What do water bottles, train robberies, inventory management, 7x increases in shipping containers,  employee purpose and the great job exit, have to do with one another? They're all topics of today's fascinating conversation with Simple Modern CEO, Mike Beckham. From Mike's first reactions to Covid, to his company's purpose and how that translates into keeping employees around, you won't want to miss this next interview!As a reminder, Mike was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen!

I'm excited to share this next interview with you, because Mike schools us all on inventory businesses and the challenges of the supply chain. If you haven't already, make sure to catch the first full length episode here: The Supply Chain Crisis Explained. Why Did It Break, and How Did It Impact Ecommerce? - PPC Pondering Podcast - Ep 4

In this episode, you'll hear the rest of the conversation Mike and I had that we couldn't fit into our full Core episode on attribution as we all ponder digital attribution together.  

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Mike Beckham is co-founder and Chief Executive Officer of Simple Modern, a leading producer of premium drinkware and lifestyle products. Founded in 2015 and based in Oklahoma, Simple Modern currently generates a nine-figure annual revenue and is committed to generosity, donating at least 10% of annual profits to nonprofit organizations. Under Mike’s leadership, the company has grown into a category leader for Amazon, Target, and Sam’s Club. In addition, Simple Modern will be launching in Walmart stores nationwide in spring 2022.

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Prior to founding Simple Modern, Mike spent over a decade working for the worldwide Christian ministry CRU. Equipped with a deep understanding of the nonprofit sector, Mike transitioned into the business world and helped found and operate several e-commerce businesses, which cumulatively generated more than $1 billion in revenue. Mike graduated with a degree from the University of Oklahoma Price College of Business, where he currently serves as the senior entrepreneur-in-residence.

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Follow Mike:

• Twitter: @mikebeckhamsm
• LinkedIn: Mike Beckham
• Blog: mikebeckhamblog.com

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Episode Transcript

Mike Beckham:

It sounds absurd now, but at the time, there was just awidespread assumption that this is just a thing that's going to happen in Chinaand it's just going to somehow go away.

Chris Reeves:

Welcome to the ZATOWorks PPC Ponderings Podcast, where wediscuss the philosophy of PPC and ponder everything related to digitalmarketing. Today's show is a bonus episode of our full interview with the CEOof Simple Modern, Mike Beckham. Mike has tremendous insight into inventorymanagement and how the supply chain crisis of the last couple of years nearlybroke the system.

Chris Reeves:

He also shares some business best practices that can't bemissed. If you haven't heard Mike in our fourth official PPC Ponderings Podcastepisode about the supply chain crisis, go give it a listen. Otherwise, pleaseenjoy our behind the scenes conversation with Mike.

Kirk Williams:

Okay. So, let's go ahead and just hop in. What is yourname, title, and where do you work?

Mike Beckham:

Yeah. Hi, my name's Mike Beckham. I am the CEO andco-founder of Simple Modern.

Kirk Williams:

And when did you start as CEO, by the way?

Mike Beckham:

So, we founded the company in 2015. We didn't sell ourfirst hydration product, which is most of what we do, until March of 2016. So,coming up on six full years.

Kirk Williams:

So, you were definitely a part of the last couple ofyears. I mean, you were at the head and running things from the beginning, evenbefore COVID then, and then through all of the last two years then.

Mike Beckham:

Yes, absolutely. So, I've been in charge as CEO from thebeginning and we've been a very rapidly growing company. So, there's all kindsof challenges and decisions that you have to make when you're growing at therate that we are, which I think exacerbated some of the challenges and toughdecisions that COVID brought about.

Kirk Williams:

Okay. So, March 2020, things hit the fan here in the US atleast. Maybe just walk us through a little bit of your team's emotions, youremotions, your experiences, what do you remember from that time period?

Mike Beckham:

So, I actually remember that time period incrediblyvividly. For most people, COVID was not something that they thought about ortalked about until late February, early March at the earliest. For us, westarted hearing from our contacts in China in early January, "Hey, there'ssomething going on in a neighboring region that could be worth watching."So, this was pre-Chinese New Year. And as we paid attention to the situation inChina, our team, there were several of us that were fairly alarmed. Partially,just because you would see crazy videos like, oh, it looks like they justblocked that entire apartment building, they literally barricaded the doors andthey're quarantining people with some pretty draconian measures.

