Monthly Archives: January 2014

Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 2 of 2

In a beautiful San Francisco neighborhood stands a brick warehouse containing something unusual and inspiring – a startup that uses lean manufacturing and sustainable business principals to make products in the US. Relying on local vendors, an honest culture, and talented people, Rickshaw Bagworks produces bags that people love.

Mark Dwight

Below is the second half of the transcript from our phone conversation. The first half is available here.

Q: From your experience starting your own business – how was that to take that step? What would you say to budding entrepreneurs that want to make that same jump?

Well, the first part was that “I got pushed.” I got fired from Timbukt2, and that’s ok. It was a new group of investors. They bought the company for a lot of money and they weren’t there to have a party. They were there to build it even bigger and sell it themselves. They looked at me and said, “Look, you’re a really creative guy. You did a great job of growing this from 4 million dollars in sales to 20 million dollars in sales, but we need to make it a 100 million dollar company and you have no experience doing that. I was like, “You’re right.” So they said, “Well we’re going to go find a 100 million dollar man.” So I said, “Ok fine. You know, what do I have to say about that? You own the company, not me.”

So I left there and as I was thinking about what I was going to do next, I thought, “Well I could go buy another little, small company.” But that’s usually hit or miss. I had been very fortunate with Timbukt2. It was struggling, but it had a great brand and a bigger-than-life image. It was ready for someone to take it to that next level, and I was fortunate to be able to do that. Whether I could have taken it to that next level of 100 million dollars, I don’t know. Frankly, in retrospect, I’m not so sure I would have wanted to.

Rickshaw Bag in ProductionI looked around a little bit and I didn’t find anything that was obvious that I might want to buy. One day a friend of mine said, “Mark, you’re spending a whole lot of time avoiding the bag business.” I had been hesitant because I thought, “If I run off and start a bag business, everyone’s going to say, ‘that’s just Mark. He’s mad about Timbuk2, so he’s going to go start his own bag company out of spite.'” I didn’t want people to think that at all. In fact, I had fallen in love with bags and the bag business because bags are the most personal of personal accessories. People love their bags. At Timbuk2, we’d have people come in with a ten-year-old bag – it looked like trash – and I’d wonder, “Dude, how can you walk around with that on your back?” and they’d say, “I would never give up this bag.” These people would say, “I fell off my motorcycle and it saved my life,” or they’d say, “This stain here is where my wife, when I proposed to her in a French cafe, she spilled her wine. And that stain right there, I don’t ever want to lose that.” This made me think, “Wow, bags are interesting. Every bag tells a story.” I had learned how to make them, and I love making stuff. So I said, “Ok, I love bags, I love making bags, I know how to make bags.” I knew that Timbuk2’s custom business was profitable. Some of the other stuff we did was less profitable, but the custom part, the online customization, was really profitable. “Well, ok, I’m going to give this a try.”

Then I had that idea for a chassis strategy for custom computer bags. I thought, “Hey, I’ve got some innovative ideas, I love bags.” I had a little money from when I left Timbuk2. I had the grubstake to start, so I decided to do it. A friend of mine said, “You’re spending all of that time avoiding the bag business, why don’t you just go do it? You love it. Go do it. Don’t worry about what other people think.” We all spend a lot of time thinking about what other people think, but finally, I thought, “You’re right. I should just do it.” And I did. That was 6 1/2 years ago. It’s been a long slog; be careful what you wish for.

Rickshaw Bagworks Staff

Q: I watched a Stanford video that you did, and I liked what you said about not trying for a hockey stick growth pattern. You just want a good sustainable business that has modest growth. You go to work each day and you’re happy.

Yeah, you know, I’m not here to be the king of the bag business. I tell people, “I’m not here to make as many bags as possible.” Let’s face it, if you work for investors, your job is to make as much stuff and sell as much of that stuff as possible. That’s how investors make money, not my company. I’m not grading myself by how many bags I sell. I want to sell as many bags as necessary, not as many bags as possible, as many bags as necessary to run the kind of business that I want to run. Of course, I’m competitive like the next guy, but I don’t need to beat Timbuk2 at their game or feel like I’m competing with JanSport. I want my company to be respected for what it does, and I want it to be sustainable financially.

Sustainability starts at the bottom line. If you’re not profitable, it doesn’t matter what else you got or stories to tell because you’re not going to be around long. Hence, I want to run a financially sustainable business. I love working with my team. I love being my own factory. I love everything about it. Do we want to be a little bigger? Sure – because we’re just on the cusp of profitability right now. It’s been almost seven years, a long time. We’ll all be really proud of ourselves when we get to profitability.

