Peter & Alex (00:07)
Here we go, now we get to feel like superstars.

Welcome to the Better Batch podcast where batch process manufacturers learn from industry experts. I’m Peter Suttered. And I’m Alex Kovas. We’re joined today by Brian Sweat, Brian Leeds Activate, who is a sister company of Markov and ⁓ a technology provider to industrial manufacturers, much like Markov. Brian, so happy to have you on the podcast.

Brian Sweat (00:40)
Yeah, thanks guys. It’s good to be here. Just really happy to be introduced to Markov and we’ve been building software primarily for small to mid-sized companies and our laser focus is finding companies that are using QuickBooks, whether it’s QuickBooks desktop or online and have outgrown the inventory and order fulfillment and process manufacturing capabilities in QuickBooks, which are very, very limited. So that’s…

Peter & Alex (01:03)
Mm-hmm.

Brian Sweat (01:08)
been our laser focus. We’ve been doing it for over 20 years and have a lot of experience more on the distribution side than the manufacturing side. So it’s a really good match up, you know, meeting Alex and Peter, meeting you guys and ⁓ learning a lot more about quality and production scheduling and things that we’ve just not done as much in the past. But we do have a lot of focus on inventory and costing and the transactions that are needed by these companies.

Peter & Alex (01:33)
Mm-hmm.

Man, we’re gonna nerd out on that. It’s gonna be great. Excited. Yeah. Let’s start with inventory. What is it if you are a manufacturer, what are the things you’re starting to see where maybe QuickBooks isn’t enough? If you’re looking around your facility and you’re saying, okay, now we’re really starting to struggle and we need to go the next step up, what are these people seeing?

Brian Sweat (01:57)
Yeah, the number one thing is the lists that are available in QuickBooks. So when you think about your bill of materials, your finished goods, your raw materials, your components, QuickBooks is really designed for companies who are selling widgets, who have, you know, they’re just buying and selling products. So just basic distribution companies. And as everyone knows, we really, really focus on like food and beverage companies and complex manufacturing that just

does not exist in QuickBooks. Even their quote unquote enterprise software edition is very, very basic and limited. So our customers generally have hundreds or thousands of products and parts and they mix them together and they assemble items together in a way that QuickBooks just breaks down. And the number one thing is QuickBooks is actually built for accounting, but when you start having different lot numbers and

you know, things like that, it all gets mixed in together. And so your cost of goods sold when you finally sell the product is really averaged out and it’s not very accurate. So we just do a lot, it’s companies that have outgrown the limits of QuickBooks, but also need accurate costing and profitability.

Peter & Alex (03:15)
And so what would be ⁓ some of the hardship or consequence of inaccurate inventory for a manufacturer? Because people might not realize they’re suffering, right? Like, what ways are they suffering that then gets relieved as we come in and solve that?

Brian Sweat (03:30)
Yeah, the best example is most of our companies that start with activate when we get brought in to help them and find a solution for them is finding that they have negative inventory. they’ll have, you know, they’ve oversold, there’s absolutely no control and there’s no lot number control. Even with enterprise, you can add a lot number field, for example, but it’s just a reference field. So you can type in anything you want. And so somebody selling it can enter lot number one, two, three, and

Peter & Alex (03:42)
no.

Mm-hmm.

Brian Sweat (03:59)
that lot number doesn’t even exist in the system. So, I think just the mess that we find in QuickBooks when they start, if you look at your inventory list and you see a lot of inaccurate quantities, that’s probably because you don’t have any ⁓ good controls in place. The other thing is that a lot of our companies, when you’re using QuickBooks for accounting and you realize that your entire inventory is in an Excel spreadsheet, that’s…

that’s a big problem, right? So they’re disconnected and there’s no connection between accounting and your inventory because it’s in an Excel file that’s on Bob’s desktop.

Peter & Alex (04:34)
Well, and something we often see is that whether they’re trying to keep inventory still in QuickBooks or it’s in Excel, it’s not right. And so people like the purchasing person or the production person are just forever going out and recounting things, right? why does the purchaser have a forklift license? Why do they need to go out? Shouldn’t they be able to look it up? Yeah, it’s just, it feels like a nightmare. And then, so as you guys come in, I guess frame the question two ways, like…

what can people do to best use a system and get accurate inventory, know where things are and have confidence that it’s right and how do they take the training wheels off, right? Like, okay, now I’ve got, know, system in to track everything. At what point do I begin to trust it and stop recounting everything all the time and actually say like, okay, yeah, I believe in the system and it works.

