Join us on this call led by Insignia Ventures Partners Vice President Shefali Dodani, as she is joined by ecommerce and supply chain founders shaping the way brands are built and scaled from Indonesia to the US: Patrick Cao, one of the co-founders of GoTo Group, JJ Chai, Co-Founder and CEO of Rainforest, and Phil Opamuratawongse, Co-Founder and CEO of Shipper.

Editor’s Note: This episode is a edited recording of a panel at the 6th Annual Summit of Insignia Ventures Partners. Watch other panels from this summit.

Highlights / Summary

Seven Hard Truths About Scaling Brands and Supply Chain Networks

1/ Building a consumer-first brand trumps all tactics. An obvious point, but easy to lose sight of in the midst of growth. Rainforest CEO and Co-founder JJ Chai talks about how there are sellers who become very focused on marketplace tactics after shooting up with their sales.

“[The sellers] become very focused on tactics on the marketplace — how you do X to get a bit of sales here and there — and they just forget the core of just making a product that works well, staying with the consumer, and the original founding story…”

2/ Local infrastructure is developing in Indonesia, but is it enough to compete with more global brands coming in? When it comes to Indonesia, local manufacturing and supply chain capabilities have been developing with push from investments and regulation, and there is a trend of local players opting to manufacture locally instead of importing. 

As Shipper CEO and co-founder Phil Opamuratawongse shares, “We’ll continue to see a lot of the rise of brands that manufacture and build their supply chain domestically.”

3/ This infrastructure development push has enabled ecommerce-ready logistics networks to be built beyond the greater Jakarta area and tier 1 cities in Indonesia. But at the end of the day, the fundamental go-to-market is to start where customers are and where they are willing to pay. 

What is worth noting is that along with government-driven infrastructure development, there have been more innovative distribution networks emerging to meet tier-2, tier-3 needs (Super’s social commerce approach or Shipper’s warehouse network) lowering the costs to scale for local brands.

4/ It’s just as important to de-risk and diversify a brand’s supply chain, as it is to expand sales channels. 

As Phil puts it, “From a brand owner’s perspective, you are not thinking too much about how to de-risk your supply chain, but you’re constantly thinking about how to sell more. But I think there’s something around de-risking the concentration in your supply chain so that you have different suppliers, different ways to get products, in case of a rainy day or in case of any regulatory changes.

5/ Lost and stuck inventory is a pain point where more innovation is still needed. While the panel spoke to the problem in Indonesia, it is a global issue that all businesses from small brands to MNCs face.

For Phil, it’s the biggest opportunity for them to better serve their customers. “On average when we take over our customers’ inventory and help them with their fulfillment and logistics about 20 to 30 percent of the information that they give us is wrong or the products are lost…And then another 10-20 percent of inventory is just stuck…Immediately almost 50 percent of our customers’ inventory is not creating value for their business…So for us, the most important thing is, how do we make that 50 percent of inventory create value for our customers?”

6/ It’s not enough to be close to the consumer. As much as we operate in a digital world with remote teams, for supply chain and logistics leaders, it is indispensable to be an on-the-ground presence. 

As Patrick Cao, emphasizes, “You need to be close to your customer, not just the consumer, but also the merchant and everyone in between the distribution network.”

7/ You don’t have to do everything on your own. Many enablers have emerged to support brands, but it’s important to work with quality SLA and services that align with your target customer segments. 

Timestamps and Highlights

(00:00) Highlights;

(01:18) Introductions;

(07:39) Two Trends to look out for in Indonesia’s Brand Competitive Landscape;

(11:22) Developing Distribution with Indonesia’s Maturing Infrastructure from the Greater Jakarta Area to the Rest of the Country;

(16:20) What Separates an Enduring Brand from the Rest;

(20:11) From Scaling Enablers to Managing Inventory Loss: Underrated Opportunities in Supply Chain Innovation;

(26:17) What Makes a Great Supply Chain Leader;

The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund.

Transcript

Note: Transcript has been edited for concision and clarity.