Rickshaw Factory Floor

I think the company could be two or three times bigger than it is today and still be a company that I feel is an authentic, make-what-we-sell kind of thing without help from outsourcing. Frankly, I’ve played that game, and I’m not that interested in it. At some point, you have to decide what you really like to do. I love to make my own products. It’s not me sitting down at a sewing machine. I love my company making what it sells in its own factory and the kind of control, and not just control but satisfaction, that comes from that. It’s what makes me tick. That’s just me, and it’s nothing against people who design things and go have other people make them. That’s great. You’re a great designer; you don’t have to be a great manufacturer. I’ve tried to become both. Actually, that worked backwards.

I said I wanted to be a great manufacturer, and then I taught myself how to design and do the other parts. I tell people, “I’m here to make a living, not a killing.” It’s just bag. Yes, we’re creating a brand, like Timbuk2.

Timbuk2 had been around for 13 years when I joined them. We basically took that brand and blew it up. “Let’s go to China and make a $99 computer bag – we will sell tons of them.” And that’s exactly what we did. I said, “This company’s making expensive bags in San Francisco. We’ve got a great brand. I know how to design computer bags. Let’s do a $99 computer bag, make it in China, and exploit the Timbuk2 brand and heritage.” That’s what we did, and we sold tens of thousands of those bags. It was the bag that turned around the company. But, as I look back on it, I think, “Well, that’s one way to do it.” But it feels a little like you’re prostituting the brand.

I think what came with that strategy was a level of exposure that sort of betrayed the roots of the company and all the of the sudden people started saying, “Oh, you guys don’t make bags in San Francisco anymore.”

“Well, no, that’s not true at all; we still make our custom messenger bags here”

“Oh, but I just see all the stuff you make in China, so to me, you’re just a China-made company”

“No, that’s not it at all.”

With Rickshaw, I’m trying to be a little more true to that, even though I started out in China. Now I’m of the attitude of, “The more I can make here, the better.” We learn more every day. Part of it is training ourselves to make bags.

The reason China is so great at bags is because they have expertise, equipment, and capacity. The supply chain is all right there. You can sit in your factory there and say, “I want to see the buckle guy.”

“Ok, well let’s give him a call. He’ll be here at 2 o’clock”

“I want to see the webbing guy”

“Ok, we’ll drive over to his place.”

Everyone is right there. It’s like making cars in Detroit with the way it used to be when everyone was a local vendor. You could go over to the vendor, work stuff out, and go on with your life. Now, you say, “Ok, I have to book a flight to China – how many days do I loose when I go?” and all those headaches. Either you do it remotely or you plan these epic trips over there. It’s very costly, so what we try to do is build our own local supply chain.

Rickshaw Bicycle DeliveryQ: There’s definitely something to be said for having the local vendors right there. And I’ve heard that you sometimes visit them on bikes?

Yes, as a matter of fact I’m standing on the curb right now because I was delivering a box of canvas tote bags that we just made for Whole Foods Markets. A couple of their stores here in town are carrying some canvas bags that we make. I get a kick out of delivering by cargo bike occasionally. It gets me a little exercise.

Q: When you started on your own 8 years ago, knowing what you know now, would you do it again?

Oh, absolutely. I love every day of it. It’s really fantastic. Running your own business has its own headaches, but working for other people has its headaches too. I like the ones I give myself better than the ones others give me.

I’m very fortunate that I’ve had the resources to get as far as I have. That’s one thing I do advise entrepreneurs when they go into their own venture. I say, “Look, I guarantee you it’s going to take more time, more effort, and more money than your business plan says – even if you double everything. It just does. And I guarantee you that 3-5 years from now your business will not look the same as your business looks today.”

For example, Huckberry is a company that curates products for companies like us. They just opened a pop-up store nearby; they’re based in San Francisco. I was just talking to the two founders, and they said, “You know what Mark, we were just thinking back about when we met you three years ago and the advice you gave us.” They said, “We distinctly remember you saying ‘so, how long do you guys think you’re going to be in this business’ and we remember you saying ‘better give it 3-5 years.'” Then they said, “Here we are, 3 years later.”

I said, “Well you’re fighting a good fight if you’re here three years later.” I’ve been at it for almost seven years. It takes more time, effort, and money than you ever think. But, if you’re enjoying it, it’s ok. And for me, my business at Rickshaw is not only my occupation, it’s my hobby, my life, and my life style. I quite enjoy it. I don’t think about the work-life balance. I have four teenage kids, and I want to spend time with my kids, my girlfriend, and people in my family. But, they all know, “This is what Dad does. It’s a big part of his life.” It’s just what I live and breathe. I try not to let it consume, but it’s also what keeps me interested and vital. When I’m out in the world, I’m thinking about bags.

Q: I know you founded a non-profit supporting companies making products in San Francisco – how did you start that?

I founded the organization called SFMade. I conceived of the idea while I was at Timbuk2, and actually, it’s kind of a funny story.