Brian Sweat (05:31)
Yeah, so as I said, when we start with a company, it’s a mess. So it’s not day one, right? So when you start, when you implement and you find accounting software, and then you find your inventory and your distribution software, and maybe that does the manufacturing or it’s a third, another product, when you put these systems together, you can’t wait until you have perfect data to begin using that software.

Peter & Alex (05:37)
Mm-hmm.

Mm-hmm.

Brian Sweat (05:56)
So you’re

right, it could be 60 to 90 days, it could be six months based on the size and scale of your company. But starting to use those tools and have the picking, for example, like when we pick orders, we actually have like mobile devices that, they’re just like an Android phone, but a little bit rugged. You don’t want your iPhone in the warehouse. It’s a lot of glass, it’ll break. So you give that tool to your…

people who are actually pulling orders and putting things on the shelf, they start using it on day one, but the total quantities could still be off because of the garbage that you brought in to begin. So over time, we start doing those inventory audits and counts, but maybe product by product. You don’t have to stop your whole business, shut it down for a week while you get everything in order before you start using a warehouse management and an inventory software like Activision.

Peter & Alex (06:50)
And then, ⁓ so let’s talk about costing for a second. So we know QuickBooks native costing is this average costing. ⁓ And what would people expect to see in terms of improved costing, not just over average, but also as they start to be able to work things in like landed costing and so on, you know, beyond what QuickBooks does.

Brian Sweat (07:14)
Yeah, that’s what we really focus on. And what we do is we actually break the cost down by lot. So as you are building and producing your inventory or processing, so we deal with a lot like meat processors and even coffee companies, coffee is a huge industry we deal with. So they buy the beans, they buy the fowls, the chicken themselves or whatever. And as they buy that product, it creates a lot number, right? And then

Peter & Alex (07:21)
Mm-hmm.

Brian Sweat (07:43)
as we add costs. we have, know, in this, in America today, you know, in Canada, everywhere, US and Canada both, we have a lot of tariffs, we have duties, we have insurance, we have all these fees. And most of the companies we talk to, prior to using software like this, they’re actually entering those fees as direct expenses. So on their P &L, you have your sales and your cost of goods sold, you know, what you paid for the product.

but then your additional fees are separate. So you can’t see your true gross margins, your true profit for sales, for products. But in Activate, we allocate that cost. So what you need to look for is a landed cost feature, right? So we take that cost, but we allocate it to the lots. So every lot will have a different cost over time. So instead of being all mixed in, average cost.

which is what you see in QuickBooks, or even if they call, even if you have software that says it’s FIFO, FIFO is still not exactly correct. It’s better to be lot by lot, have that cost calculated. So yeah, so the landed cost goes into the lot and then also into manufacturing. Timing is a big problem with small businesses. You know, want to invoice your customers, you want to get the product out the door. And if you calculate that cost and that profit,

Peter & Alex (08:47)
Totally.

Brian Sweat (09:05)
when you create the invoice, you may not even have all your expenses yet for the product that you’ve already sold. So what we find is a lot of these small businesses are just trying to get paid and trying to get the invoice out to the customer. So if you require them to have all the inventory and expenses and duties and taxes all allocated and in your accounting software before you invoice the customer, it’s going to fall apart. So we allow that ⁓ kind of a backdating concept and it works really well.

Peter & Alex (09:34)
of that it makes total sense. something that I’ve seen is people with QuickBooks, they’ll have some luck getting the landed costing in if all of those costs are in that one invoice, right? If your vendor of the materials is charging you for freight, then you can with some massaging get that to land with the inventory. But if you’re getting a separate freight bill from a different freight vendor, it’s just not possible in QuickBooks at all. And to ⁓ the timing issue as well,

One nightmare I’ve seen in QuickBooks is that the inventory receipt date and the invoice date from a vendor can’t be different in QuickBooks desktop. So it’s like, ⁓ here’s the date the actual invoice came. Now I’ve moved the date of receipt of the material and now I didn’t have the asset at that time. So it’s just a total mess. ⁓

Brian Sweat (10:20)
Yeah.

