Safety Stock podcast starring Dan and Will

Prices Are Rising. What to Do About it?

Dan and Will talk about some of the factors that lead into rising costs and what are the solutions you have as a business to handle these challenges moving forward.

Will:
All right everybody, we are back with your favorite podcast, Dan Magida. Looking good as ever. This is Will Davis and Dan, You know how they say rent’s too high?

Dan:
Yeah, that infamous rant.

Will:
Yes. Well,

Dan:
Great rant. Rent. Damn. Too high. We can say damn on here. Yeah, you can. True damn high mayor, right? You wait for Mayor of New York City. Few, few times I think.

Will:
I think so. You’ve

Dan:
Lived around the corner from me actually in the East Village at one of my apartments. I’ve seen him before.

Will:
Fun note. We’ll be giving out Dan’s address later.

Dan:
Warmer apartment. No longer. There.

Will:
There, yeah. There you go. Damn Butter. Butter is rising, skyrocketing and it’s not going down. There are some factors that are leading to that high prices, which you know, is interesting because there’s a lot of parallels that I think we can draw in some of our experiences as well.

Dan:
Yeah, I mean, butter just as a whole per pound is up 27% from the beginning of this year on average to now. So it’s a full dollar and some change increase 360 7 per pound to four 70. But the main reason why butter is rising is milk production is down 1.4%, which I’m actually very surprised about. I did not picture, you know, maybe the health of the cows or reproduction of the cows would decrease at, cuz one perc over, one percent’s a pretty steep drop. But then, you know, the ones we’ve always talked about labor shortage and then farms are just more expensive and they more extremes going on. Temperatures, floods, droughts, storms, you name it, they got it. Feel bad for the farmers. They could never catch a break of late.

Will:
Yeah, I think I’m sure the, you know, when you talk about the availability of goods in general, you know, when you talk about, you know, there’s labor issues which a lot of people see and then additionally, you know, when you have extremes, you know, we can now relate this to a lot of the customers that we work with and like what are they seeing? You know, sunflower oil, which is a big component in a lot of cosmetics, has taken a big hit in terms of their production based on the war going on in Ukraine and,

Dan:
And dies too. Dyes have

Will:
Dies and you know, you continuously see, you know, the brands that we work with, they’re having to be agile in how they’re supporting the products that they make. And if you’re a brand, Dan, you know, we know that you, you typically deal with things in phases and so if you’re dealing with some, you know, I, I’ve seen it where, you know, in certain cases, you know, a brand is air shipping active ingredient that they have to have, which is extremely, extremely expensive to continue.

Dan:
At least it’s cheaper now than it’s bid silver

Will:
Lining. It’s cheaper now that it correct it, it would’ve been a lot worse if this was a year and a

Dan:
Half ago. Yeah. Oh boy.

Will:
But you know, the short term is, is that they’re doing it because they have to, but at what point in time, you know, do they start making the decision, Okay, is there something else I can do besides this active or is it I’m going to pitch a new product to the places where I’m selling it or can I start instituting it and new active in order to get rid of this issue if we think it’s a long issue that we’re always going to see.

Dan:
Yeah, it’s just visibility into every key component is so important. Especially, I mean, well you talk about butter, but sunflower oil, I mean there’s so many ingredients that make up that finished product and as a brand you sometimes only look at it like the main components, like what’s the customer physically touching. But inside of just like a shampoo or a body wash, there’s so many active and also non-active ingredients that make up for it. And you gotta have your, you gotta have your finger on a pulse there. Now most of most people use turnkey for that, which is relying on the manufacturer to source those ingredients. But you need to know and talk to your manufacturer on like, hey, where are the delays here? Because a normal lead time that’s say four weeks to manufacture could actually be longer if for those raws coming in. So forecasting is super essential for any ingredient based product.