Mike Beckham:

But the more that I started to really look into COVID, themore that I became convinced, this is not a containable event, it's a virus.And in retrospect, if you zoom backwards two years ago, it sounds absurd now,but at the time there was just a widespread assumption that this is just athing that's going to happen in China and it's just going to somehow go away.No one really knew how. It was kind of magical thinking, but this idea thatsomehow a virus was going to just not spread once it had reached a criticalmass. I have no idea why we believed that, but that was the prevailing thoughtprocess at the time.

Mike Beckham:

And so, by mid to late-February, I'm like, "I thinkit's coming here. I think we're going to have to go through lockdowns."And I'm like the crazy guy, right? My role on the team is to be the forwardthinker, be looking out on the horizon. I'm buying the multi packs of macaroniand cheese and toilet paper on Amazon. My wife is actively mocking me. I'm nota prepper, but I'm acting like a prepper. And I'm making fun of myself, evenwith the team. I'm telling them, "Hey, I think this is going to bedisruptive." And we have this pond in back of our office, I'm like,"When the apocalypse happens, we can survive by eating the ducks in thepond for at least a couple weeks."

Mike Beckham:

So, I'm making light of it, but I really, seriously amtelling the team, "Hey, I think this is going to be disruptive." So,we were very aware and very prepared. Oklahoma City has a very uniquerelationship with COVID, because I think for many people, the pivotal momentwas there was a Thunder Utah Jazz game that was supposed to happen, this wasMarch 15th or something. And all the players come out, they're warming up, thestands are full. And then all of a sudden they just shut it all down, becauseRudy Gobert from the Utah Jazz had tested positive.

Mike Beckham:

Within 48 hours, just everything hit the fan. Tom Hanks ispositive and we hear about a couple of other people that are positive. And, ohmy gosh, this really is here, there's quite a few cases. And just everythingstarts to shut down. So, we were prepared that that was probably going tohappen. And we almost immediately went to a work from home situation. We'refortunate that we run a company that has a highly digital piece of what we do.And so, we were able to go to work from home, but I'm messaging to the team theentire time, "Hey, we've been prepared for this. I would expect two tofour weeks of disruption, and then we're going to get to the other side ofthis. And I think everything's going to be back normal."

Mike Beckham:

So, I was certainly in front of, that this was going to bea disruptive event, but just like everybody else, I never could haveanticipated just how disruptive an event we were prepared to go through. So,that was where our team was right as things started to grind to a halt. I don'tknow if you want to ask the question or if I can go ahead and anticipate, I cantell what happens next, because what happens next is super interesting.

Kirk Williams:

Yeah, go ahead.

Mike Beckham:

Our biggest sales channel at the time, our two biggestsales channels were Amazon and Target. And at this point, this year we'llprobably sell 11 million units, I think maybe we were trying to sell fivemillion units that year, 2020. And maybe 80% of that was happening betweenTarget and Amazon. Amazon's fulfillment centers are overwhelmed, because somuch shopping shifts to Amazon, that they're just inundated. They can't keepup. They're obviously putting priority on essential items, food, medical, thatkind of stuff, as you would hope that they would.

Mike Beckham:

So, one of the ways that they responded is they said,"Everything that we don't deem is essential, is now going to a one monthdelivery timeline." Their application of that was interesting. We had acouple of products that didn't get dinged, somehow stayed in the group ofproducts that were still getting decent timelines, but everything else goes tojust nothing, right? The sales rates just go to the floor, because why buysomething if you can't get it for a month?

Mike Beckham:

With Target, they contact us and say, "Hey, we can'teven place purchase orders right now, because we have to use all of ouravailable capacity for essential items." So really, there was this point,probably two weeks into COVID, where I was thinking to myself, "It's bad.It's going to be fine. We're a very strong company. We've got a solidfoundation. This will be tough, but we'll be fine." Then there was a pointlike a week and a half later where it was like, "Are we going to be fine?It's not entirely clear to me that we are. How long is this going to last? Wecan't even get product out to our major sales channels right now."

Mike Beckham:

Our revenue, right before COVID hit, we were hitting thebiggest revenue numbers we'd ever hit. And then within three weeks, we're down80% year-over-year. We went from up 60% year-over-year, to down 80%year-over-year. And it was a very gut check moment, I think. One of the thingswith our company that's unique is, we really built the company around thecornerstone idea of generosity. From our perspective, capitalism has gone offthe rails a little bit, where the only stakeholder that really is prioritizedin a lot of situations is the shareholder. But there's all these otherstakeholders, there's the employees, there's the customers, there's the localcommunity, there's the environment, there's all these other things that oftensuffer in service of trying to just please the shareholder.