That’s a great story. We see that a lot where, you again, you want to receive the inventory. So we, you know, we have customers, you know, they, you want to receive it as soon as it’s there. You don’t want to wait until you get the bill. Cause a lot of these, a lot of distributors, especially if you’re buying product from other small businesses who don’t have their act together, you can’t demand that, you know, you don’t really want the invoice either. You, you want to delay your expenses. So.

Peter & Alex (10:41)
Mm-hmm. Right.

Mm-hmm.

Of course,

yeah. Right.

Brian Sweat (10:58)
So you

want to sell it, get paid for your customer and not wait until you pay your vendor before you can do that accurately. No, absolutely not.

Peter & Alex (11:04)
Yeah.

When we see the same thing rolling out of production, right? We’ll have a production order and they’ve made the first five out of 26 pallets, the customer wants them. We’re going to ship to them, right? But the order’s not done. And so we don’t have the labor in yet. Well, you’re not going to wait till the order’s done to ship it. You’re going to ship it and then like have the final cost flow through when it’s done, right? And so, yeah, it’s exactly as you said, there’s a lot of nuance there. ⁓

I wanted to also just touch on something which ⁓ QuickBooks doesn’t do. And some of the other softwares out there that, you know, both ⁓ Activate and Markov compete with don’t do even if sometimes they advertise themselves as being built for manufacturing and serve process manufacturers is they don’t track actuals, right? So you’re making bicycles, right? Two wheels, right? Every time you’re never going to use 2.1 wheels, but

When you’re making food, when you’re making cosmetics, dietary supplements, there’s variance. You weigh out an actual amount, there’s actuals on the batch, and if the system can’t take those actuals used and make it in the product, the inventory’s gonna be wrong, the cost is gonna be wrong, and you’ve got a giant mess, right? So.

Brian Sweat (12:20)
That’s right. Yeah, my experience, again, we’ve seen 15 or 20 different software products over the years and most inventory software built for small business is really built for, I think you said bicycles, I think that’s a great example. It’s really designed for building a discrete manufacturing, right? Where you’re building one item at a time. So your bill of materials are just quantities. And that’s kind of what QuickBooks has and some of the other products in the market.

Peter & Alex (12:39)
Yeah. Yes.

Brian Sweat (12:49)
So yeah, we have that and it’s not just the outputs. We have the inputs as well. So the components, here’s your standard and you’ll actually put the weight or the actual usage. And then we give the variance as well so we can show you whether you’re doing better or worse. And then also on the finished good, you might pull enough components to build 40 boxes of…

Peter & Alex (12:56)
Mm-hmm.

Brian Sweat (13:18)
you know, chicken or whatever you’re doing. And then you only come out with 38. Well, you want to know that, were, were, we were, the production run was for 40 and our yield was 38. And, and QuickBooks and the other software, you just go in and you edit the 40 to be 38. There’s no history. There’s no way to see what happened there. And then when you change 38, guess what happens? All your components on that bill of materials assembly transaction are going to be updated for 38.

Peter & Alex (13:31)
Mm-hmm. Mm-hmm. Yeah, yeah.

Brian Sweat (13:44)
You know, there’s no way to keep them as so you do 40 and then you do an inventory adjustment for two and it’s it’s just a mess. So. Yeah, you or you copy the you clone the bomb and then what happens and we see this a lot with with small business companies and you know, those of you watching, you probably you’ve probably done this. You end up with a lot of copies of a product, so you’ll have 50 different versions of the same product for every discrete quantity that you’ve ever, you know, for every unit quantity you’ve ever had and.

Peter & Alex (13:44)
Yeah.

Yeah, you rewrite the bomb. Like, okay, we got to rewrite the bomb for this one run.

Brian Sweat (14:13)
That’s just a disaster.

Peter & Alex (14:15)
One of the big benefits we’ve seen too is now the production manager can go in at the end of the month and it’s like, oh, second shift is always under producing. Like it’s the shift that Peter’s running has a problem. Whereas Brian now has that much more output and higher yield than it. Like what can Brian teach Peter now? Now we can start figuring out, you know, do I have a packaging line problem? Do I have a supervisor problem? It’s something you don’t…

you don’t have access to in QuickBooks.

Brian Sweat (14:45)
Well, between,

I mean, Peter and Brian, it’s probably a supervisor problem. It’s probably you, but yeah, I don’t know, man. Crack the whip.

Peter & Alex (14:48)
Yeah.