When I started making this computer bag over in China, the San Francisco Chronicle ran an article about us in the local newspaper. Basically, the gist of the article was that we finally had faced economic reality, and we were manufacturing in China like everybody else. We were facing the fact that it’s too expensive to make stuff in San Francisco. And in the that article, they showed a fairly large black and white photo of a sewer, a seamstress, who was a Chinese woman. If you read the headline and saw that picture, you would had said, “Oh, well of course, there’s one of their sewers over in China.” Well, the Chinese community in San Francisco is the backbone of the sewing community. That Chinese sewer was in my factory at Timbuk2 Headquarters in San Francisco. Now, it said so in the caption, but you read headlines and you see pictures – the same way you read a comic book. So that really irritated me. So I started thinking, “We just don’t get enough credit for what we are doing here in San Francisco.”

SFMadeI was in Silicon Valley working in high tech when Intel launched their famous campaign, “Intel Inside.” Here’s a company that is behind the scenes, no one really knows them, and they decide, “You know what, we’re going to convince people that if they’re going to buy their own computer, then they should demand that it should have an Intel chip. People don’t even know what a chip or microprocessor is, but we’re going to tell them, if there’s Intel inside, it’s going to work the best.” And they went to great lengths to make it seem like “Oh, your Microsoft Word isn’t going to run properly if it’s not on an Intel chip,” or “the operating system’s not going to work the same way.”  I thought that was brilliant.

I thought, “Intel can do it with technology, why can’t we do it with Geography?” The Champagne region did it. They protect the word champagne with vigilance. This notion in wine is very common. San Francisco is a special place. People think of us differently, “Whack jobs out on the west coast; super-progressive, liberal city; summer of love; the gold rush.” All those things that happened here in San Francisco are part of our culture. We have a very special place, plus we’re beautiful geographically. We should use San Francisco as an ingredient brand. So I conceived the idea of geographic ingredient branding, just like Intel did technology ingredient branding. I came up with this little logo for SFMade, and we started using the SFMade logo on our custom “Made in San Francisco” bag at Timbuk2.

When I left Timbuk2, I negotiated with the investors, “You know, this SFMade thing, it’s really for San Francisco. It’s not just Timbuk2’s thing.” I invented it, and they let me take it with me. They actually stopped using it after I left.

So when I started Rickshaw, I started using the SFMade label. Then I had the opportunity to launch the organization as a nonprofit. The executive director, Kate Sofis has done all the hard work to make it what it is now. Today, it’s 500 companies, in San Francisco, who are either making things themselves or having local subcontractors make things for them. Being an SFMade product means it has to be made by a San Francisco-based company here in San Francisco.

Q: A deeper question for you, what advice or life lessons have guided and motivated you personally and professionally?

My father was a successful Silicon Valley entrepreneur. He founded a company, the first commercial laser business called Spectra-Physics back in 1962, when I was 2 years old. So I grew up around an entrepreneurial environment. Business was the topic of conversation.

One thing that my father has always stressed is integrity – personal integrity and business integrity. He’s always made it clear, “There is no mistake so heinous that you can’t tell the truth. It’s the not telling the truth that makes minor mistakes major mistakes.” I tell that to my company, because you know, you get scared. You make a mistake and you get scared, especially if you’re on the job. “It’s the boss’s money.” or whatever fear you have. I tell my team, “There is nothing you can do here that you can’t tell the truth about, because otherwise it just gets out of control—a small problem becomes a huge problem.” We haven’t had a problem that was a mortal wound. We’ve had problems, and we’ve solved them. If we catch them early, they do less damage. I try to impress upon everyone that your personal integrity is your foundation. It’s your bedrock. Don’t do anything to compromise that, no matter what. Sometimes the truth hurts, but I tell people, “The truth hurts for a day, a lie can last forever.”

Q: Here’s a fun question for you. If our readers are looking for a nice new bag, which one of yours is your favorite and which would you tell them to check out?

What’s my favorite bag? Well, my favorite bag is one you can’t buy yet. I’m usually wearing a prototype. But as computer bags go, I love our Commuter bag. It’s my third or fourth bag design for computers and I think it incorporates all I’ve learned over the last 15 or so years of designing.

I like our messenger bag a lot, and I wear our Zero Messenger bag a lot. It’s nice and simple and I can just throw stuff in it, sling it over my back, and I’m off and going.

We have a new backpack coming out. We’re just finishing up a run of 2,000 backpacks for Google. We designed the product just for them. We’re going to be launching that on our website soon, so that will maybe be my new favorite, but for now it’s the Commuter and the Zero.

Thanks again to Mark Dwight for sharing his thoughts. Leave your thoughts in a comment below.

Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

In a beautiful San Francisco neighborhood stands a brick warehouse containing something unusual and inspiring – a startup that uses lean manufacturing and sustainable business principals to make products in the US. Relying on local vendors, an honest culture, and talented people, Rickshaw Bagworks produces bags that people love.

Mark Dwight

I recently had the great privilege of interviewing Mark Dwight, Founder and CEO of Rickshaw. Mark shared his experiences and the lessons he’s learned with lean manufacturing, domestic sourcing, sustainability, and much more.