Mike Beckham:

So, we said, "What if you built a company wherereally it was about generosity, that every single stakeholder that's involved,wins, and experiences generosity?" One of the ways that played out in thisperiod is, we've got this real desire and commitment to generosity. I thinkthere were five or six million people that lost their jobs almost literallyovernight, right? When the economy just shuts down. And there's all thesefrontline workers. And at the same time, our business is falling apart beforeour eyes, right? We don't know what's going to happen.

Mike Beckham:

But one of the things I was the most proud about from thatperiod is we really made the decision of like, "Hey, we've got this givingbudget for the end of the year, several hundred thousand dollars, and we've gota lot of extra bottles and let's do that giving now. Even though it's a superuncertain business environment, let's go ahead and do that giving now. And weleaned in and did a bunch of giving.

Mike Beckham:

And the reason why I've always been really proud of thatstory is that it's hard if you didn't go through it, to really communicate theamount of uncertainty and to some extent, fear that everybody was experiencing,because nobody knew what was going to happen. But even in the midst of that, wewere able to make some really key decisions to lean into the very core of whatwe wanted to be about. Now, obviously, things got better, but the way that weresponded in those three or four weeks near the very beginning, I think, werereally foundational and have really helped shape the company's DNA.

Kirk Williams:

Yeah. That's amazing. Yeah, it's especially cool to seesomeone's core values, they're going to primarily be tested in times of difficulty,right? It's easy to uphold your core values when things are great. So, that'sreally cool. Okay.

Kirk Williams:

So, you're very dependent, from what you've communicatedin terms of manufacturing that, on China. Obviously, China's the first placewhere this all starts. Maybe talk to us a little bit about supply chain stuff.When was the first time that you were ... I mean, I'm sure you were concernedfrom the beginning. When was the first time where you were actually starting tobe impacted by the supply chain? What did that look like?

Mike Beckham:

Yeah. When you run an inventory business, imagine apendulum and there's two extremes it can swing to. One is, we have too much,and one is, we don't have enough. And really, the experience of running aninventory business is the process of perpetually swinging from one end of thependulum to the other. And the only time that you're really perfectly in themiddle, where you have just a right amount of stuff, is as you're swinging fromone side to the other.

Mike Beckham:

So, if you had talked to me in April of 2020, it's like,"How am I going to sell all this stuff? We've got all this stuff thatwe've built. We've got all this inventory that was built around this certainrate of growth. I have no idea how I'm going to sell it." Then as thingsstart to open back up, all of a sudden you're like, "How do we get morestuff? We missed production. We didn't order for a period of time. We reallyprobably needed to, and we've got to catch up."

Mike Beckham:

And I think that this is probably almost universally whatinventory businesses went through during that period. They went through the,"Wow, we've got to get conservative, quit making stuff, quit buyingthings. Let's see what's going to happen." And then, "Okay, theworld's not going to end. We've got to make up for lost time." And so,everybody, in really the global economy simultaneously goes through this cycle.And what that leads to is a period where China's not shipping nearly as muchstuff as it usually ships, and all of a sudden China and some of these otherexporters, they're just slammed with orders. The way that I describe COVID topeople is, if you've heard the term butterfly effect, I think that's a good wayto describe what happened. It's a cascading set of consequences that's fairlyunpredictable.

Mike Beckham:

When you walk through each thing that happened and whythat happens, it makes sense. But I remember saying this to some people inApril of 2020, "If you know the second and third order effects of COVID,you're going to be like a billionaire, but nobody knows what they are, becauseit's just too impossible to really understand how this thing's going to rippleout." And supply chain has certainly been that, that what happens is youdon't ship stuff for a while, then China's inundated with orders. Thatincredible demand for orders leads to electrical shortages in China, it leadsto supply shortages in China. You've got monetary impact happening where the USand China are doing different things with their currencies, which is messingwith the exchange rate.

Mike Beckham:

All of a sudden, shipping rates on containers go from, itmight have cost us four or $5,000 to ship something from China to our 3PL, nowit's $25,000. I mean, we've seen literally 5, 6, 7X increases. And not onlyhave the prices skyrocketed, but also, it's taking forever. I've got someimages that I've shared. We use Flexport for a lot of our freight forwarding.And one of the things that Flexport does is they'll show you where all of yourdifferent shipments are in the world. And you can trace out ships that arecoming from China, you can trace their route all the way coming to the US andgoing to your 3PL or wherever they're headed.

Mike Beckham:

And there are these pictures that just show a ship,getting across the ocean, getting to the port, and then just going on some kindof pleasure voyage from hell around the West Coast, where they're just going infigure eights and all kinds of ... Because they can't dock, they can't unload.And so, you can't get things off of ships often, like the ship's here, but it'sbeen sitting in port for 45 days. So, that's a complexity.