Now something in an area that Peter and I have less experience with is around fulfillment, right? So, you know, we usually work with the contract manufacturers and manufacturers and less with this, you know, pick and pack, ⁓ you know, kind of, you know, DTC type type deal. What can you say about, you know,

When is a company outgrown, like paper pick lists or whatever, and needing a system to help them? And what can a system do to make that go, you know, go smoother?

Brian Sweat (15:21)
Yeah, so, you know, I see there are a couple different scenarios that we run into where the accuracy is really important. So number one, when you get that deal and if you have a customer that comes to you, like we have companies that satisfy orders from Costco and Kroger and grocery stores and the accuracy of the packaging, the labeling requirements, all of that.

is really important when you get that big deal. So if you’ve got, you you start talking to a buyer at Walmart, you get excited, you you have your webinar, your calls with the buyer and you get the order and it’s great, they like your product, but are you really prepared to satisfy their requirements? And they don’t talk about that a lot, but there are a lot of strict requirements and you can actually get penalized. You know, if you don’t label your products right, there’s a dirty word in fulfillment called chargebacks.

Peter & Alex (15:51)
Mm-hmm.

Brian Sweat (16:18)
So if you don’t have those labels correct and you don’t have the proper barcodes on everything, then you’re going to actually have fines that can just completely obliterate your profits. So the main thing is volume. I think our companies that have very small local sales, so they have customers that come and pick things up at their location and they’re not really delivering or they’re not using ⁓ LTL carriers, like they don’t have a truck coming up on their dock.

Peter & Alex (16:30)
Mm-hmm.

Brian Sweat (16:48)
then maybe you can get away with paper tickets. But as soon as you start to get that volume, you really need to look at having a system that can actually barcode, and even if you don’t have barcodes, but you can actually pick and pack the items electronically and have that in a database that we can use to communicate with the customer.

Peter & Alex (17:02)
Mm-hmm.

Yeah, and I’m interested in something that actually we do have some experiences with that, you know, filling through a distributor or filling larger loads for Walmart to stores. But where we sometimes have less certainty is these smaller onesies and twosies like I have 2,000 orders today that are going to go direct to end users. Is that something you guys address with Activate?

Brian Sweat (17:36)
Yeah, for sure. So the scheduling of orders and the scheduling of items to be picked. Yeah, if you’re if you’re just using a basic software like QuickBooks or paper based, you’re going to have all the stacks of paper, you’re going to print out those order forms, but not having that that audit that the list we call it pick list. And our pick list will tell the pickers and tell the guys in the warehouse exactly what to pick across all orders. So the

Peter & Alex (17:42)
Mm-hmm.

Brian Sweat (18:05)
The small business way without software like us is that you’re going to go pick one order at a time. So you’re going to make a trip through the warehouse really for every single order, but we’re going to give you a pick list, which will show you everything that needs to be pulled for today’s orders. And then you can go to the warehouse, pull those, then move it to staging and actually do the boxing there. So I think it’s just cutting down on the time it takes to process one order at a time, which is the traditional way of processing picking.

Peter & Alex (18:14)
Mm-hmm.

yeah.

Brian Sweat (18:35)
and then move to batch processing, which is pick list. And then also with software like QuickBooks or paper-based, you’re probably creating invoices one at a time. So you pick the order, you pack it, and then you need to remember to make sure immediately you build a customer. Because a lot of our companies don’t prepay, so their customers are not paying for the order upfront, and then they’re delivering after the fact. The terms and…

Peter & Alex (18:35)
Mm-hmm.

Mm-hmm.

Brian Sweat (19:02)
their agreements with their customers is that they don’t actually send the invoice until the order is being prepared for shipment. communicating that back from the warehouse is a mess with just pay-per-pick tickets.

Peter & Alex (19:15)
This is such an easy time study an owner can do just walking back into the facility and say, how long does it take you to go out and grab? And if we’re doing 50 orders a day, what does that look like? If we’re doing 200, if we’re doing five a day, when is that really starting to hurt? That’s such an easy 30 minute exercise to go out and take a look at just to get a sense of how much money you might be able to save. That’s good. I love what you said about the timing of the invoicing as well.

We’ve seen that too, like you said, where you might make an aggregate invoice if a particular customer wants to say, invoice us at the end of the month, for example. But we also have this interesting case we see with contract manufacturers. This comes up sometimes where they might have a brand that is a smaller brand and wants us to make the product but hold it on their behalf until they’re ready for it to be released and then maybe drop ship it on their behalf.

