Supply Chain Therapy with Flexport and RTIC

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0:00 | Sanne Manders
hello, and live from forward here in Los Angeles. My name is Sanne Manders and I'm here together with Chris Chelko who's the coo at artic. Well, Chris, first of all, let's introduce artic a little bit. And I would love to hear from you how the company started because I heard they're starting started as a company selling moving boxes direct to consumer. But now you're a very different company. So tell me a little bit about the story and especially how the brand took off.

0:30 | Chris Chelko
That's right? Yeah. So we were founded in 2015, as a company arctic and with a legacy before that. And as a moving box business. Now, we are the number two player in the premium cooler space where what's really important to us, is living up to our brand promise where we deliver overbuilt not overpriced products. So, we, you know, when we started and moved from being a moving box business into coolers, we had a, an in house ERP that handled really bulky and awkward things in the warehouse and got them out to DTC E commerce customers. And our founders took that and said, what else can we do with it? And, and, you know, pretty quickly found that the roto molded coolers, was a good target for it. So, they moved into that business and we've since grown and scaled a lot. And so over the last five years in which I've been part of the business, you know, we've really moved the business in a, big shifts. So, one is we've moved from being an E commerce only player to being an Omni channel player. We're currently in over 8,000 retail stores across the us. We've also really professionalized our team when it comes to marketing and creative and product and sourcing. We've also turned over our entire supply chain, really focused on high quality providers that we can work with and build trusted relationships with our product innovation is unmatched, and we really do a lot with our product development team to bring new innovative things to the market. So, I.

2:10 | Sanne Manders
learned actually two things. It started with big bulky, and that's how you got into the coolers. Yeah. And then it really took off and that's only five years ago. So the company has basically taken off. So tell me a little bit about you. You joined, you know, in an operations capacity initially heading the customization business. I'd love to hear a little bit more about because you came from a consulting background just like myself as both BCG. So I'd love to hear a little bit about your personal journey and how you became from a consultant operator. And now the coo of this business. Yeah.

2:45 | Chris Chelko
So, I left consulting about five years ago and joined the business. I had the opportunity to come in and take the reins on our custom shop business unit, which is bulk decoration of our products for corporate customers. And, you know, worked in that business, for about two years and about two and a half years ago took over the reins as coo. So now I look after all of our operations. I kind of pick up everything once it's on the water and getting it through the port, working with flexport, to do that, getting it into our facility, running all of our own DTC fulfillment and fulfillment into our retail partners through three PLS and other things, and then on down the value chain to customer service, and even look after our own retail stores that we have.

3:30 | Sanne Manders
Sounds like a real coo business, yeah.

3:32 | Chris Chelko
It's a lot of fun.

3:32 | Sanne Manders
A lot of problems every day every.

3:35 | Chris Chelko
Day, but it's good stuff.

3:36 | Sanne Manders
Tell me a little bit more, about the warehousing because, you know, you're you guys are running your own warehouses. I think you played a big role in building that out, that's a tough job to build out warehousing.

3:51 | Chris Chelko
Yeah. So one of the big things we've done in the last couple years is actually consolidate our warehouse footprint and we brought our custom shop business as well as our fulfillment center for DTC all under one roof. It's been really impactful for the business. You know, there, we fulfill all of our orders for our own website as well as stuff we saw on marketplace, drop ship orders for other retailers. So, and then also wholesale fulfillment orders, into some of our smaller retail partners that we work with. So it's a really complex warehouse, in terms of all the different things we do. Customization is a big part of that not just on the custom shop side, which is the bulk decoration but also what we call personalization where you can order a minimum order, of one unit and have it decorated. So, we have a amazing capability, to do that and turn it around the same day. Yeah.

4:47 | Sanne Manders
I want to learn a little bit more about that because I know a little bit about warehousing. Yeah. As, you know, we run a couple of warehouses as well. Customization is typically the dirty word, right? Because it's hard specifically if you're going down to an order of one, what's your secret sauce there, what's you know, because.

5:04 | Chris Chelko
Well, what I want to share and what I'm comfortable sharing. Of course, what we fundamentally did is we figured out a way to run our customization processes in an automated way, and that's elements of the customization really, the backbone of it is we ride on the infrastructure that we've got in the warehouse to move product around and to fulfill orders and you, and tapped into that, those capabilities and add it on to them, the capability of automating, the decoration. So we, you know, can laser engrave or color print a cooler, laser engrave drinkware or color print a cooler the same day. We take the order for it and get it shipped out.

5:45 | Sanne Manders
Wow. That's impressive. Yeah, that's really impressive. Hey, you guys started with a single cooler. It's now a whole line of products. What drove the expansion?

