does it do it? Basically, by aggregating the services that I mentioned, really, brands can understand who their customers are, and get into them quickly. Consumers have this need for speed. I mean, we're all consumers, we all shop online, especially through the pandemic, there are some things that you don't need in 15 minutes, there are some things that maybe you do need in 15 minutes, so a half hour, the only way that you can do that is by being in that same zone as the customer. And additionally, we know based on data out there, that in 2025 99% of all brands and retailers are going to offer same day delivery. And with that need for speed, meeting the fulfillment demands that exists today, whether it's how do I sell on Shopify, Amazon, or target.com? Or conversely, how do I deliver products at the end of the day, outside of just ups and utilizing local characters in order for those demands to be met. That's where micro fulfillment really comes into play. And then, of course, having automated micro fulfillment centers, which Davinci is now the first company across the country to offer automated micro fulfillment centers, which is something we're really excited about in some news that we announce, and we'll talk about shortly here, you're able to hit scale, and utilize these smaller footprint MFCs to maximize throughput and capacity.

Aaron Conant  7:09

No, I love I mean, one of the things that I think that gets brought up here is that retailers are going to be offering it that means they're going to be expecting it as well. Right? Correct.

Corey Apirian  7:18

And as we know, you know, retailers, they don't have the capacity to do it themselves for everything. There's certain things, you know, Target, if it's in their store, they certainly can hit those some of those requirements and buy online pick up in store has been a really big thing. Target stores, using their footprint as a micro fulfillment center, and taking out a lot of the delivery cost has allowed them to have a really strong stock and, you know, flourish over that through the quarantine. And even before they've kind of been the most improved since, you know, over the past, you know, several years, I would say, Amazon, you know, they have a lot of changes going on in their ecosystem as well. I mean, obviously, not news that their stock price got hurt a little bit recently, due to some losses that they had given from an over investment in their supply chain. There was a time before they made that over investment, though they were hitting capacity, they certainly had the non essential news in the beginning of the quarantine, where they couldn't handle any more stuff, if it wasn't essential. So So brands need to have this agility in their model where they can ship direct to consumer, and their retail partners want them to do it, there's a lot of reason for it and how you do it and how you execute it. That's where the difference is made. And there is something to be said about over execution and not owning the customer experience. And you can outsource to a distributor and you can outsource to regional third party logistics companies. But in order to have a very cohesive experience as the end customer and have it interoperate with a brick and mortar in store verse online assortment plan, that's really where this micro fulfillment data and proximity for these hyperlocal placement of these facilities becomes really critical. Because if you can understand and back into what you're selling, and why you're selling it at certain channels, and have it be non competitive to your competing retail channels, and not just being exposed in one channel specifically and beholden to that, that's where you can really unlock a lot of really good things for profitability and customer experience. And also a lot of tests and learn and AB planning that you can you can execute.

Aaron Conant  9:26

I mean the other interesting thing that hit around the if you go back just one slide sticks out to me is I have a lot of conversations where people think well my current three PL, you know is doing this for me, but now they can't anymore. And the reality is the structure of a fulfillment center that's, you know, used to cases in you know, LTL and full truckload is completely different than what's required for individual pick Pack Ship, you know, kidding bundling drop shipping. You know, at scale, they just can't, they can't do it. And I think that's not a good feeling. So many feelings, so many questions around this space as a whole, is all of a sudden that system is starting to crack. And those three pillars are fantastic. There's nothing wrong with them, they still need to, you know, service that right? I mean brick and mortar is not going away. It's just there's a different need that's out there.