And now we have something that we call bill and hold where we invoice the customer, the product, but we keep it in our warehouse. So you have to like invoice it, recognize that it’s no longer ours and then still keep it in the warehouse system. And so that’s a layer of complexity as well that we see. it’s just like, another example, if you’re purpose built for contract manufacturing, then you’re gonna have something like that, but you just got no chance with something like QuickBooks to solve that.

Brian Sweat (20:37)
Yeah, yeah, if you were using

QuickBooks for that, as soon as you create the invoice, you’re back to negative inventory. It’s like, how many do we have in stock? Negative 50, I don’t know what that means. So people just stop looking at their, there’s no inventory numbers at all in the system. Yeah, yeah, yeah.

Peter & Alex (20:43)
It’s Yeah, yeah, exactly. Right.

Yeah, we need the spreadsheet. got to they got to be in and the desktop has to be on we got to check the spreadsheet.

so ⁓ you mentioned Walmart, I’m glad you did that is a great segue to EDI. Right. So I guess that the the million dollar question for me with EDI is when is it worth it? Right? You can always use this web platform, you know that that Walmart or the other big retailers will provide you when is it worth it to jump from that and then directly integrate EDI into your your systems?

Brian Sweat (21:24)
Yeah, this is definitely a question that a lot of our customers deal with. And so when I first joined the company, this is like 24 years ago, so I’m older than I look, I think. But one of the first companies I worked with had that exact situation. they, again, got the deal. They were actually a Walmart distributor. This is not a food company. So they were selling the little rubber mouth guards that you use for football and American football, right?

Peter & Alex (21:36)
Yeah.

Mm-hmm.

Brian Sweat (21:54)
So they got the orders. And so what would happen is Walmart would place the purchase order. And they had to package for store because they’re small items. And so they would ship to DC’s distribution centers. And then they would actually have the orders all marked for store. But when they got the order, this is about when it’s time to go with EDI software. Why they approached us is every time the order came in, they would have

3,000 stores, 2,000 stores. They literally sold to every store. And so when the orders came in, ⁓ they would have contract employees who would come in and what we used to call rip and read, and usually it’s just use the portal, they would log into the Walmart website and they would have to rekey the orders and their accounting software and QuickBooks because Walmart didn’t provide you with a tool to just turn around and invoice it. You actually still had to record it for your own accounting.

Peter & Alex (22:42)
off

Brian Sweat (22:52)
And so they had all these employees that would just come in. was like two or three people would rotate. And when that order would come in, they would work overnight. So they would come in at 6 PM and try to get everything ready because they had to start packaging the orders at 6 AM the next morning when their warehouse staff shows up. So if you find yourself being overwhelmed with having to what we call rip and read and reenter those orders in your software,

Peter & Alex (23:08)
Mm-hmm.

Brian Sweat (23:17)
That’s when it’s time for EDI. mean, and you have to have accuracy. Again, if you ship the wrong order, you know, if you market for store $12.56 and you ship it to the wrong DC, you’re not going to get that inventory back or that value. They’re not going to just reship it for you. I mean, it’s a mess. So I think really is when you start selling to big box retail and grocery stores like Costco, Target, Kroger.

You really you need to be ready to go to EDI as soon as you ship either nationally or regionally. If you’ve got a special at Costco where you’re selling, you know, some specialty steaks or something and you’re just going to sell it at a few locations, you don’t need EDI. You can just, you know, read it off the website and reenter it. But as soon as you have national distribution or even regional and you’re getting dozens of orders or hundreds of orders a month, then you probably should reconsider an EDI integrated solution.

Peter & Alex (24:13)
Mm-hmm.

So to recap, it’s the time savings of entering it, right? Hundreds, thousands of orders, and it’s also like the cost of mistakes, right? So, you know, a big retailer is going to punish you, you know, if, you know, for those little mistakes in order entry. It’s such an easy… This is like such an easy check for, again, an owner, someone else to do. How many orders do we get? How long does it take? How many errors have we made? And we’re planning to go from 20 orders to 100 orders a month.

Brian Sweat (24:18)
The staff.