Mike Beckham:

But the other piece of the supply chain complexity thatyou really can't understand as viscerally, if you haven't actually run aninventory business is, so much of your capital when you run an inventorybusiness is in your inventory. At this scale, for us to sell 11 million unitsthis year, we might need to have somewhere between $20 million and $30 millionin inventory at any given point in time, which is obviously a material number.

Mike Beckham:

Well, we went from feeling like, "Hey, you've got tohave five months or four-and-a-half months of inventory in the supplychain." To, "We might need nine months in the supply chain, becausethings are just taking so long." So, it's pretty easy to understand howthat plays out for a brand of our size, that could literally mean you've got toget another $20 million into inventory, or $25 million. And just take that, andthere's brands way bigger than us, you can extrapolate it out. That the factthat things were taking so long and were so unpredictable, it has caused brandsto have to put so much more of their available capital into their inventory,just to try and stay in stock. And if you look at GDP and what GDPs doing over,especially recently, a lot of the GDP growth is just inventory growth andthat's not necessarily sustainable. So, anyway, we'll see how that happens.

Mike Beckham:

So, we get to maybe May or June, and I think witheverybody else, it's like, "Oh gosh, we've got to catch up. We got to bebuilding." And I think by the time you get to July, August, September,everybody starts to clue in on, "We're going to have a real problem here."Everybody hit the exits at once and everybody tried to come back in at once,and we've got this massive bottleneck. And we've been dealing with it reallyever since. I guess, we're a year-and-a-half in and we're still dealing withit.

Kirk Williams:

And that was actually one of my follow-up questions, howbad is it now compared to what it has been? Is it actually still pretty bad?Are there starting to be signs in the right direction?

Mike Beckham:

So, to go back to my analogy of the butterfly effect orcascading, the problem is that every time you try and fix one thing, it iscreating a second order effect or consequence that creates another problem. Andwe recently talked to some people that are very knowledgeable in the industryand said, "When do you think it'll end?" And they said, "Ourinternal view is when there's a recession." That there's a point where itgets broken enough, that you just have to have a slow down in demand, that'ssignificant enough for this thing to sort itself out. So, that's a pretty grimview. I don't know. And I think anybody who says that they do know, is lying,obviously, because it's just too complicated.

Mike Beckham:

But there is a principle here that I think is helpful. Themore optimized the system is, the more fragile it is. And we had a very, veryoptimized supply chain. I give an example, I've spent some time in Moscow,Russia, and Moscow has this amazing subway system. Moscow, during rush hourafter work or in the morning, will have more people on its subway at a givenpoint in time than live in the entire State of Oklahoma. So, imagine taking theentire population of Oklahoma or Montana, putting them all underground in onecity, that's the Moscow Metro.

Mike Beckham:

And if you go to one of the really busy stations and yousit there, two things stand out to you. One is, the trains, the trains are justabsolutely predictable, every 30 seconds, you can set your watch to it. Theother thing you realize is, if those trains weren't coming every 30 seconds,people would be on the tracks, people would be getting pushed on the trackswithin a matter of minutes, because they're just flowing in so rapidly, right?So, they've got this incredibly optimized system, and it works.

Mike Beckham:

If all of a sudden, you put 20% more people working in Moscow,the whole thing would break. It would just fall apart. And that's not the waythat populations work, of people, like you just don't suddenly get 20% moreworkers. But that analogy, that's pretty much what we were doing with thesupply chain. And then all of a sudden, you did have 20% more goods that youwere trying to move around. And it's just broken. Right?

Mike Beckham:

As people have tried to fix it, it creates secondarybreaks. So, "Okay, Long Beach is backed up. I don't want my ship to getstuck at Long Beach, I'm going to send it to Houston." But enough peoplesay, "Hey, I'm going to send it to Houston." Then all of a sudden,Houston's jammed up. "Well, okay. You know what I'm going to do? I amgoing to take it through Long Beach, but then instead of trucking it, becausetrucking's a nightmare, I'm going to put it on a rail car and I'm going to takeit by rail." Now, all of a sudden, there's all these rail car robberies.So, this is, I think where we're living right now.

Mike Beckham:

And we're also in a period where there's this dichotomy ofpeople that are willing to say, "Hey, in a very apolitical way, here's theissue and here are the things we need you to fix it." There's thispragmatic class of people. And then there's this much more politicized gamegoing on in the United States, where everything needs to fit into some kind ofa narrative and framed as, our team's doing a good job, or their team's doing abad job.

