Supply chain, shipping and pricing woes: “This is how we learn to sail”
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In a sign of the continuing congestion crisis in global shipping, there were 69 container ships waiting to be unloaded outside the ports of Los Angeles and Long Beach as of Tuesday afternoon, just shy of the record 73 ships set over the weekend.
Global supply chain woes can frustrate consumers facing empty shelves but pose critical challenges for entrepreneurs trying to launch products and grow their companies.
In an interview via Zoom, “Marketplace” host Kai Ryssdal spoke with Lindsay McCormick, founder and CEO of a sustainably minded personal care products company called Bite, about how high freight rates and spiking commodity costs have impacted her company’s latest product launch.
Bite’s first product, a chewable toothpaste tablet McCormick invented in 2017, is manufactured near the company’s headquarters in Los Angeles, but a deodorant in plastic-free packaging Bite launched Wednesday includes components made in China. The following is an edited transcript of McCormick’s conversation with Ryssdal.
Lindsay McCormick: So, our deodorant is in an aluminum case [that] is made in China, and we also have a 100% paper refill that’s made of cardboard that’s also made in China. … This is our first time working with custom componentry, which meant, you know, steel dies had to be made at a manufacturer in China to get these things made, so it’s just been this enormous project for our super small team at probably one of the craziest times to be doing something like this.
Kai Ryssdal: I’m sure. So, it’s about the size of a pack of cigarettes, right? It’s aluminum and shiny, and it says Bite on it. I don’t know if you’re a “Marketplace” listener, but if you were listening the other day, I told everybody that aluminum had hit a 10-year high.
Ryssdal: And there’s the sharp intake of breath. So what is that doing to your pricing power?
McCormick: You know, it’s been a challenge. We are not passing on a lot of our, you know, increased costs to our customer. A lot of these issues we are planning for as temporary. So things like our airfreight — airfreight is crazy expensive right now. We had a quote for $30,000 to get our components to us, and typically, it would be somewhere between like $11,000 to $13,000. So that’s where it’s like, “Wow, we need to get this.” It’s also, you know, we’re in mid-September right now, we’re going into holiday [shipping season], so there’s a lot of reasons that the prices are like this, and we’ll just take the hit for a small amount of time.
Ryssdal: OK, small amount of time. So let me now interject a guy by the name of Jay Powell into this conversation. He is, of course, the chairman of the Federal Reserve, and he’s on your side, or maybe you’re on his — I don’t know — that inflation is going to be a “small amount of time.” You’re betting a product launch, you’re betting your pricing power. What if you’re wrong?
McCormick: It’s a really good question, and it’s so out of our control, right? So, the things that we’re doing to kind of help absorb some of this is that you know, yes, we had to airfreight the first shipment to make for launch, but we do see the clear sky coming. After the holidays, we can get our stuff on boats and freight it over for an easier price that way.
Ryssdal: Fair enough. What about other raw materials that are going into this thing besides the aluminum? Are you having problems there?
McCormick: Yeah, so actually, we found out that our main ingredient — it’s basically like an oil, like a wax — and it has tripled in price since we started this. And so luckily, it had actually tripled and now it had gone down to only double the price. You know, at this point, that feels like a deal. So for us, we have really great relationships with our manufacturers and our vendors, so they’re helping us take some of the price hit on that, and then hopefully we will be long-term partners.
Ryssdal: So, you’re, I mean, you’re banking on the long haul, right?
McCormick: Yeah, yeah. But you know, it’s not like we’re in a bad position, right? We’re just not in as good [of a] position as it would have been if we weren’t getting $30,000 air freight bills, right? But I think there’s a saying like, “Rough seas make great sailors” or something? And so this is our rough sea and this is how we learn how to sail.
Ryssdal: I imagine somewhere deep in the Bite, corporate secret files, you have the next product launch sort of mapped out. Has this experience changed you at all?
McCormick: I will definitely make sure that we are not launching near the holidays again. That’s a really intense thing, but also it’s, like, to expect the unexpected. We’re a small team. We’ve told ourselves every time we’ve had a launch that we’re going to get way ahead of it next time, but the fact is, we do have to play the best hand we’re dealt, and I think, you know, if we make it through this one, we can make it through all the other launches we have coming down the pike.
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