Below is the first half of the transcript from our phone conversation. I learned quite a few things that I later shared with my team. I hope to use his experiences as trail markers in forging my company’s own growing supply chain.

Q: Mark, can you tell me your background and how you started manufacturing bags in California?

I founded Rickshaw Bagworks 6 ½ years ago after running another bag company here in San Francisco called Timbuk2. I became involved with Timbuk2 in 2002. They were a small company on the verge of bankruptcy and had been around for 13 years. They had a great reputation, great brand, but were struggling a little bit. So I became the CEO and an investor in the company. We were very fortunate to get it turned around, and then we sold it three years later to a private equity firm. Eight months after that, I got fired. So, I said, “Well, I’ll go start my own company.”

Before all of this, I had spent 20 years in Silicon Valley, so I’m a high tech guy. I also have spent some time in manufacturing. I started out as a manufacturing engineer in the semiconductor equipment business, so I’m a manufacturing man at heart.

Q: I know you do a lot with lean manufacturing and one-piece flow. Where did you pick that up? How does that make Rickshaw different?

I picked up one-piece flow at Timbuk2. The founder of Timbuk2, Rob Honeycutt, is a real student of lean manufacturing. He had implemented those techniques at Timbuk2 for their custom messenger bags. They get orders in from their website, and they’re all individual orders. The practice of single-piece flow is something I inherited from Timbuk2, and I liked it, so I continued it at Rickshaw.

I think what makes Rickshaw different is that we make our own product in our own factory here in the states. Now, I’m no stranger to outsourcing. I don’t have any problem with it. I’ve done plenty of work in China myself, and I still buy a few things from there. However, I’ve really focused on trying to do it in my own factory – not as a protest, but as a celebration that we can still do it.

Q: I imagine there’s some kind of learning and experience from when you do it yourself that you miss out on when you outsource.

Oh, absolutely. It’s one thing to go into a room in a factory, say in China, and sit down with a product person and work through your prototype. You can show up with a really cool tech pack or just a sketch – which is what I do – and then you have a prototype made by the sample maker. Then you tweak it until finally, you get to a product your happy with. The rest is behind the scenes – they make the patterns, they sew the product. You never know what’s going on in the factory, and there’s a lot of implications to that. For example, you don’t know where the difficulty points are. When I’m working in my own factory, my people come and tell me, “Hey, this is really hard to do.” That’s either a design problem or a process problem. It’s not their fault – it’s the design or the process. Then we can say, “Well, do we need a different machine? What’s really going on here?” You never know that when someone else is making your product and it all shows up in is your cost. If there’s lots of rework, that’s in your cost. Then, if you go to your factory and say, “You need to sell this to us cheaper,” the following conversation takes place:

“Do you know how much rework goes into this?! No we can’t make it cheaper, this design is a disaster.”

“Why didn’t someone tell me?”

“Well, we’re just making what you told us to make. You didn’t tell us how to make it, you just told us to make it.”

I’ve learned that outsourcing often brings unintended consequences. For example, remember the debacle, years ago, with Mattel toys, when they imported toys with lead-tainted paint. Everyone was freaking out, asking “how could that happen?! Mattel is an upstanding company. Their factories have been making them for years without this problem, and all of the sudden, lead-tainted paint.” Well, it came out that the way they operated their supply chain management was that every time they placed a new order they took a couple percent off the price. Mattel would say, “Here’s an order, now you will make them cheaper.” At some point the factory said, “Hmm, we’ve taken out cost everywhere we conceivably can. Hey, go find some cheaper paint.” And so the purchasing department dutifully marches off and returns, “We found some cheaper paint. Let’s use this.”

“Well, why was it cheaper?”

“Oh, well, it’s a little lower quality than what we normally use.”

Mattel’s operations team was so removed from the actual process of making their products – they probably had never even been in that factory before. When you’re not intimate with your own supply chain, problems happen. Now I’m not saying Mattel should open its own factories – that’s not practical right now – but they do need to be intimate with the factories that make their products. Ultimately, nobody looks through them to the supplier to say it’s the supplier’s problem. They look at Mattel and say, “It’s your product, your brand, your fault.”

So even when I’ve subcontracted, I’ve always spent lots of time with my factories. For one, it’s a partnership. I’m not just shopping for the lowest prices. I’m looking for someone to make my product the way I want it made – someone I trust. Someone that when I’m not there, I trust them; and when I go there, I’m a partner. I think a lot of people just say, “Let’s outsource. That’s cheap. Let’s just go have someone else do it.” But there should be a lot more that goes on to make that happen. They have to be good factories, or your product suffers.

rickshawTEDlowres

Q: For those of us who are interested in doing more domestic sourcing, what’s been your experience and how have you been able to make that transition?