Shefali Dodani: We now explore another frontier for growth in Southeast Asia, supply chains and distribution within the context of the global digital economy. It is my pleasure to be moderating this panel, and I would like to invite the founders joining me into this conversation.

Thank you so much for taking your time today. I’d love to kickstart this panel by doing a quick introduction from each one of you and to make it a little more interesting. Maybe share a little bit about yourself and your company building journey.

Patrick Cao: So, I’m Patrick. I was one of the co-founders of GoTo when we merged Gojek and Tokopedia, and subsequently listed it last year. That’s been an interesting adventure, as with many technology stocks. For those of you who don’t know, Gojek and Tokopedia, we combined the largest consumer technology use cases in Indonesia.

As well as Singapore and Vietnam. So we’re the largest on-demand mobility food delivery, grocery delivery, e-commerce, and financial services. And our main base is in Indonesia. So we’re not exactly a distribution company, but we do a lot of distribution. So in Indonesia, we cover 99 percent of the 17,000 islands.

The only 1 percent we don’t cover either doesn’t have electricity or doesn’t have a telecom service. So you can’t access the app or we just can’t get there. And we do that by working with 13 logistics partners, some of which are here today across third-party logistics delivery across fulfillment. But we also look at distribution in terms of not just goods, but also digital services and money. So this is a very important part of our largely marketplace business.

You asked me one thing about my journey, so a lot of people don’t know this, but I was one of the earliest investors in Gojek. So that happened around 2013 when I was at Formation 8.

I had the option at the time to either join Gojek or Tokopedia. But my wise wife told me, maybe you join something where you don’t know everyone, where the culture is a little bit different. And so I made that decision seven years ago and here I am today. We went full circle. So I invested in Gojek, invested my life in Tokopedia, and then married the two.

And we’re very lucky to be here. 

Phil Opamuratawongse: My name is Phil. I am the CEO and co-founder of Shipper. When my partner and I decided to build Shipper, our goal was to help businesses of all sizes simplify their logistics and supply chain from their manufacturers to customers. 

So today we serve thousands of e-commerce businesses, offline retailers, helping them to move their goods, store their inventory and manage their inventory essentially from manufacturers, sometimes overseas, to their customers and where we’re operational. We are primarily operational in Indonesia and Thailand with customers from all over the world.

One interesting thing about my journey with Shipper. So in the first three years, we were about a five-year-old company going to six. In my first three years building Shipper, I didn’t get a lot of time to exercise, so I started to get really big, and I like to keep active. So what I used to do to keep myself active was go to the warehouse for free gym sessions, which basically meant moving boxes.

So in the warehouse and out of the warehouse, that kept my fitness level at its peak. I’d say that’s probably one of the hardest jobs that you can imagine. Today, I’m getting old and I can barely run up and down the basketball court, but it was a lot harder than that. I really appreciate all the folks that we work with on the ground who do that day in and day out. 

JJ Chai: So I’m JJ Chai, Co-founder of Rainforest. Rainforest is a house of brands. We acquire and operate brands in the modern and baby space.

We’ve got 16 brands now predominantly selling to the U.S. and predominantly marketplace-driven on Amazon. So we typically acquire from small operators for these brands and then optimize and grow them in terms of product expansion, geo expansion, and channel expansion.

An anecdote about my journey — when we first started Rainforest, we weren’t so focused on mothers and babies. Actually, we were big on the thesis around Amazon being a growing platform. There are a lot of small players on Amazon that are not run optimally, and we could get any type of brand and just run it.

After the first few acquisitions there, we started realizing that running a car parts brand and a cereal brand has very little synergies between them, and it is really complex to drive growth. And we decided to focus on a specific segment and we looked at the different buyers we could focus on? Interesting ones included health and beauty. Pet owners were a big one, and then, but for us three co-founders, including myself, we were all three parents, six kids amongst all of us. 

So we all took a look at ourselves and said, okay, we’re not the typical profile, but understand enough of the parenting journey and the number of products that come into your life once you have a kid and decided to focus on the maternity and kid space as the target category and audience.