Corey Apirian  10:17

I completely agree with that, I think very highly of the three PL marketplace that that exists out there. I think highly of a lot of my peers, they've been doing this for a long time, the shipping pallets and master cartons and truckloads to fill up a modular or a fulfillment center, even that system is not broken, right? You can add automation to that to make it more efficient. But when you're talking about a regional three PL or a wholesale distributor, there's a different unit economics that is involved in that there's a different philosophy set. And when you're handling single piece, each is in a fulfillment environment built to handle the service levels of Amazon, Shopify Target, Walmart DoorDash, whoever it may be, you need to have automation in order to be successful. It's okay to start manual we certainly did. But there's also a philosophical and financial perspective of for deployed inventory, that I think this is where Davinci is very different than anybody else out there, we're not marking up our four walls of real estate, or labor up charges, or freight up charges and passing it back to a brand or a supplier or an end retailer, we are a part of their ecosystem with this forward deployed model, and really driving it from end to end with the ability to help them with assortment content, digital marketing, network optimization, replenishment, fulfillment, MFC, operations and data analytics, all while being in a in a carrier and integration agnostic environment as well. And again, I've said this several times, but everything is really connected. And if you use data and science in the right way to figure out how to enhance the learnings of that connected ecosystem, then really the brands win, and they have control over their business and can really service the end customer and maintain profitability with with the right infrastructure in place. And leading to that, I mean, there's a lot of data out there that talks about what the biggest pain points are. And I think if you talk to most brands and retailers in the industry, these eight components here are really what is been feeling as a pain point, even before the pandemic, I mean, Davinci built this concept before the pandemic happened. And a lot of this is things that we've learned and seen over the years, having the ability to have strong distribution and logistics and order fulfillment in the right locations, using your network design and demand forecasting, to replenish back into those correct locations, is really critical. I mean, that's, that's the crux of it. And one of the big ways to really understand that is by understanding your merchandising assortment, and then of course, reverse logistics. You know, reverse logistics is a huge issue right now and pain point for brands, retailers and carriers on how to handle that. And having inventory that's closer to the customer also allows you to consolidate and taking take it back with less freight onus and cost and handling related to it, which is really the game in reverse logistics as well as transparency and data and analytics. And then of course, sustainability. You know, there's a lot of talk about ESG and sustainability today. And really, microfilm and is critical to that not shipping from Miami to Seattle. And the most egregious example that you could have there, you know, obviously reduces the carbon footprint handling a lot of the traditional parcel carriers even working within their ecosystem, being able to deliver in a zone to, you know, next day shipment for UPS, FedEx, and you end post office is really important. And then of course, when you add the local carriers into the mix, and being able to deliver from MFC to customers home, you're really doing a lot of things to drive sustainability in the appropriate way. And that is a measurable offset that you can provide back to your customers and your retail partners. And it's it's doing good. And then packaging, of course, right. Limiting corrugate if you are using local carriers, there's a better ability to use less disposable packaging, mailers and corrugated and things like that you don't always have to use that there are reusable things that you can use when you have the right infrastructure and can provide products to end customers even with cold, cold chain and frozen goods as part of that assortment.

Aaron Conant  14:47

Awesome. And just a quick reminder, if people do have questions along the way, drop them in the chat or the q&a. And we'll keep fielding them.

Corey Apirian  14:52

So as we've talked about, you know, quarter of companies out there struggle to meet delivery time was really because of the travel distance. This has a lot to do with local carriers, but also very much with parcel carriers. So by being placed in the same location as the end customer using hyperlocal delivery, and using companies like Davinci, or others, where you can interoperate these types of strategies within your ecosystem, and use your own facilities, your store footprints, or a micro fulfillment center, you're able to meet the markets demands with precision. And I would say that that precision is probably one of the biggest benefits that micro fulfillment and Davinci specifically can provide, it's something that is critical, there might not be a need for 15 minute delivery, there might be a need for a two hour delivery or a two day delivery. Or it could be a 15 minute delivery, but being able to manage that in the way that the customer needs, so that it can be handled appropriately from the operational perspective as well. Knowing knowing that precise time and the precise data that goes into that is really important. And probably one of the only ways you can succeed in the future.

Aaron Conant  16:01

No, I love it from that data driven. Because right I mean, you right next day, isn't required same day isn't necessarily required in it. Everybody wants to know if it is or not, but it's just crunching the data on the back end, right? To see like, hey, across all this category, you see over and over again, this democratic demographic, this category is perfectly fine with today. Right? But why? But I know there's a lot of companies overpaying right now because they think it has to be same day one day.

Corey Apirian  16:28

Yeah, that's correct. And it depends on the retailer SLA depends on the category. You know, as I note here, by digitizing and connecting the last mile resources, like that's really the only way you can work backwards to meet that demand. And also by understanding it equally on the front end, and having you know, the appropriate geofencing and geo proximity routing, and the appropriate carriers on the back end to either rate chopper to manage that delivery set. And what you're promising to the end customer, that's really how you how you can accomplish that. But, you know, if you're if you're offering baby formula, and you need it in 15 minutes, and there's a customer out there who may need that Ma Ma have a really strong want to be a part of that, if you're selling ice cream, you know, you probably have to get that delivered within a half hour to an hour depending on how it's traveling. But if you're you know, selling a pair of shoes that are for a Father's Day gift, you know, and you pre plan that you don't need it in 15 minutes. Awesome, love it, love it unless it's a pair of Jordans coming to my house for father's industry trends. So basically, this is something that that you're seeing out there, you know, customers want stuff faster. You've seen increased urbanization, I think by 2030. And beyond up to 2050 There's gonna be over 65 75% of the world is going to be urbanized. Hi mile last delivery cost the last mile is the most expensive mile, as they say. And getting closer to the end customer mitigates a lot of that increasing product variety, you know, understanding your assortment and where it needs to be placed from a physical location network. But then also like, what are you offering on a modular on a shelf? And how do you back that up online with the appropriate bundle or, you know, product size, you know, there might be a 16.9 ounce bottle of shampoo that's been on the target shelf at a certain price point for three decades, right? If you're if you're a mass CPG company, but you know, online, you might see a 33.8 ounce of shampoo and conditioner being sold and replenished so often. So those are things that you can do with the assortment planning, in order to provide the customer with the right item at the right time. That increases your shopping cart size as well as your gross margin dollars.