Mike Beckham:

And certainly with logistics, there's been some of that stufflike, "Hey, we want our administration to look like we're really fixingthis issue at the ports. And so, we're going to tell all the ships, they can'tpark in the port. They have to park 20 miles up coast." Well, that'sgreat, but obviously that's not solving any problems. There's some people, RyanPetersen from Flexport, has been pretty vocal on Twitter with some of what hethinks the solutions are. But there is also just a fundamental thing here of,if your knee didn't have cartilage, your knee would fall apart. The cartilageprovides the cushion for shocks. And the more optimized you build something tobe, the less cartilage there is to absorb abnormal events or variants.

Mike Beckham:

And we just didn't want to spend the money. I mean, just generally,we don't want to spend the money to be protected against things that we can'tforesee, or that may not happen. And that's true, not just with logistics, butreally with our country in general. And so, that's what we're dealing with. Andprobably, maybe it's a pessimistic view, but I do think you're going to have tohave some kind of a slowdown before this thing works itself out.

Mike Beckham:

To me, the biggest question, that I can't reallyanticipate is, at some point when we do get that slowdown and thatnormalization, what is the new normal and how does that look? There is thisother element that's going on, that's stacked on top of this, which is you'vegot all these tariffs. So in, it seems like the ancient past, when Trump passedhis tariffs. But if you were running an inventory business and you're dealingwith supply chain, these tariffs were a massive deal, and there was a lot ofoutcry about the tariffs.

Mike Beckham:

Biden's come into office, he hasn't removed any of them.And so, that's yet another complexity for brands of like, when you're thinkingabout, "Hey, how do I handle supply chain? And where do I get stufffrom?" If I get it from this country, I have to add 20% in cost comparedto if I get it from this country, country B, but country B doesn't have enoughdeep water ports. And so, they don't really have the infrastructure to supportit, but I can get around the tariffs. You have things like Chinese, aremanufacturing piece A, B, and C, and then they ship it to Vietnam and they putit all together, so that they can avoid the tariff. So, that's another layer ofcomplexity, that's just stacking on top of. There's a lot going on, obviously,to this.

Kirk Williams:

Yep. So, it's funny, I've been digging into this and firstof all, this is the first time I've even heard about an increase in rail carrobberies and I quick Googled it, and it seems to be this huge problem, whichagain, speaks to the complexity of this, because there are so many thingshappening that even something big like, hey, there's just extra trainrobberies. Isn't even something that hit my feed, which is literally, I've beendigging into this. So, anyways, that's a-

Mike Beckham:

Yeah. If you had, "Chinese virus causes increase inCalifornia train robberies," on your bingo card, congratulations. But Idon't think any of us saw that connection, right?

Kirk Williams:

Yeah. Yeah. Okay. So, big narrative we've heard over thelast year or two is, this is a great example of our over-reliance on othercountries for manufacturing and that we should manufacture here in the US. Whatwould you say to someone as far as who would say, "Hey, there's the easyanswer, why don't you just manufacture your water bottles here, Mike?"What would you say to that?

Mike Beckham:

So, got lots to say to that. I'll start here. One thingthat I think everyone can agree about is that manufacturing's only going to getmore automated. It's going to involve more machines, more artificialintelligence. That's the future. We're never going back to, and thankfully,we're not going back to the industrial age where there's a bunch of peoplestanding on an assembly line. Even our primary manufacturers in China are usingautomation in as much as they can. Now, their business model, I think, preventsreally highly automated things, because you have to be able to do a lot ofdifferent things, and no robot is ever as flexible or as versatile as a person.But especially when you really have a use case that you're just doing a lot of,the machinery is really good.

Mike Beckham:

So, I think that we could all agree, if we zoomed 100years into the future, there's very little manual labor and manufacturingthat's going to be done by humans, 100 years from now. Even 50 years from now,I'd make the argument, there's probably not a lot being done from humans. So,we're in this period of transition from where manufacturing still is this blendof us using our technology and us being the labor in some cases. And there'sdifferent product types. We'll probably transition sooner or later, right?

Mike Beckham:

There's some things that are made, like if you wanted tosee how a Gatorade bottle gets made and gets filled, nobody's touching thatthing. It's all automated. And then there's other things like clothing, thatcan still be pretty highly manual. But if you think about it from like, okay,broad strokes, things are going to be a lot more mechanized and automated inhow they're made, what will naturally happen is that things are going to bemade closer and closer to where the people who buy them, live.