Shefali Dodani: Got it. And for some context, could you maybe share a few brands that you have actually acquired or built? Maybe for context, I’m sure some of you here are parents as well. 

JJ Chai: We don’t distribute here in Asia yet, pretty much in the US, but if you go on Amazon and look for a diaper backpack.

You just put in those keywords. The top seller up there — BubbleRoo — is one of our brands. One of the interesting parts about this bag brand — I’ll just comment a little bit about it — is that a lot of these bags used to be designed for the mom, right?

So they’d be smaller, a bit softer, more feminine. Nowadays, a lot more dads are doing the job of carrying these things. So it needs to be big enough and not look so feminine. So that’s a lot of interesting changes in consumer behavior around how parenting is done. We also do products for children for toy storage as well called Lily’s Love.

Two Trends to look out for in Indonesia’s Brand Competitive Landscape

Shefali Dodani: Thanks for sharing, JJ. 

So Phil, I have a specific question for you. So if we look at Southeast Asia today, I think Tokopedia itself has done a great job of bringing brands to reach customers at scale. Now, Phil, you’ve built one of the largest logistic networks in Indonesia.

So how are you seeing the competitive landscape in Indonesia specifically? We are seeing more foreign brands as well as established local brands that are digitizing and emerging brands, right? So maybe could you share a little bit of how these brands are evolving and how the distribution has evolved over time?

Phil Opamuratawongse: There’s a few questions there. I’ll start off with what are some of the trends that we see in terms of brands coming in and out of Indonesia and who are doing well and why. And then the second question is our role in that journey. 

On the first question, I think historically, building domestic brands and growing domestic brands were difficult because manufacturing and local supply chain capabilities were not so strong in Indonesia. But I think over the last few years, there has been a lot of investment and a lot of push from regulation to get local manufacturing and supply chain capabilities up.

So you see a lot of customers and businesses beginning to set up local manufacturing capabilities. One of our most recent customers is going to set up a large phone case manufacturing plant to produce all the phone cases domestically rather than import from China.

So I think number one is, we’ll continue to see a lot of the rise of brands that manufacture and build their supply chain domestically. 

Second is, over the last 12 months, there has been a rise in an influx of brands coming in from overseas, especially with the entrance of TikTok.

So with the entrance of TikTok, the ROI on selling online on that specific channel, at least when they were still live over the past 12 to 18 months, was quite competitive, while the ROI on selling in other markets or selling on other channels domestically was not growing as well. 

As a result, folks who knew how to sell on TikTok, the majority coming in from China, quickly all came in at the same time and started leveraging their ability to sell on TikTok and grow with TikTok.

So we saw a huge influx of sellers over the last 12 to 18 months who knew how to do that type of business really well, come in and do well really quickly. 

So those are the two kinds of seller trends that we’ve seen that have helped our business do well and think about our business differently over the last 12 to 18 months in terms of how our business helps these brands.

Essentially, the way we think about it is we want to help our customers to lower down the barriers to entry to build a brand and build their business, and the way we think about it creates competition for our customers’ competitors. It makes their life harder.

So our goal is to continue to do that. We want to continue lowering down the barriers of entry for these businesses. We help them to drop down their fulfillment cost from something that they had to invest in large capex before to something that they can pay per unit and come in and start on day one.

So it’s our entrepreneurship package, and we help them to continue to grow and optimize their supply chain. And some of the biggest customers that we work with, the largest shoe brand, the largest F&B brand, the largest paper brand, some of these are some of the largest companies who we help to digitize their supply chain and help them to optimize their logistics.

Our goal is to make it as easy as starting within a week so that any entrepreneur can start a brand today, and we want to be there and continue to grow with them as they grow.”

“We’ll continue to see a lot of the rise of brands that manufacture and build their supply chain domestically…there has been a rise in an influx of brands coming in from overseas, especially with the entrance of TikTok…the way we think about it is we want to help our customers to lower down the barriers to entry to build a brand and build their business.”