5:58 | Chris Chelko
You know, I think in the early days it was, you know, what else makes sense to go along with this cooler? And at that time, we didn't really do a lot of our own product development in house. So it was really outsourcing that to our vendor partners and what else can they do and what else can they help us with the natural expansion was, you know, from hard coolers to soft coolers, and then to add some drinkware to the mix in the last five years with the build out and growth of our product development team and sourcing team, we have really done a lot to drive innovation in our product. We're really proud of our ultralight coolers, so we can create the same kind of ice retention performance in our products as the classic heavy duty roto molded coolers, but we do it with a 30 percent lighter product. So a little bit lighter, a little bit more accessible for everyone to use. The cooler itself isn't heavy or nearly as heavy on the drinkware side. We've driven a lot of innovation as well. We're the first player in the market to bring ceramic line drinkware across the board. So there we've worked with our vendor partners and understood what's out there and what we're capable of. We tested it on a few products. And then about a year ago made the decision to move it across the full line. So I turned over all the product in our warehouse, replaced it all with new ceramic line product, a bunch of new features on it. And I think we've got world class drinkware now that I'm really proud of.

7:28 | Sanne Manders
Yeah. And while you're driving this product line forward right now, you have a close relationship with your vendors. How much is that, you know, are you driving that yourselves now from your own RD? What has changed there? Because you said like we started just by buying products. Yeah, it sounds like you're shaping the portfolio and doing a lot more work these days.

7:49 | Chris Chelko
Absolutely. Yeah. All of our products proudly carry a little marking on there that says designed in Katy Texas. So we do have our own in house product design team. We work closely with our vendors to understand what is and isn't possible when it comes to manufacturing and in the actual production, we work with their development teams as well on new things that we may not have thought of and we work collaboratively with them to bring the best ideas together and ultimately create the best product. So we can live up to that overbuilt not overpriced brand promise. Yep.

8:21 | Sanne Manders
Yep. I assume that, you know, with building this, you know, bigger product portfolio, you're also introducing a lot of complexity, multiple SKUs, you know, then on top of that, you have the customization that's probably all that complexity lands on your plate as the coo. So how do you deal with that?

8:39 | Chris Chelko
Well, on the customization front, the way, you know, it actually helps with managing because we print it all and produce it all on demand. So that's actually really helpful when it comes to having a broad offering where we can, you know, our customers can find something or create something that's really tailored to what they're looking for in terms, of the other kind of skew proliferation, and broadening, of our offering set that's something that we were pretty careful about. We do have really strong relationships with our vendors and we work closely with them, and under stand, you know, how do we start slow but put ourselves in a position to chase the opportunities? Yeah.

9:18 | Sanne Manders
So you test the markets when the fly, you know, it starts flying up the shelves, then double down on.

9:22 | Chris Chelko
Is be prepared, you know, put in that first order, you know, maybe a little bit conservative on the low end on the first order is, so we don't get stuck with any dogs and then, but at the same time be prepared to chase it, and produce enough to follow up and capture the opportunity that we've created because a new product launch, you know, has a lot that goes into it. It's not just the product design, in the supply chain side of it, but also building that credibility for that product in the market through our marketing and other efforts.

9:52 | Sanne Manders
Yep. Another dimension of complexity is that you went from being a pure DTC player to also delivering through retail. You know, how did you know that's a big decision first of all? How is that decision made? And, and, you know, how tough was that execution? I think that a lot of people are going to listen into this because, you know, a lot of flexport customers are DTC brands and like we would love to sell through retail as well. But they're scared of making that step.

10:23 | Chris Chelko
It was pretty terrifying. It was, and I say that a little bit in jest, it was exciting at the same time, it was not a decision we took lightly, but ultimately we were looking at an opportunity to put our brand in a major retailer in the U. S with walmart. And they were eager and we were eager to kind of go big and fast. The first step in that was making sure our supply chain was ready for it, making sure that we could support their volumes, making sure that we could do all that. The second was ensuring that we had the right fulfillment partner. So we really searched for a three PL that would have that expertise in working with the retailers we were targeting because we didn't have it in house. So really making sure that we found the right partner learned from them, worked with them very closely to get things up and running because that walmart compliance piece of it, when you're shipping into the walmart, DCS, it's really critical.

11:20 | Sanne Manders
Well, and it's not only the compliance it's also like it comes with like massive orders. So it's not only this, you know, your fulfillment partner needs to be ready for it, your supplier overseas also needs to be able to deal with these type of like walmart or target volumes. Yep.