Will:
Yeah, you’re right. And when it comes to, you know, certain brands, I think that they are struggling to do that forecasting piece and in some instances there is the hesitancy that brands continuously have in the fact that they don’t want to over order because they’re afraid of the inventory hit that they will take and the amount of money that they will not necessarily have to spend on other things if they are carrying too much goods and then you discount and you get in that cycle of having to clear out inventory in order just to order what you think you need to do. Again, that is a real issue where it comes to brands that are smaller and they have, they are more cash conscious at, at, you know, on the flip side, when brands are growing at such a high level, that’s when they typically need to start thinking the other way and they’re like, you can’t go outta stock.

Dan:
No, that’s worse. I think that

Will:
It is worse, it’s worse, it’s worse.

Dan:
Especially now, especially in today’s now market. Before it was manageable because everybody was just ordering everything left and right through e-com the last two years. But in today’s market you don’t want to be out of stock.

Will:
And, and the reason why you don’t wanna be out of stock is because as the consumer becomes more and more choosy about what they’re going to purchase, you only have a certain amount of at bats if you’re new and it’s like, okay, if your product isn’t out there and that person ends up picking something else, not only did they skip over your item, but you gave your competitor a chance to win and maybe they like your brand loyalty and all of a sudden they may like your product and then now your shot is gone. You have to give yourself a chance to have that at bat, which is ultimately a mentality that, you know, cash strap companies have to take into account and they just need to be diligent about, okay, what is the right amount that we think is going to be there? And it’s going to keep me in stock while knowing all the other parameters that I need to pull the trigger to support more once I know it.

Dan:
Yeah, it’s you sometimes you’re, look, there’s a lot of luck in this, but there’s also, you gotta take a risk and you got possibly thread the needle so you’re gonna have to step out at one point, but you gotta, you gotta fully understand what you’re stepping out on to do that. But if you’re growing a brand and you’re just starting off, brand loyalty is the most important thing and you do everything your power to retain them, even if it’s giving out free product or discounts, you gotta keep those early customers cuz they’re your, they’re your brand ambassadors.

Will:
Yeah. I’m Dan I’m trying to think of like you know, a recent time like where we’ve seen, you know, a brand do a good job about, you know, as they launched and as they were trying to maintain, you know, they always had that availability. Like you, you,

Dan:
I I, I mean one of my first jobs we had a, we ran out of inventory and we were able to ma manage it was, we were down for like three or four months. We changed the formula completely in like the delivery form, but we were able to retain that original cohort. And it took time, but it’s all about communication to the customer and knowing that like, this product is a great product and it’s gonna sell, but it’s all about communication and keeping the customer informed. But it’s not easy. It’s not an easy thing when you launch and run out of inventory and you have a backlog log. But customers can be patient as well. So but it’s hard. It’s, it’s, it’s a very delicate line that you’re walking.

Will:
Yeah. well I think the interesting thing is is that, you know, as people use the Avil software you get a chance to see specifically where your orders are and if people are confirming to you that they’re gonna ship on time, and then additionally you can ask the suppliers to put the shipping information into the software and then you’ll have that visibility of where the shipment actually is. So there’s that point to where you want to have your suppliers corroborate and give you good information, but if for some reason they’re not being transparent with you, why are they not tra transparent with you? And I think that’s, obviously we can go into that in another episode, but having that information is one of the biggest things you can do as a brand to at least protect your equity on the brand side. Well Dan, once again, I think, you know this probably want us to Emmy in terms with the stock or from the podcast awards. I don’t know if they are, There

Dan:
Are podcast awards out there. I think, I think we should be nominated for at least like both nominated for host awards for short for short platforms. We don’t want to compete against the hour long podcast, but that sweet spot of like 10 to 15 minutes, I think we got the market cornered.

Will:
That’s right. And in order to help us make sure that you go until your friends out there we’re expanding. Love to hear your feedback. You can reach us at hello@anvyl.com. That’s A-N-V-Y-L.com. Until then, we’ll see you soon.