Developing Distribution with Indonesia’s Maturing Infrastructure from the Greater Jakarta Area to the Rest of the Country

Shefali Dodani: Thanks for sharing, Phil. 

Patrick, I noticed that if you look nationwide, especially in Indonesia, there’s, as you mentioned, 17,000 islands, right?

But in reality, if you look at the seller side, a lot of the sellers are concentrated in Jakarta, which makes logistic costs in general very high. If you want to distribute from Jakarta to the likes of Makassar or Medan — in that case, how has Tokopedia actually prioritized some of its city expansion plans? And how do you ensure that distribution becomes and is able to be maintained efficiently?

Patrick Cao: So when we started 15 years ago, you’re right, buyer and seller geography was largely based in the greater Jakarta area. Every year that goes by, that number gets better distributed. So we started in greater Jakarta and then tier one in the rest of Java, and then tier one across all of Indonesia.

And then now tier one, tier two, tier three. So the mix of Greater Jakarta contribution has gone from 90 plus percent down to under 50 percent. And that took 15 years to do and the question is, why is that so? A large part of it is this distribution issue. 

Because when we first started, there weren’t a lot of 3PLs and at the time, if you wanted to do logistics between islands or between cities, there weren’t a lot of options. And even if there were options, it was very expensive. 

So the thing is, if you take a look at history, the way the government invested and built infrastructure layered with the rise of third-party logistics (3PLs) and then the digital-first 3PLs — we all grew up together such that we were able to create a distribution network to be able to facilitate that. 

And I think at this stage, and this is something that Phil mentioned, is that the game has changed a lot. So the biggest problem before is that people either were trying to do everything or they couldn’t do anything, and a lot of them were subscale.

But what Phil has built is completely different, right? It’s digital-first. He understands the pain points of the brands. You’re not trying to build everything. Some of the enablers in the beginning, they would do marketing for you, they would pick and pack and fulfill and they tried to go and go everywhere, but you don’t need to do that, right?

There are certain channels that make sense the most. So for our journey, one of them was infrastructure related. The other was technology-related. We built the largest 4PL that connects all the fulfillment companies, all the third-party logistics (3PLs) to be able to, at our scale, basically deliver anything and then when you inject Gojek bikes into that, you can do even more — people, food, and packages.

Then the next iteration of this is you do your own fulfillment because there are certain SKUs for certain customers in certain regions where they want it fast and they’re willing to pay and the existing players can’t provide that SLA.

So you have to do it yourself. So that’s the kind of journey that we went on, but for anyone building a business, you need to start where the customers are, where customers can pay, and that’s the capital city, Tier 1, Tier 2, Tier 3, and so on and so forth. 

Shefali Dodani: And in terms of systems, it’s really a case-by-case basis, so how do you actually localize your platform and ensure that the user experience is still retained?

Because as everyone knows here, the dynamics per city vary a lot. Some of them are more tech-savvy than the rest, right? So is there something that Tokopedia is doing differently to ensure the user experience remains consistent? 

Patrick Cao: Yes, so the rural versus the urban experience are completely different.

So there are roughly two things that have happened. The first is, as Indonesia became more developed, then you saw both the government post office, but also 3PLs set up retail and distribution centers in those areas so that you could serve the rural customer. And it was by no means widespread.

It was highly linked to GDP growth. But that enabled us to go and service those markets, leveraging our partners. 

The second thing that we in particular did was we built our Mitra Tokopedia business. So imagine you set up like a 7-Eleven equivalent with all of our branding in major villages around Indonesia.

And you work with basically, the village elder or main mom and pop shop, and they become your distribution hub. So that was a fantastic strategy for us. It’s great marketing, but it also allows you to serve that customer with the most basic things that they need. 

And then third is working with the distribution companies that exist already, in particular, the ones that sell FMCG and cigarettes, right?

Because they are widespread across Indonesia. They exist. They are our partners, so we work with them. So I think one was what was already there or what developed as we developed and then what we built ourselves in order to service those markets that weren’t being well served.