11:38 | Chris Chelko
Yeah, that's absolutely right. Our, you know, one of the things that we checked on before we made the commitment was checking with our supply chain and making sure, hey, this is a good idea. This is a cool thing. We're going into walmart, we sell coolers, nobody sells more coolers in the us than walmart. So seems like a really good place to be if you're a Guy selling coolers, and we brought that message to our vendors and they stepped up and were willing to be part of that kind of adventure with us.

12:08 | Sanne Manders
Yeah. So for other brands that are considering this expansion, what were the biggest learnings that you took out of this expansion into retail?

12:20 | Chris Chelko
Yeah, I think we talked a little bit about the compliance already that was really critical in finding the right partner that can help us with that. The other part was for us, walmart had not sold premium coolers and that's a little bit different than just regular coolers. And by that, I mean, they didn't have the dialed in experience on how to plan an assortment and forecast volumes for our products. So, the big learning that we took from that was actually we need to work closely with walmart to plan those things and to get it right? And once both sides are bought in on it, it's something that we can jointly execute together on that plan. But, you know, we felt, I think on the outset, we didn't know what we were doing, but I think looking back on it, we had a lot more knowledge and insight that we could bring to the table and did bring to the table than we were initially expecting. And I think it proved to be really fruitful that we were able to have a strong voice with them and really have a partnership with them in terms of planning what the assortment was and understanding what the volumes were expected to be.

13:28 | Sanne Manders
That's awesome. I want to talk a little bit about you working with flexport. You guys have been a flexport customer for a while. Let me see here you're buying ocean freight, customs, drayage, basically, you know, the full scope from us. Tell me a little bit how that partnership started and how it has evolved.

13:50 | Chris Chelko
Yeah, we were in a position and we're dealing with some tariffs that we had some questions about from the first trump administration the.

13:59 | Sanne Manders
Three ones.

14:00 | Chris Chelko
The three ones exactly. And, you know, the flexport team was really helpful in providing some valuable insight and helping us to navigate that. And I think the relationship really grew from there. So that was kind of the foot in the door and I think.

14:17 | Sanne Manders
We're talking here about like 2019 or something like that.

14:20 | Chris Chelko
I think it was even later than that later.

14:21 | Sanne Manders
Than that, yeah.

14:23 | Chris Chelko
And really the foot in the door, and it was the first example of how the flexport team kind of started to understand our business and continue to bring us ideas and solutions that could be impactful for us. So that's where I think it started with the customs piece and the freight forwarding. And really the flexport platform with the data and the visibility and what's going on with our shipments was really valuable. We don't book all of our containers through flexport, but flexport manages all the containers we book. So we actually use that platform even if we're booking with other parties.

14:57 | Sanne Manders
So you're also a control tower user. Yes, great. Great. So tell me a little bit about that visibility and data. So basically customs, you know, was like let's say our foot in the door helping you out on like let's say, you know, the three ones and probably a lot more these days. And you said like, you know, the platform helped in terms of visibility and data. Can you tell me a little bit? How you use it day to day, how it has changed your way of working?

15:24 | Chris Chelko
Yeah. You know, I think our team on the ground is in the flexport platform day after day particularly when it comes to scheduling new shipments and tracking the shipments we've got coming also through the dray, you guys manage our dray from the port of Houston into our facility. And so being able to work with the team and understand where things sit. The other big thing that I think was a differentiator, for us. And in our experience, with flexport is our data or our tech team was able to integrate on the back end. And so not only is the tech that you guys provide great from a user interface perspective, but we're able to tap into that data and actually integrate the data into our in house ERP, which is super powerful. So we can, you know, while we do manage our own orders and POS out to our vendors, we can quickly link up the shipments to those POS based on, the shipment data that that's brought in automatically through the integration? Yeah.

16:24 | Sanne Manders
But ultimately, our client platform is a visualization of the data that we generate for you. Absolutely, you know, we always encourage customers, to link up with us. We actually now also have for Netsuite customers, we have an out of the box integration which is great. So, you know, it's something like 30 percent of our customers are on Netsuite. So you get the integration for free, which is great. So, so, so tell me a little bit about the data. What is the type of data that you are using? Let's say as a coo, to manage your supply chain?

16:58 | Chris Chelko
Yeah. So really it comes down to, how well things are moving and being able to understand where our shipments are at any point in time, you know, you talked a lot about or we talked earlier about new products, right? Yep, new products, for us are a great way to give us something to talk about it when it comes to marketing. And so hitting new product launch timelines is really critical. Yeah. So the.

17:25 | Sanne Manders
shipment tags are really important.