Mike Beckham:

And there's two main reasons for this. I mean, one is,obviously it costs money to move things around and you've got political thingslike tariffs. But then the other dynamic is this inventory piece, that when Ihave to move my product around, I have to carry more of my product and I haveto put more of my capital as a business, into product that's literally notdoing anything, it's just there so that I don't run out, when there's a lotbetter uses for that. I can give that to employees that can go out and generatesales. I can put that into machines that can make product. Whatever.

Mike Beckham:

So, in general, in our lifetime, this will be a majortheme. I'm convinced of this, is that the transition of where things are made,closer and closer to demand centers. If you look at what has caused a lot ofthe outsourcing to the East, of manufacturing, a lot of it is a product of twothings. That number one, it's been cheap to move things around the world. Andright now, it's not inexpensive to move things around the world and maybe itgets inexpensive again, but at least right now, that's not the world we livein. And if tariffs stay high, then it'll always be expensive.

Mike Beckham:

The second piece of that is that most things that weremade had a really high labor component and labor was cheapest in the East. So,you have a high labor component, you move to where labor is cheap, and it'scheap to move things around, and it works. But as China develops, people aremaking more, and they're no longer a low cost of labor. And there will alwaysbe some country that's the low cost of labor, but I think my higher argument isjust that labor is going to make up a smaller and smaller slice of the pie ofcost of making things in the future. And so, my view of the future is thatyou're going to see things gravitate towards demand centers and where you'regoing to want to make product as close to the people as you possibly can.

Mike Beckham:

There's challenges and there are going to be some thingsthat make that transition later. For us, we sell, if you think about our twomajor product lines, we sell stainless steel drinkware and plastic, like Tritandrinkware. Stainless steel drinkware has a lot of steps. There's someinteresting things with stainless steel, where China has subsidized it.Sometimes in some product categories, you've got elements that make materialsharder or more expensive to buy in one country than another. So, the level ofcomplexity there is high.

Mike Beckham:

Our category, 96% of stainless steel insulated waterbottles that are made in the world, are made in a 100 square mile or some kindof ridiculously small area. And you'll see this like, oh, hey, almost everyprom dress comes from this region in China, and when they shut down with COVID,nobody had a prom dress, because there just weren't any being made. Because youget these kind of cottage industries where a lot of specialization and a lot ofthe tooling and stuff around that particular use case, comes up. So, for us,getting to the point where we can make stainless steel bottles, I mean, it'ssomething that we want to be able to do, but it is certainly a longer termundertaking.

Mike Beckham:

In contrast, Tritan water bottles are actually theinverse. Tritan is patented by Eastman Kodak. And so, if you buy a Tritanproduct from China, here's what happened. Eastman made the Tritan andfunctionally shipped it across the world to China, sold some in China. There'sa tariff involved in that process, I think. And then China takes it, theymanufacture it. You've got your manufacturer's margin. It goes back on a ship.It's this big plastic bottle with a bunch of air that you're paying to ship.There's tariffs again. And it's actually like this really inefficient process.And what's even crazier is the way that they're made, there are these amazingmachines where you ... I don't want to oversimplify, but you can pretty muchpour in plastic pellets and you can have machines where you press a button andit just spits out water bottles. If you look at Nalgene, if you look at Tervis,they're making all their stuff domestically anyway.

Mike Beckham:

So, I think there's a lot of product categories, likeplastic water bottles, where it is completely viable and even a lot more economicalto make it locally. And for sure, you're going to see people pulling thetrigger on that. I'm in talks pretty regularly with people at different levelsof government, with our supplier, we work with the biggest retailers in theworld. Everybody is excited about that story of building manufacturingdomestically. It'll be a slow process in some categories, but other categories,I think you're seeing things move now.

Mike Beckham:

There's also in between, the intermediate future mightlook like people doing stages of manufacturing. So, I think we have a prettymajor competitor that I think brings over stainless steel bottles, but they doall of the powder coating and all the ornamenting, they do that domestically.So, some of their manufacturing process is domestic and some of it'sinternational.

Mike Beckham:

But yeah, so anyway, for us, we're fired up. We're firedup about, number one, let's learn how to make things. In this country, we'velost a little bit of the ability to know how to make things, and we're fired upabout doing that. We think it'll really help us to make better products and toserve our customers better. And we're starting the journey with, we've leased acouple hundred thousand square foot facility, and then we've bought about $5 millionof equipment. But we're going to start by supplying Walmart, Sam's Club,Amazon, Target, with made in America plastic products, and then gradually say,"Hey, how do we gradually grow into being able to do more of our productline here?"