“For anyone building a business, you need to start where the customers are, where customers can pay, and that’s the capital city, Tier 1, Tier 2, Tier 3, and so on and so forth…[for us, we worked with] was what was already there or what developed as we developed and then what we built ourselves in order to service those markets that weren’t being well served.”

What Separates an Enduring Brand from the Rest

Shefali Dodani: That makes sense. Essentially, you’re also catering to the offline demand and not losing business from there.

I think Patrick did a great job of sharing a little bit about distribution locally, but for you, JJ, you’re building a platform for brands on a global scale. 

So, in your case specifically, for the brands that Rainforest partners with, how does Rainforest actually adapt acquisition strategies? It’s very different, looking from one country to another. The requirements for acquisition and go-to-markets are different. How do you prioritize that internally? 

JJ Chai: Yeah, we built on, basically in the US at least — the platforms, the infrastructure, and 3PLs, and so on, have been built out over the years. And actually that’s what gave birth to our industry, which is the aggregation of smaller brands. 

The Shipper of the US, Tokopedia of the US, Amazon, and so on made it super easy for anyone to create their own brand and launch it. Anyone with just a bit of imagination and capital can do it because the infrastructure is there. The result of this is thousands of brands coming through, and unfortunately, not all of them succeed.

A lot of them actually don’t succeed. Some of them become the next Allbirds, and so on. And then there’s this mid-tier of brands that do quite well, but are unable to scale to the next level. And that’s where we come in to give them an exit, and scale up these brands.

What we have found in this whole acquisition approach is that a lot of these owners have been able to grow on the back of tailwinds on logistics being made easy, and marketplaces making it easy to reach the consumer.

You can be very successful in that marketplace, but the moment that stops because of Covid pullback or because the capital markets change, you don’t really have a brand. You really have a good product on the marketplace.

And a lot of it is really helping these brands become a true brand. Meaning that like it’s investing in compounding effects where people actually decide and understand that I want to buy this brand of bag versus it being top-ranked on a certain marketplace and so on.

Shefali Dodani: And what would you say are the learnings so far? What differentiates a good brand from a subpar brand, based on your history of acquiring a lot of brands. 

JJ Chai: Yeah, it’s an interesting one that we’ve been looking at a lot, right? In the past, we’ve been actually very focused on online [indicators] — if it’s got a lot of reviews, if it’s ranked by consumers. That’s a good brand. 

Now we’re changing our tone and going back to super old-fashioned basics. Actually, so I ask people around, do they actually recognize this brand? Have you heard of the brand called BubbleRoo?

Is this part of your consideration set? Do retailers actually want it offline and so on? Changing to a pretty old-fashioned way of assessing whether a brand is actually a durable brand, from a sort of recall perspective. 

Then the other elements of it are a bit more obvious — do you have IP, do you have something unique that differentiates you, and that no one can just get a supply into China to produce the same goods?

Patrick Cao: I don’t know what you think about this, but I think the other thing is, at least on our platform, the brands that became successful online, that tried to copy what everyone else did offline, they failed. Because they end up losing what made them good to begin with. 

The second one is the founders and management teams of these brands that don’t have a story and like an authentic, I’m gonna call it marketing strategy. They got so successful at grassroots, and then for some reason, as soon as they got a little bit of scale and success, they stopped doing it. 

And I think those combinations of things with what you described. I think those who create enduring brands do so because they understand their purpose or their why. The ones that are like a shot in the dark, they forget what made them special to begin with. 

JJ Chai: The fact that when you talk to some of these sellers that’s shot up on the marketplace, they become very focused on tactics on the marketplace — here’s how you do X to get a bit of sales here and there — and they just forgot the core of just making a product that works well, staying with the consumer, and the original founding story is super interesting.

“The fact that when you talk to some of these sellers that’s shot up on the marketplace, they become very focused on tactics on the marketplace — here’s how you do X to get a bit of sales here and there — and they just forgot the core of just making a product that works well, staying with the consumer, and the original founding story is super interesting.”