Peter & Alex (24:41)
you know, at some point at 35, it starts to make sense. ⁓ It’s like an email to double check this. There’s also this interesting ⁓ to change the topic slightly for a second. I think, know, Brian, we’ve had some similar experiences when our customers ⁓ are ready to have direct EDI connection with their customers. ⁓ They’ll sometimes ⁓ say, OK, well, ⁓ you know,

we’ll need you to connect to SPS, which of course SPS is a market leader in EDI. And, you know, one story that I think it would be interesting to tell is there’s this whole who’s on first kind of situation that happens here because what happens is the retailers use SPS for as their EDI platform. And then SPS says, well, we need to get your ⁓ vendors on SPS.

so that we can efficiently communicate. And then they use that as an avenue to sell SPS as the EDI provider to those vendors. But it’s being provided to them as like a web interface tool, right? Not directly into the accounting. So then what happens is we come along and it’s like, okay, time to connect to SPS. And they’re like, they introduce us to their SPS contact, but it’s their SPS account manager that they use for their account, not the customer’s account manager.

Sorry, not the retailers account manager and we’re like, no, no, no, we need to talk to the SPS person with Walmart Not your SPS person ⁓ You know your your guys the one we’re gonna cut out of the loop and you’re not gonna have to pay them anymore and of course like now we’re playing who’s on first except that like, you know SPS is actually not actively trying to make this less confusing, right? You know, they they they benefit from that confusion. So it’s ⁓

Brian Sweat (26:04)
Right.

Yeah,

so our experience and we’ve worked with SPS Commerce for like 15 years, maybe even longer. ⁓ Starting with like plain text FTP and kind of moving from there. So transferring files back and forth, right? So the SPS model is to bring you on as a full service. So if you are a vendor to an SPS trading partner such as Target or one of these large grocery companies.

Peter & Alex (26:57)
Mm-hmm.

Brian Sweat (26:58)
You either have to pay the service to use their software. And again, if you have the volume, it’s probably worth it to sign up. But if you don’t, if you do find like, let’s say your IT guy says, I can make it work. You know, I can do the integration. Then you have to go through and you have to pay and you have to deal with their certification. So if you use their service and you find software that integrates with SPS commerce, like we do.

Peter & Alex (27:17)
Mm-hmm.

Brian Sweat (27:25)
then you don’t have to worry about that certification. We’ve already been certified. So it’s just turnkey. There is some timeline. They have to set up a new trading partner connection. You have to get an account. You have to pay for it. But if you don’t do that, you still have to work with SPS. But you just have to have your, you know, your custom solution has to be certified and integrated. And the cost of that really can be as much as the software costs for buying a system like ours. So it’s, it’s, it’s really shocking with how

Peter & Alex (27:50)
Mm-hmm.

Brian Sweat (27:55)
Small businesses are just not prepared to sell to these large big box retailers and grocery stores. They just don’t expect that. And if your buyer tells you that it’s just like email, well, it is, except it’s very strict and there can be consequences if you type anything wrong, you know?

Peter & Alex (28:14)
Mm-hmm.

⁓ Something else, know, unlike Markov, think, ⁓ Activate, you you guys work a lot with brands, right? So that side of the fence where brands, you know, a lot of the same challenges around tracking inventory, but they’re not holding it there physically, right? They’re holding it at remote locations. ⁓ I think it would be useful, you know, our audience are primarily these manufacturers, but maybe we could get a ⁓ peek at the other side of the street. What’s the view from the brand perspective, you know?

deploying a system and then looking across at like, you know, how do I interact with my contract manufacturer?

Brian Sweat (28:52)
Yeah, that is, we actually have probably had more brand companies than we have the actual contract manufacturer. So again, that’s why I’m so excited to meet you guys and join team because I feel like we serve both sides of the supply chain, but our companies are definitely the brands that you’ve seen in the stores. So if you walk through these cosmetics, if you’re at Ulta or you’re at Target and Kroger, our brands are the companies that you see on the shelf.

Peter & Alex (29:16)
Mm-hmm.

Brian Sweat (29:22)
And the number one thing that they need from the contract manufacturers is, you know, being able to satisfy the needs of their customers, the customer service needs. So communicating and exchanging data for lot numbers and, you know, the dates required. So the best buy dates, you know, you know, the manufacturer date, the lot number, the quality, every everything that we need. We like to work directly with

the contract manufacturers and set up a relationship for data exchange. So some of our companies, especially the larger companies, will use EDI, not just for the trading partners to the retail stores and the grocery stores, but they will also use EDI to their manufacturer partners and the three PL, the third party logistics warehouse companies. So if you think of these brands, they’re just a hub. They’re a marketing company in most cases, right?