Kirk Williams:

Very cool. Okay. Let me switch gears. So, thinking throughthe inventory issue of bringing in too much inventory, then bringing in toolittle, and all that. So, over the last couple years, did you notice that tothe extreme with, let's say, consumer purchasing ever increasing? Did younotice things like stimulus bumps that some people talk about, things likethat? Was that part of the challenge the last couple years, and what did thatlook like?

Mike Beckham:

So, two things that were challenging. One was, we selltumblers, we sell water bottles. Usually, people will drink from tumblers whenthey're more stationary, more time in cars, more time sitting at a desk, moretime at your house. They'll buy water bottles when they're more traveling, likeI'm going hiking or I'm walking around the city or whatever. It's usually tiedto how long you're spending, sitting somewhere. The less time you're sitting,the more likely you are to buy a water bottle, is the basic correlation.

Mike Beckham:

So, you can imagine that what happened with COVID and somuch work from home and everybody's patterns getting blown up, is the mix ofwhat they bought really shifted. So, that was one thing that we saw right offthe bat. We weren't actually necessarily that far off in terms of how manyunits we sold for 2020, but the mix was completely different than what wethought. And so, that's the thing, is it's like the hard part about aninventory business is, you're not just trying to guess, hey, what's the totaldemand? You're trying to guess, what's the demand for each of these individualthings?

Mike Beckham:

And that's every single thing you buy, you're eitherover-buying or under-buying, and we really had some categorical misses. Anotherexample was, anything having to do with drinking at home, like wine and spiritsproducts, we don't sell a ton of that kind of stuff, but that stuff wentbananas during this period. Stuff that involved going to the gym and being out,or traveling to work, commuting, some of that stuff was really weak. So, thatwas one thing.

Mike Beckham:

The other thing we saw was, and this is, I think, for whatyou do, and people that are listening to this that are in the e-com industry,March 2021 through early April 2021 is just an impossible column. Everybody isgoing to have some really ugly dashboards for the next month or two, because,it turns out that if you just dump buckets of money in the population, thateverybody sells more stuff. And so, the way that I think it functionally playedout for most of the peers that I've talked to is, you went into '21 thinking,"Hey, there's vaccines. There's going to be a return to normalcy here. Andeverybody's fired up about that."

Mike Beckham:

And then, there's all this stimulus money that getsdropped in January, February, March, April. And March is just this unbelievablesales month, basically for every single type of company in the world, everybodywho sold products in the US, they killed it. And it was a pump fake, basically.You get to May and you realize, oh, that's just a super artificial ... Thereason we were up that much year-over-year, was that people just had this crazyamount of money that they got dropped on them. I mean, I think you saw it inthe equity markets. I think you saw it in the crypto markets. You definitelysaw it in consumer package goods.

Mike Beckham:

So if anything, what that did is it exacerbated the supplychain thing, because it caused people to order even more product like, "Ohman, we're just going to blow it out this year." And I think recently,Peloton announced that they are completely pausing production right now,because they're so oversupplied. And it makes sense, right? You get a product,you get a mix change. All of a sudden everybody's at home, so they're buyingtons of treadmills. And then you get this massive, January, February, Marchbump, and you just go super big. And then all of a sudden, you get to May andJune, you realize, okay, that was a head fake, and you're really heavy oninventory. So, those are a couple of the ways that we've seen it.

Kirk Williams:

Yep. Nope. That's great. Same. Yeah. It's funny, becauseit basically doesn't matter who you talk to, the story is pretty much the same,which is sometimes actually helpful, right?

Mike Beckham:

Yeah.

Kirk Williams:

The more that you realize like, oh, hey, this is what weexperienced as well.

Mike Beckham:

I do think it's interesting how people are looking forbrands, they're caring a lot more about brands and their values than they everhave before, or maybe in a different way than they ever have before. And Ithink some of the political unrest and the racial issues of the last two yearshave really highlighted that. And I think that that's been interesting to thinkthrough. I think the pricing thing is interesting. I mean, we have definitelyraised prices, and that's been interesting to deal with, although I don't knowwhat I would say, other than the fact that we have had to raise prices.

Mike Beckham:

And generally, there's been a lot of understanding, evenfrom people like Walmart. It's so bad that, historically a place like Walmartis like the last bastion of inflation protection for the United States. Theirbuyers are just trained that costs only go one way. And we've had conversationswith them where they're just like, "Hey, we get it. Your shipping is fivetimes as expensive, the costs have to go up."