From Scaling Enablers to Managing Inventory Loss: Underrated Opportunities in Supply Chain Innovation

Shefali Dodani: We resonate with that because we ourselves at Insignia do look at a lot of brands ourselves, but it’s very hard to build a long lasting brand as you mentioned rightfully, JJ. 

When it comes to building distribution for brands and businesses in specific geographies that you focus on Indonesia in this case, or even the US, what is the biggest market opportunity that you’re seeing but not everyone is paying attention to?

Patrick Cao: I still think that the enablers are largely subscale. The SLA as they scale actually declines despite the fact that there’s more volume and more utilization. So I think one is they just don’t know how to build and scale basic operations. 

Part of that is they were great at, let’s say, 10,000 orders per day. Once you get past that, they’re not leveraging technology automation, very basic SOP that you’d get at a big company to bring it to the next level, or they’re hiring these people that they think are silver bullet people from Amazon or Unilever or wherever but who don’t actually have the ability to scale teams or digitize to get them to the next level. 

So I think that’s one, right? It’s just a matter of scale, teams, and SLA. 

I think the second thing is they just tried to do too many things. I think the one exception to this rule is Baozun in China. If you go visit them, they have a whole building for Nike and they literally do everything right from where the shoe is produced in China or overseas to when it hits the factory floor directly to the customer.

But to do that, they built everything in pieces without forgetting what their core business was. Enablers out here tried to do everything under the sun and all of it is not done well. And I think that we’ve seen that pressure, which is why we had to go and build our own fulfillment business because they just couldn’t fulfill the SLA.

So I think that’s one area where if you’ve done what Phil’s done and his team’s done, you pick your lane, you do it super well, and then you add to it. That’s very effective, but trying to do everything under the sun — that doesn’t work.

“[Enablers] just tried to do too many things. I think the one exception to this rule is Baozun in China…But to do that, they built everything in pieces without forgetting what their core business was…you pick your lane, you do it super well, and then you add to it.”

Shefali Dodani: Case in point is that models in general can’t be copy pasted right from the US or even LatAm to Indonesia.

So Phil, same question. What is the biggest market opportunity in your perspective that others are not seeing?

Phil Opamuratawongse: Yeah I think the biggest opportunity is what we spend our time thinking about, which is inventory management for our customers. 

And the reason why that’s such a big problem is on a good day, of course, inventory management is not as important because everything sells and everything’s all good. 

But on a bad day, that’s when you know poor inventory management can really kill businesses. On average when we take over our customers’ inventory and help them with their fulfillment and logistics, about 20 to 30 percent of the information that they give us is wrong or the products are lost. 

When I say the product information is wrong, that means they say it’s a blue shirt, when in reality, it’s a pink shirt. So that’s already 30 percent that is not sellable because it’s either wrong or lost.

And then another 10 to 20 percent of inventory is just stuck. Stuck means it doesn’t move, and doesn’t move means it’s just sitting in their warehouse. Some have already expired. If it’s not expired, it’s already out of date or out of fashion. Immediately almost 50 percent of our customers’ inventory is not creating value for their business.

So for us, the most important thing is, how do we make sure that 50 percent of inventory creates value for our customers? So how do you make sure that the inventory information is correct, transparent? How do you make sure nothing is getting lost along the value chain, which is very complex, especially with larger supply chains?

And how do you make sure that for the 10 to 20 percent of inventory that’s stuck our customers have transparency over that information, so they don’t make that same mistake or that stuff is flushed out so that the customer can continue to have good cash flow. 

So for us, that problem statement is still very fresh for the market that we serve, and we think that’s the biggest way we can help our customers today. 

Shefali Dodani: That’s interesting that you said that. We’ve seen that it’s not only lost inventory. It’s more dead inventory or, as you said, inventory that is stuck — the 10 to 20%. Who’s really solving it right now? 

So over to JJ, I would love to hear your thoughts on what is the biggest market opportunity for you.

JJ Chai: This is unscripted, but actually very, very similar [with Phil’s]. We are a brand principle. So we feel the problem of having inventory that’s not moving and figure out how to solve, liquidate, move this inventory is a real one. And so you start back where the problem is coming from, it’s like in ecommerce and so on. 