17:27 | Chris Chelko
If those start to slip and we don't see it coming, then we're you know, we've spent time to build creative and marketing campaigns that we then can't execute on. And so making sure that we have clear visibility up front and can track the shipments throughout the process and know when that stuff's going to hit our docks so that we can be ready to turn around and ship it out to our customers.

17:45 | Sanne Manders
Yeah. And especially when it goes to a walmart where that type of like shipping compliance is extremely important. Hey, let's switch gears to our new product introductions. You were here this morning with us when Ryan presented a lot of our new products as part of the full release. What's most exciting for you?

18:07 | Chris Chelko
I think the whole custom suite is, really exciting given where everything is in the market right now and how much that's moving on a day to day basis. I think some of the tools you guys have coming out or have come out with today on the custom side is really interesting particularly, you know, understanding on a day by day basis, what the tariff simulator pro can do. And as things change, some of those additions that came out with the pro version of it where we can put our whole assortment in at once and also set ourselves up to get notified when there are changes. I think just takes a weight off, right? Like you guys are tracking it. You guys are who we're going to go to anyway for the expertise. Now, we just know.

18:56 | Sanne Manders
that you can proactively yeah.

18:58 | Chris Chelko
The question's going to get answered before we can ask it exactly. I think that's really cool. I think one of the ones I'm excited about looking further into is the AI driven audit. So we can really understand, hey, are there errors going on in there? How do we find them? What have we left on the table? And finally some of the drawback stuff I think is really interesting. It's not something we've done a lot of before because we are very us focused. We're not exporting, but I think that there's some opportunities for us to look at some of that well.

19:32 | Sanne Manders
It's also if you destroy stuff, you can also use it. So, yeah, I'm personally very excited about the compliance toolkit because what I see because now we're you know, using the compliance toolkit already for a while on our own on our own brokerage operation. And what I see if the regulation changes, a lot more mistakes happen simply because people have to get trained up, you know, you, there's so much changing right? In the last, I believe month we parsed 234 pages of regulatory changes, right? So it's impossible for the human to comprehend, and be totally compliant. But the software gets it. So, and now we can actually before we submit, the entry, we can actually run it through and say, like, okay, here we're setting some red flags. You know, you have to do an extra review and, you know, we're getting just like, you know, it's upgrading the quality there. Yeah, in terms of let's say the insights builder, how useful is that for you? That you can talk in natural language to your supply chain?

20:37 | Chris Chelko
I think I, I'm really excited to see what I can do with it and get in there and play with it. I think it'll be really interesting, to kind of see what kind of analysis like it can drive right off the bat given that it has access to all of our data, and it's actually, I thought it was quite fascinating what Ryan was explaining this morning that, you know, the natural language input is actually driving the creation of a SQL code which is then applied to our data. So our data is not actually leaving the flexport ecosystem, and it stays with you and with us. Yeah. And then we can get the insights.

21:10 | Sanne Manders
Even to be more accurate, right? Your natural, your input, what it does, it matches it to a 1,000 or so standard queries, and then it actually uses also the LLM to change the query. So if, you know, the query could be like, you know, how much duties did I pay in January? 20 24 from all shipments originating China, right? But if you would ask if Vietnam, it will just change it, right? So it is like we've basically categorized the 1,000 questions that everyone asks. We started with a set of 200 it's by now a 1,000, but it's kind of like infinite if you see like how much, how many things people can query and it will basically bring it down to those 1,000 questions, but it's but you can get a lot of information out of it. Actually, when I'm preparing for a QBR and I go meet you, for instance, I'm impersonating, you know, I'm going into the account and I'm asking the questions that I want to know. So it's super powerful. And, you know, when I'm demoing it, I feel very comfortable to give a customer. Like here, you get my computer, just try it out. That's super.

22:13 | Chris Chelko
Cool. So.

22:14 | Sanne Manders
What's next for arctic?

22:17 | Chris Chelko
What's next for arctic? That's a great question. You know, I think we're going to continue to drive towards that brand promise of overbuilt not overpriced innovation has really been a core part of what we've done over the last five years. We talked about the product innovation, but also on the services like the personalization. So really looking forward to what's coming on the innovation front in terms of continued new product innovation. And, you know, looking forward to continuing to grow that way, growing and hopefully getting in some more retail partners and maybe even looking abroad.

22:53 | Sanne Manders
Yeah, yeah. We'd love to have your products in Europe. Yeah, we can help you with that as well. Perfect. Well, this has been a real pleasure. Chris. Thank you so much for joining us on the podcast and thanks.

23:07 | Chris Chelko
For having me.

23:07 | Sanne Manders
Thank you all viewers.