Mike Beckham:

And then the other thing that I thought was interesting,talking about the worker shortages, we really have not experienced that, but Ido have some strong opinions about that. I mean, I think that there's a macrosecular trend going on, that is, people are thinking about what they want outof companies differently, both as consumers and as employees. And there aresome things that COVID changed, that I don't think the genie's going back inthe bottle.

Mike Beckham:

One of the things that became obvious is with the racialtensions of the last couple of years, with the highly politicized nature of theUnited States, that people care about what values the brands that they buyfrom, stand for. There are brands that have been extremely vocal about takingstands on particular issues, and have had problems doing that. And there arebrands that have really tried to not take a stand on things and have had anissue as a result of really trying to not deal with things.

Mike Beckham:

And I think for anybody who's trying to run a company, youreally have to know what you stand for and you can't manufacture that based onwhat you think the public wants to hear. I think you have to really start with,why does this company exist? What do I want it to be about? What are the corevalues? And I am willing to have the company's success rise and fall with that,but I'm not going to try to change that around, to pander to people, to playthe public perception game.

Mike Beckham:

We're just going to be about what we want to be about, butyou have to be about something. And I think, if the extent of what you're aboutis to make money, I think increasingly it's just going to be hard. There's justnot an appetite for that type of company in today's environment. And I teach upat OU, I'm the entrepreneur in residence. And I can just tell you, talking totoday's college students, they are more motivated to make an impact throughtheir careers than any group of people that I've interacted with. And there'sless patience, I think, for what they view as corporate, self-serving greed,dollar motivated thought processes and organizations.

Mike Beckham:

And the way that plays out on the employment side, is fora long time, companies in this country competed on financial compensation. Andif you want to be successful over the decade and decades to come, you are goingto need to be ready to compete across a lot larger dimension than just how muchyou pay somebody. That if you think about it, what we all really want out ofour work and out of life, is we want quality of life. And for sure, when wehave resources, that really helps with quality of life, but quality of life isso much more robust than how much money we have.

Mike Beckham:

And in fact, I would make the argument that therelationship and correlation between how much money you have and your qualityof life, is actually fairly weak compared to a lot of other things. And I'm notthe only person that says this, Yale has a whole study on happiness and qualityof life that says as much. And the people you work with, and do you feelconnected to them relationally? This matters.

Mike Beckham:

We're in a remote work kind of generation, and I'll justtell you, it won't go well in terms of organizational culture in a lot ofplaces, because if you don't feel relationally connected to the people that youwork with, that goes against the way that we've interacted as humans forcenturies. And people are going to, they're going to feel that, they're goingto feel less bonded to their coworkers, and they're going to feel lesssatisfied with their work if they don't feel bonded to the people that they'reworking with.

Mike Beckham:

What you're working on and feeling like there is acompelling why and a purpose behind it, is more important to people than everbefore. And if you can't provide that as an employer, no matter how well youpay, you're going to have a really hard time hanging on to people. Becausefeeling like your life matters, and we all have to put 40 or 50 hours a weekworking towards something and feeling like what that's going toward matters, isa huge part of quality of life.

Mike Beckham:

Not to mention, are you feeling empowered? Are you feelingcoached? Are you feeling developed? Are you getting to work on interestingproblems? Are you developing a skill set? These are the things that people arelooking for. And the great resignation is really just all of that coming to ahead. And certainly, some of that will normalize, we're in an abnormal periodof people resigning and moving jobs. But I think all of that is part of thislarger, macro secular trend of people are changing jobs more frequently thanthey ever have before.

Mike Beckham:

The department of labor releases statistics, you can goback 50, 70 years. This is a trendline that's just been up and to the right,the whole way. People are just, you're likely to work more jobs. You're morelikely to change jobs than ever before. And even if the great resignation is alittle bit of an outlier in terms of how much people are doing it, it's allpart of this larger trend of, we're just more restless, professionally, thanwe've ever been.

Mike Beckham:

So, if you're running a company, if you're trying to leadpeople, you better have a compelling reason why people should want to comealong and how you're going to help drive quality of life. And it's got to bemore than a paycheck. That's probably one of the things I feel the most confidentabout in all of my conversations with other business leaders, with the peoplethat are a part of our team. And it's very doable, but it starts with reallyhaving a clear understanding of your why.

Chris Reeves:

This has been a bonus episode of the PPC PonderingsPodcast. Keep checking back for more interviews and our next full episode. Ifyou like what you hear, please consider sharing this with your network andleaving us a review on Apple Podcasts. Until next time, may the auctions beever in your favor.

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