Obviously, the self-straight-line growth that used to happen doesn’t happen anymore. There’s also a lot of consumer need to actually get stuff quickly. Nothing more true in the US where it’s Amazon Prime, click and tomorrow it’s there.

So we move, we have to predict, build a lot of products, send it to all the nodes. And then if demand doesn’t happen for exogenous reasons and so on, we’re stuck, right? And this happens across many different industries and categories as well. 

And the tools to solve this are quite lacking. We are seeing some providers trying to figure out, solve name-your-own-price solutions to make a bid. But I think there’s a lot more innovation that can happen in this space both on a demand-shaping perspective as well as on the supply chain side of things.

Patrick Cao: I think the business model that we were looking at is — let’s say you’ve got dead inventory or you’ve got inventory that doesn’t move. So the beauty of a country like Indonesia — I think this is for most emerging markets — is it might not sell for the majority in Tier 1, but when they return it or it’s dead, it’s actually still very valuable in non-tier 1 markets.

So that was a big piece of infrastructure that we were looking at. Because it will still sell, and a pink teapot doesn’t sell in Jakarta, but it sells really well in tier two or tier three, tier four cities. So that’s how you can help it move. When we first thought of it, we didn’t have the infrastructure, but now that we’ve got better coverage, it’s a lot easier.

“On average when we take over our customers’ inventory and help them with their fulfillment and logistics about 20 to 30 percent of the information that they give us is wrong or the products are lost…And then another 10-20 percent of inventory is just stuck…So for us, the most important thing is, how do we make that 50 percent of inventory create value for our customers?”

What Makes a Great Supply Chain Leader

Shefali Dodani: Really interesting insights, everyone. Thanks for sharing. 

What would be your key message passed on to the next wave of entrepreneurs building in the distribution space? I think all of you here have ample experience under your belt, right? So we’d love to know as well. What are the key success factors that you’ve seen?

JJ Chai: Yeah, mine is back to very simple basics around actually keeping very close to the consumer and understanding what they are looking for and what’s changing in there. 

I think that’s ultimately one of those more long-lasting, can’t-be-wrong answers, but also as founders, it’s so easy to forget, right? It’s so easy to get distracted and then build for investors, what investors like, what are the trends in the market. 

But actually, it’s about going back to the consumers to figure out what they want and starting from there. It’s one of those extremely trite, but easy for founders to forget, myself included.

Phil Opamuratawongse: I think number one is don’t do it yourself. Use a third party. If you guys want to enter Indonesia or Thailand, call us. Let us know, we’re here to help and we’re here to serve. 

I think second is where I see some of our customers get hurt is around how they concentrated their supply chain on imported products only, especially in the recent days. Or in the recent last couple of months, I’ve seen a few businesses go from a lot to very little overnight because of that. 

I guess from a brand owner’s perspective, you are not thinking too much about how to de-risk your supply chain, but you’re constantly thinking about how to sell more. But I think there’s something around de-risking the concentration in your supply chain so that you have different suppliers, different ways to get products, in case of a rainy day or in case of any regulatory changes.

Patrick Cao: So Phil and I have a very good friend who runs our logistics business, and he’ll say to you if you don’t look like you sleep in the warehouse, you are not a logistics and distribution professional, and I would say that is entirely true. 

So JJ and I are clearly not dressed to do that job, but Phil is dressed very well to move for that job, and he’s ready to move a box. And I’m not actually not kidding because you have a lot of these execs that come and say, “Oh, we run this 3PL business, this fulfillment business.” And I respond, “When was the last time you were in the warehouse?” And his management team laughs. That’s not a good thing, right?

JD’s Richard Liu still goes to the warehouse. He still drives a truck. And the point is you need to be close to your customer, not just the consumer, but also the merchant and everyone in between the distribution network.

Shefali Dodani: All right. Thank you everyone for your time today. Your insights. It was very exciting to have this conversation. Thank you so much, Patrick, Phil, and JJ for the insightful conversation. And we’ll move on now to the next panel.