To answer that, let me back up a bit to the beginning of Rickshaw. I came up with a product design concept that is similar to how Ford builds cars. You design a platform, or chassis, and you invest in that chassis because you expect to use that chassis for a decade. On that chassis, you expect to build multiple models. In the case of General Motors, you can have multiple brands sharing the same chassis. So my thought was, “For a complicated computer bag, what if I develop the chassis, and I have that made over in China. Then, I bring it over in pieces and do the final assembly here. I’ll put on some colorful elements to give it its personality. “The idea was I’m going to outsource 90% of the labor and complicated stuff, and I’m going to insource 90% of the personality – I’m going to do all the customization here. That is a Harvard Business Review manufacturing strategy. Great story for an ops guy, an ops geek like me.

I thought, “Wow, that makes total sense,” and the idea had lots of advantages. I pay 7.8% duty on subassemblies instead of the 17.5% that I have to pay on finished bags. The subassemblies nest in a way that bags don’t, so I get a 5-to-1 shipping volume efficiency. The chassis are all black, and there’s only two sizes, so I effectually have zero inventory risk. Operationally, it’s great. That’s how I got into the custom bag business. I designed a custom chassis, started importing them, and then I was custom making these computer bags and people really liked them.

Well, as time went on, we had to buy sewing machines to do the customization part. One day, we were sitting around and said, “Well hey, let’s make a messenger bag.” So we had an idea for a messenger bag that we could make in our own factory here. We started making it, and it became really popular. As we met more and more people, and said, “Here’s our computer bag, we make parts of it in China and do the final assembly here. And here’s our messenger bag, we make this whole thing here.”

“Oh wow, I want to know more about that messenger bag.”

People were really jazzed about that fact that we were making something from scratch in our own factory. As time went on, that really became our narrative. People really liked that story. And when we said, “Oh, we make this part in China.” They’d say,

“Oh, well that’s too bad. You should make that here”

And I thought, “Yeah, your right, I should.”

We’ve had to adopt a design philosophy that is sort of counter to the way bags are designed, or the evolution of bag design today. With cheap labor, designers get a little lazy. When they need to change their design, switch up their design season to season, they just add another pocket, zipper, or feature because labor’s cheap. It’s alright; it’s not a lot of material, just throw a little more labor at it. After years and years of doing that, you get fabulously complicated bags. For example, if you go down to your local outdoor supply store and look at a new camping backpack, they’re like a tour de force with so many pockets, zippers, and features. When you see them, you’re like “Wow, this is fantastic.” Now think about all the labor that goes into that. At $0.50 an hour, that’s no big deal. But at $20 an hour, big deal.

If we were going to make our products in our own factory here in San Francisco at an effective burden rate of $20 per hour, we had to rethink the whole design process. We design for simplicity, which in operation terms means we design to drive the labor out. We don’t want a bunch of labor; it’s too expensive. So we follow a minimalist philosophy of design, which in designer speak means we make elegantly simple products. We have gone the opposite direction of other bag companies.

The interesting phenomenon, though, is what happens when people who have been buying bags with lots of features for years buy a Rickshaw bag. Because I know Rickshaw and Timbuk2 intimately, people will come to me and say, “I’ve been wearing Tumbuk2 bags for 10 years, but oh man, I just love my Rickshaw bag. It’s the best bag I’ve ever had.”

Then I say, “If you and I sat down the Timbuk2 bag and the Rickshaw bag side by side I could show you the Timbuk2 bag has 10 times the features that the Rickshaw bag has.” But the people don’t need them.

As a matter of a fact, people say, “Yeah, it has too many pockets. I lose things in it.” So we’ve found that taking things away doesn’t necessarily mean our product is less. It just makes it different, and differentiation is important. We’ve differentiated ourselves by making elegantly simple products by focusing on customization. If you go to REI, you’re going to see everything’s in five different colors. If you come to us, you can have any color you want. We’ve really honed in on being the maker of custom bags.

rickshawcustomization4

Q: Piggybacking on that, a major, emerging trend is mass customization, which you’re set up to do and thrive on. What’s been your experience with mass customization? What challenges have you faced as you offer a mass customization model?

Customization at Rickshaw BagworksThere’s no question that customization costs you in terms of time and complexity. It just does. I don’t care how much anyone tells you how brilliant his or her mass customization program is. When our factory’s making an order of 2000 for a corporate customer, and they’re all the same, we are rockin’. We’re working at probably 1.5 to 2 times the speed that day than if every single one of those was a unique order off our website. It just is. Just to think, “Ok, the lining is this color, the inside is this color, the outside is this color, the label is this color,” those split-second decisions cost you time. They just do. There’s a level of complexity in the factory to do that. Nevertheless, we’ve set up our factory to do that.

We know customization takes a little extra time, so we have to factor that into our cost mode, but we accept that. We don’t complain about it, because that’s the business we want to run. We’re not the only guys that do it, there’s a few other people that do it. However, we do it on a scale that is larger than many. I’m not one guy sitting in my garage saying, “Oh, I got another custom bag order,” and then sending five emails to and from my customer telling me what to make. No, we built the customizer online.

rickshawcustomization2

Honestly, it’s not really customization, it’s personalization. You can’t walk in my door and say, “I have an idea for a bag. It has to have a pocket here and a pocket there.”