Aaron Conant  18:52

I mean, that's a unique one, too, as well. I mean, he was just, you know, was talking with Darren just earlier today around product variety and, you know, having different the ability to have different products and different marketplaces. Right and and then you can start to divide up. So I mean, price matching is a reality. But is there a way to get around it and the kitting, the bundling, it's something you can do to immediately increase queue count, but also alter available pack sizes and actual you know, ASINs listed on different marketplaces.

Corey Apirian  19:29

Yeah, that's exactly right. And if you think about traditional, you know, retail, I mean, how many times have we heard, you know, good, better best from brick and mortar merchants, right? But like online, you have this infinite shelf, but that infinite shelf can really only be managed the right way through automated micro fulfillment centers that have product and physical locations in order to hit that availability being the best ability, because that's the only way that you can really manage that on the back end operationally, you know, having, you know, 500 to 1000 skews and MFC and doing it manually might not be the biggest channel. But when you take that to 15,000 skews, and now you're getting, you know, two to 3000 orders an hour, you really need automation to really manage that the right way, and to keep your cost structure down and to be able to meet the customer demands.

Aaron Conant  20:18

But also, I mean, you think about the the idea of testing and learning as well. Right? What is the pack size? What is the count size? What is the product mix? That's really going to move? Right? You can literally exactly right, you're not changing a co packers here, either. I think that's the cool part about this model is where they say one of the many cool parts is you can literally change pack sizes in variety packs near instantaneously, right as it's uploaded, and you can start offering something new, because you're handling it at the each level.

Corey Apirian  20:50

And that's exactly right. Awesome. Yeah. And being able to not pre pack things in a warehouse and, you know, tying up unnecessary cash on hand and inventory through that Tesler and process those are all things that are really critical. And you need technology and digitization of those assortments in that data flow to be able to manage that.

Aaron Conant  21:10

I mean, we've been doing a ton with and then people think, Well, what about the imagery, we've been doing a ton and CGI, anyways, it's, you know, imagery is as a whole, you don't have to do another whole product, you know, a product shoot, this is

Corey Apirian  21:23

correct. And then of course, automated MFCs, you know, really counteract the higher workforce turnover rates and being able to have multiple MFCs across these hyperlocal areas allows to offset your own capacity and have some redundancy built into the network, where you're not as reliant as filling up a 300,000 square foot or a million square foot complex distribution center with hundreds and hundreds of people across different verticals within within your fulfillment or distribution center, having MFCs allow you to maintain, you know, five to 12 people managing you know the appropriate products for that localized assortment, and be able to manage it at a high level with a lot of cross train labor and things like that. So that you pick up a lot of advantages in the MMC network.

Aaron Conant  22:10

Yeah, the remote to do that. Yeah, I also, you know, the comment came in around the replenishment challenges. And that just takes me back to what if it's locked up? Either in you know, during quarantine, right? People had inventory locked up, or they couldn't get any inventory in q4 the last couple of years. Like, you know, from an Amazon standpoint, you can just have backup, right? You never run out of stock unless it's a supply chain issue. And you don't literally as a company have any stock? Correct? Correct. Are you having a lot of people use you as like backup for like FBA and vendor fulfilled?

Corey Apirian  22:45

Just Oh, no question. I mean, direct fulfillment is, you know, one of the biggest strategies there is for backup supply alone. And you know, getting the ability to get a prime badge and act as one of Amazon's FCS behind the scenes and backing up your own inventory, while being able to test and learn either a longer tailor product or using your core assortment for a profitability and control perspective. Those are all reasons why you want to have direct fulfillment immediately, in addition to your vendor, central bulk business, that's that's something that that I personally have been doing for 20 years. And it's a really successful way to approach the Amazon business. And similarly with Seller Central, you know, whether it's merchant fulfilled, SFP, FBA, Amazon, local, whatever it may be, having all of them driving together is very appropriate. Obviously, having a prime badge is great on Seller Central. But there's a cost to that. And there's a cost to that when it comes to your inventory metrics, and FBA and backing up that appropriate items. There's also a profitability perspective, even if you have have an SFP badge, where you can make an argument for certain product sets and drive times as well, where you may not need an SFP or FBA, listing and a merchant filled might be even more appropriate in many cases.

Aaron Conant  24:02

Awesome. Love it. And I see we probably had about four minutes left. So yeah, we can.