No, we say, “Here’s our design, choose your colors, and maybe choose a couple features,” but they’re modular. In our design process, we’ve designed for modularity; we designed for customization. We know what’s easy to customize and what’s not. If it’s not easy to customize, then we don’t make it an option because it will be too complicated for us. We look for some things that are easy to do, and then we try to make those signature design elements. Our binding, for example, is made out of the same fabric that we make the body of the bag, called self-binding. We have 50 colors of binding, because we have 50 colors of fabric. Not everyone offers that kind of thing. That color binding has become a signature of our product. In my business, you look for the smallest differentiators you can. We’re not rocket scientists here, we’re just making bags.

Q: I want to touch on sustainability, a hallmark of your company. How did you make sustainability a core value? For others that want to incorporate more sustainability principals into their business, what advice would you give?

I wouldn’t call myself a social responsibility entrepreneur or sustainability entrepreneur, because on one level, sustainability means “don’t waste stuff”. That stuff is material, and that material is stuff I paid for. So if it’s ending up in the garbage, that’s money out the door. The way that translates into a business philosophy is designing to minimize waste. Our zero messenger bag’s design criteria was to create as little waste as possible in the factory. The result of that is a bag made from four rectangles of fabric. Those rectangles can be sized to optimize material use off the roll, which means we don’t waste very much fabric when we make those bags. It’s a very simple idea, and since it wasn’t my idea, I can call it brilliant. It’s actually an idea that Rob Honeycutt, the founder of Timbuk2, came up with. He’s a friend of mine, and when I started my factory, I asked him to help buy my machines. One day he said, “I have this idea for this bag,” and I said, “Great, let’s make it,” and that became our zero messenger bag.

Some of these business principals are just my own personal values. I don’t like to waste things. I like to operate my business in a transparent way with great integrity. Those are personal values, and because it’s my company, those values have translated into the company’s brand value. Frankly, it’s just a good way to live: “Don’t waste things. Tell the truth. Be transparent.” It’s an easier way to live, actually.

Q: In terms of focusing on sustainability, you’re designing your product not just to take out labor, but also to take out waste.

Exactly, we’re designing our product to minimize waste. Minimize waste of material, minimize waste of labor. That becomes a philosophy of our design. There’s a design philosophy called minimalism – and so we’ve embraced minimalism as both a design philosophy and an operational philosophy. When you simplify, you make things faster. You make things more frugally, and you’re more flexible. I talk about the “three fs” of sustainable design – form, function, and footprint – but being fast, frugal and flexible are the “three fs” of sustainable operations.

zero-tagsThe second half of the interview will be posted next Monday. Share your thoughts in a comment below.

“I Fight for the Users!” – What Tron Taught Me about Serving Customers

A Review of the Movies

In the Disney movies Tron and Tron: Legacy, the character for whom the movies are named famously declares, “I Fight for the Users!” In the world those movies create, the Tron character is passionately loyal to the humans who designed and use the computer program. It’s been a few years since Tron: Legacy came out, so here’s a short clip to remember the movie:

Tron - UserYouTube – Tron Recognizes a User

Toward the end of the clip, Tron (also known as Rinzler) sees his opponent bleed and realizes that his opponent is a user (human). Because of his loyalty to users, Tron refrains from killing the human. At the end of the movie, Tron sacrifices himself to save the humans from being killed:

Tron - I fight for the UsersYouTube – Tron Realizes He Fights for the Users

The reason I’m fascinated by Tron’s loyalty to the users is that my supply chain should have equal loyalty to the customers. In all our efforts to fight waste and inefficiencies, we should boldly declare, like Tron, “I Fight for the Customers.” For some reason, however, I often ignore or stop paying attention to the voice of the customer and find myself fighting against, instead of for, the customer.

Voice of the Customer and Putting Away Christmas Decorations

A poignant example of ignoring the voice of the customer happened recently while I was putting away my home’s Christmas decorations. The Christmas lights are especially time-consuming to neatly organize, so I instead gathered everything into a giant ball and stuffed it into a plastic bin. I just wanted to get done as quickly as possible, so I told myself,” I’ll deal with untangling this mess next year.”

However, this is exactly what a good supply chain shouldn’t do. I’m creating a local optimum (putting away my decorations as quickly as possible) that will cause pain to my customer (in this case, me in 11 months). Since I am my own customer, I know the voice of the customer quite well. I remember untangling the lights just weeks before, and I know exactly what I should do to please the customer. I don’t though. Since it’s a hard task and it pays off now to just throw everything into a box, I do the minimum to get the job done when I could increase customer satisfaction.

“I Fight for the Customer”

This same type of local optimization occurs every day along the supply chain. As we get busy or deadlines get scrunched, we naturally reduce the effort we put into pleasing our customers. Whether it’s our internal customers or the end consumer, it’s easy to forget that how we stack a pallet or design a product can negatively affect our customer down the line.

Each day, I need to repeat “I Fight for the Customer” throughout process improvement and Kaizen efforts. As you and I battle inefficiencies and reduce waste, we should have the same natural instinct to stop what we’re doing when it threatens customer satisfaction. For example, I can reduce airspace in packaging boxes, but as soon as my product’s quality is compromised from being too tightly packaged, that’s the blood that should force me to rethink my initiative.

The Empty Chair at Amazon.com

In the early days of Amanzon.com, Jeff Bezos, CEO and customer service champion, reserved an empty chair at all important meetings. He told his team that the chair was reserved for the most important person in the company – the customer. He asked everyone to imagine the customer was sitting there and to keep her in mind in throughout all their decisions. Later, Bezos hired someone to sit in the chair and passionately represent the voice of the customer. This practice helped to guard Amazon against any initiatives that didn’t help its users, and kept everyone’s thoughts centered on who kept them in business.

How Can I Better Fight for the Customer?

What ways can you better proclaim “I Fight for the Customer” in your supply chain? Here are some questions to consider:

  • Do I have adequate channels that bring the voice of the customer to me?
  • Do I frequently review how process changes affect the customer?
  • Do I address both the external and internal customer experience in all major meetings?
  • How can everyone in my organization feel closer to our customers?
  • How can I prioritize initiatives more closely to fit customer needs?
  • How can I better share my voice, as well as my customers’ voices, with my vendors?

By bringing the customer back into focus with your daily efforts, your organization can better solve the needs of those that keep you in business. Building the resolve to fight for the users of your product and services will result in a more loyal and pleased customer base.

“He Ships, He Scores!” Improving Your Supply Chain with Games

Mario Fork Lift
Friday evening had arrived, and I was very excited to be on my way home. My wife and I were going on our first date in over four months – the first time we would leave our new daughter with family as we had some fun. After dinner, we went to one of my all-time favorite places: The Nicklecade. The Nicklecade is an arcade full of older games that each only cost $0.05 to play. Ten dollars can keep two people playing the gaming classics all evening. As we played Ski-ball, Dance Dance Revolution, San Francisco Rush racing, and even Guitar Hero, I was struck by how motivated I was on a Friday night.

I had just spent an entire week in typing emails at a computer and occasionally helping with repetitive physical tasks in the warehouse. Now, on a Friday night, I was in front of computers again pressing buttons and tossing ski-balls up the ramp over and over to try and beat my wife’s high score (which I was unable to top). How could the similar skills and activities be so fun and motivating as I worked for tickets, and less so as I worked for paychecks?

The Game of Work

My question caused me to recall a business book classic called The Game of Work by Charles Coonradt. Written in 1984, before a generation was raised on videogame achievements and scores, Coonradt was struck by a similar question to mine regarding construction workers. They would slowly plod along building a house, but during lunch time, they’d run to a local basketball court and give everything they had to obtain 4-on-4 lunchtime victory. Realizing that the principals of games could increase motivation and productivity in the workplace, Coonradt defined five rules of gamification – harnessing the power of game thinking in traditionally non-game work.

  1. Clearly defined goals – Put the basketball through the basket
  2. Better scorekeeping and scorecards – The score is 87 to 89, our team is down by two with a minute left in the game.
  3. More frequent feedback – The scoreboard tells you immediately if you made a goal, and a referee’s whistle will sound every time you break a rule
  4. A higher degree of personal choice of methods – Score points; it doesn’t matter if they are lay-ups, dunks, field goals, or 3-pointers
  5. Consistent coaching – whenever I have a question, I can look over to my coach for guidance or call a time out for more detailed help

Supply chain and operation works lends itself directly to this type of job enhancement. Below are some examples of how gamification has helped boost productivity.

Charles Schwab Throws Out a Challenge

In Dale Carnegie’s book, How to Win Friends and Influence People, the story of Charles Schwab keeping score is a fun example of early gamification.

“Charles Schwab had a mill manager whose people weren’t producing their quota of work.

“How is it,” Schwab asked him, “that a manager as capable as you can’t make this mill turn out what it should?”

“I don’t know,” the manager replied. “I’ve coaxed the men, I’ve pushed them, I’ve sworn and cussed, I’ve threatened them with damnation and being fired. But nothing works. They just won’t produce.”

This conversation took place at the end of the day, just before the night shift came on. Schwab asked the manager for a piece of chalk, then, turning to the nearest man, asked: “How many heats did your shift make today?”

“Six.”

Without another word, Schwab chalked a big figure six on the floor, and walked away.

When the night shift came in, they saw the “6” and asked what it meant.

“The big boss was in here today,” the day people said. “He asked us how many heats we made, and we told him six. He chalked it down on the floor.”