Corey Apirian  24:09

Yeah, I'm going to kind of jump through a little bit. So this is something that we've talked about 99% of brands and retailers will be offering same day delivery within the next three years. And there's a need to be able to connect data in order to do this successfully. Through transparency. Obviously, we've talked about automation, and having automation, managing your MFCs and your last mile operations. Those are things that are really critical. And using data to make those real time decisions is how you can execute that. And having you see a lot of companies now having chief robotics officers and heads of automation. I mean, those are all critical changes that are happening into the ecosystem. And I think you're going to see more of that. I don't think you're going to see people be replaced, but they're going to be enhanced by the use of automation and more tools that are able to be provided and less mechanism. And even that you'll see, and carriers, right having this just very traditional way of saying, Well, I'm just going to give everything to UPS or give everything to FedEx and try to get the largest discount. To me that doesn't work anymore that that has kind of gone away, there is a need for those carriers for all of them in your environment. And by pairing those with local carriers as well, depending on marketplace DTC and your wholesale dropship, depending on the item and order type, the zip codes being delivered, the category and the business rules, you can make an argument for having all or some of those carriers, but not one, it's very challenging to give everything to one carrier and to try to meet the demands of the retailers and your own businesses that are out there. And that obviously has a major impact on sustainability as well, the more traditional parcel carriers that you're giving your business to, and shipping from one or a few locations across the US, the less sustainable of course that your business will be. And supporting hyperlocal and fast delivery times, you need to be in the same zone as the end customer, which has a positive effect on all these subcategories here.

Aaron Conant  26:08

What are you most excited about? You know, as we get the last couple minutes, you're like, what excites you the most about this, this space as a whole.

Corey Apirian  26:21

To me, I mean, it's the interoperation of all of it. I've been in the industry for a very long time. And I have been lucky enough to touch all these different facets of it. And it's so great to see that it's so like it we're getting to a point in an industry where people are really understanding how connected it really is, and getting the right tools and data and automation and technology in place. As well as like the industry learning. I mean, this is still an industry that it's in its infancy and we have some of the smartest people in the world, on this industry right now and getting to work with those people. And to be able to learn together and build every step we take, we're kind of paving these bricks in front of us. To me, that's the most exciting part of what we're going through right now. But really, by giving control back to brands, in my opinion, and we do work with many retailers, but retailers benefit office. So giving control back to brands who historically have like, you know, made a living off of selling to a brick and mortar buyer. And they're choosing, you know, on these like very like quarterly or seasonal cycles of how to replenish certain items into the stores. It just there become some ability of self serving strategy that benefits everybody, right, and gives customers brands and retailers the ability to have profitability, as well as like, really great products that get delivered to them and create a really good customer experience, Family Promise. There's just so many good things happening in the industry right now, when you look at it through that lens, and I love being in the middle of that.

Aaron Conant  27:56

Awesome, and I know we were gonna have to have a follow up conversation. I know, we didn't get through all the slides today, either. Is there any like, last slide that you'd like to get to, but again, you know, if anybody's looking for any kind of follow up conversation, Corey and the team at Davinci just leaders in this space, in more than happy I know, in many occasions, just to jump on the phone with you and kind of explain what's going on what expectations are and what you should be planning for the future. So 100% worth of follow up conversation. You know, they just come highly recommended from a ton of brands in the network. But oh, cool. Yeah, so this is just

Corey Apirian  28:21

our automation. So one of our automation partners adverb technologies, we announced a strategic partnership to automate two of our buildings at the end of this year. And we have additional partnerships that we'll be talking about in the very near near term. So we'll have four locations automated, probably by February of next year, and add the ability to really handle enhance throughput and capacity and have the first micro fulfillment center that is automated in the industry. We're really excited

Aaron Conant  29:03

about that. Yeah. Awesome. Love it. Well, you know, we're just one minute over here. So we're gonna wrap it up. But Corey, you know, thanks so much for your time today. You're super busy. Right here really quick? Is there flexibility in the Davinci system to have slower shipping periods of selling off a Shopify site or fulfillment for b2b fulfillment?

Corey Apirian  29:24

Absolutely, it's really based on that precision again, and it doesn't have to be same day, it can be one to two days could be two to three days. It's really the amount of data that that we can look at together and run those analyses for partners so that we're optimizing their business in the right way. We're less is more sometimes.

Aaron Conant  29:44

Awesome. Love it. And if anybody has additional questions more than happy to put you in touch with Corey. Again, from my side, we'd love to have a conversation with you know what your pain points are. lend any advice I can have or connect you with people who can help you solve the pain points in this space. Hey, yeah, again it's Corey the team at Davinci. Corey thanks for being such a great brand partner supporter the network. With that, I think we're going to wrap it up. Hope everybody has a fantastic Monday. Have a great rest of your week. Everybody takes care stay safe and look forward to having you in a future event. Thanks again Corey.