The next morning Schwab walked through the mill again. The night shift had rubbed out “6” and replaced it with a big “7.”

When the day shift reported for work the next morning, they saw a big “7” chalked on the floor. So the night shift thought they were better than the day shift did they? Well, they would show the night shift a thing or two. The crew pitched in with enthusiasm, and when they quit that night, they left behind them an enormous, swaggering “10.” Things were stepping up.

Shortly this mill, which had been lagging way behind in production, was turning out more work than any other mill in the plant. The principle?

Let Charles Schwab say it in his own words: “The way to get things done,” says Schwab, “is to stimulate competition. I do not mean in a sordid, money-getting way, but in the desire to excel.”

Quoted from Dale Carnegie’s How to Win Friends and Influence People

A Jewelry Manufacturer Keeps High Scores

A factory that made recognition jewelry created a very simple computer program in the 1980s. The employee would log in his or her manufacturing job, say polishing 100 medallions, and the computer would time him. After the employee completed the work, he or she would see how quickly he or she had accomplished the work. The computer then ranked him or her against personal past records as well as everyone else. The program let the employee know whether the score was above or below average – and by how much. This simple program quickly increased efficiency of the entire factory as everyone tried to beat their coworker and their own records.

Real-time Shipping Dashboard Focused our Warehouse

A couple years ago, as our company quickly grew, we felt a need for better visibility to our warehouse operations. I had worked at Sonic in high school where little TV screens showed each order and helped me know how many hamburgers to make. Could we make a dashboard that showed us what orders we had to ship? With some VBA coding, I was able to create a real-time shipping dashboard that did just that. Every ten minutes, the computer would automatically update from our system database and show the orders we needed to ship and had shipped already that day. If an order went late, it would show up in red. As long as everything was green on the dashboard, we knew we were shipping on time and winning for the company. The dashboard was so effective that I was able to completely step away from warehouse operations as the team worked together to keep the dashboard green – or score points –rather than a manager directing every step.

Ideas for Gamifying Your Supply Chain

Having a better grasp of the principals of gamification, how can you better apply them in your supply chain? Here are some ideas:

  • Vendor Scorecards – We’ve been working extensively on a comprehensive vendor-scoring program. We are giving quarterly feedback on how key vendors are doing on dimensions important to our success. We also hope to build a “Vendor of the Year” award to reward good scores. Without the scorecard, however, our vendors can’t be confident in how they can better serve us as their customer.Crosstraining
  • Cross-training Achievements – An easy way to turn long-term training into a game is to create a grid of people and processes. As employees learn new processes, they receive a sticker that becomes a badge of cross-training achievement. Fast-food restaurants do this all the time. When we put this together in our warehouse, I was amazed by how quickly people began asking their supervisor to train them on new skills so that they could mark it off on the grid.
  • Pick-to-voice Warehouse Picking Systems – Wearing a headset that tells you where to pick your next order is a popular technology in large warehouses. These pick-to-voice systems often track efficiency and set goals for each picker. Taking that technology a step further, you could keep score on a large screen or let pickers “level up.” As employees reach certain scores, they could be rewarded with more difficult orders to pick – or move into new zones of the warehouse. Even adding the “1UP” sound from Super Mario and other video game trademarks could make order picking more engaging.
  • Pallet Wrapping Competition – If you have 30 pallets to wrap by hand, divide everyone into three teams and see who can wrap 10 in the shortest amount of time. Whenever students from local colleges tour our company, I ask them to compete in a “warehouse Olympics” game to see how they fare with the most basic of supply chain tasks. I quite enjoy watching college students race, and often struggle, to tape boxes, sort returns, and wrap pallets.
  • Vendor Terms Competition – Our CEO created a list of vendors that he wanted a dozen employees to contact and ask for extended payment terms. Each Vendor had an employee assigned to it. The list was in a Google spreadsheet we all shared, which allowed us to see each other’s progress in real-time. We could approach the request any way we wanted, and we even received a small gift card when we achieved our goal.
  • Real-time Dashboards and Metrics – Building on our shipping dashboard, we now have a large handful of other real-time dashboards. Purchase Orders, Accounts Receivable, and Accounts Payable are just a few examples of how we keep score. Our jobs become a game of keeping the dashboards free of red lines, which helps us focus on activities that help the company.

Supply chain is the ideal place to apply gamification principals. Large amounts of real-time data make keeping score much more achievable than in other less data-driven disciplines.

Whether it’s PlayStation 4, the NFL, or Monopoly, everyone on my team has a passion for games. Tweaking processes to channel that passion has helped my company in powerful ways. Applying Coonradt’s five “Game of Work” principals helps everyone better achieve results that help the company and enjoy their work more. Most importantly, that increase in motivation helps us become a stronger company and a more competitive supply chain.

Now instead of getting back to work, get back to gaming.

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If you’d like to learn more, please check out the below sites that were a source for parts of this article.