Peter & Alex (29:57)
Mm-hmm.

Brian Sweat (30:22)
So they built the product, they market the product. We’ve talked before, a lot of our customers are in Manhattan. It’s like, where’s your warehouse? You’re on Madison Avenue. It’s like, where’s your inventory? Well, it’s not there. It’s at a big logistics warehouse or multiple warehouses across the country. So again, that customer service and being ready to communicate where your products are, what’s coming out, what’s being shipped.

Peter & Alex (30:29)
Mm-hmm.

Yeah.

Mm-hmm.

Brian Sweat (30:48)
in real time really to your brand is very important. And if you don’t satisfy that need, they’ll look for somebody else. So it’s not just being a low cost manufacturer. It’s also giving that customer service and visibility. So if you have, you know, maybe software like Markov or, you know, whatever else you’re doing, exchanging the tracking numbers and the, you know, the shipments, knowing where things are, when it’s going to arrive, all of that data is what our customers demand from their manufacturers.

Peter & Alex (30:49)
Mm-hmm.

Mm-hmm.

Brian Sweat (31:17)
And these are, you we’ve got companies that that stayed on QuickBooks into the a hundred million dollar revenue range, which is shocking. But, you know, if you’ve sold, you know, 20, 30 products at every grocery store, you can get away with that. So, yeah.

Peter & Alex (31:31)
Totally.

And you know, ⁓ something that we’ve often seen, you know, almost every time I do a site visit with a customer and we get to join the production planning meetings and their scheduling calls, ⁓ something I see time and time again is they’ll be looking at the production schedule, like what are we gonna make this week? What are we moving around? And like, well, we’re gonna have to bump that order because the brand ⁓ didn’t get us their ⁓ branded labels or

branded packaging components on time. And so we’ll bump the order. Meanwhile, the brands, you know, pressuring the pretty, you know, the manufacturer to get things done on time and to move fast and then drops the ball on communicating around when those brand supplied components will arrive. ⁓ And oftentimes doesn’t doesn’t give information at all, right? Like the contract manufacturer has a Markov that does all their production planning for them the around inventory, right? Like

What raw materials do I need? What packaging components do I need? When will I run production? Will I have enough on time? Will it meet the demands of when the customer needs it? Okay, everything’s locked and ready and I’ve got this beautiful schedule, except one missing piece of information is when will I get that branded bottle or label? And they just can’t get that information out of the brand. like, okay, well, we’ll have to hope for the best in schedule production and then it doesn’t show up. So I guess public service announcement to brands is like, you you need a system.

to at least participate in that part of the planning to make things easier for the contract manufacturer and the communication to do so. It’s in your self-interest to say, is when the components are coming and this quantity will come and we will make sure they are there at that time.

Brian Sweat (33:20)
Yeah, that’s a great story because it absolutely goes two ways, right? I think the, but the thing to keep in mind is the brand also doesn’t have a warehouse full of jars and labels and packaging. that’s another, so there, you know, we, we, we always present, you know, our software as a hub for managing all of this for a brand, right? So, you know, knowing that the manufacturer needs the, the packaging materials on schedule on time.

Peter & Alex (33:24)
Yeah. Yeah.

Right. Good point.

Mm-hmm.

Brian Sweat (33:49)
⁓ It goes both ways that they need to be able to communicate that to you and to that other partner, that other vendor. You know, when those supplies arrive, you’ll notice that they didn’t ship from Madison Avenue in New York. know, again, they’re coming from another ⁓ manufacturer and they’re upset that they didn’t, they weren’t communicated your production schedule. So I, like I said, I think one of the most important things in this space of, ⁓ you know, co-packers and co-manufacturing is that

Peter & Alex (33:56)
Mm-hmm.

Yeah. Yeah.

Right. That’s right. interesting.

Brian Sweat (34:19)
is communication and being open and working with them and not just doing the electronic data exchange like EDI and ⁓ emailing Excel files, but actually having a ⁓ good platform in place to track and communicate.

Peter & Alex (34:35)
Beautiful. Do you have other questions to ask before we get to implementation? Let’s do it. ⁓ Advice for companies. I’m sure there’s companies out here listening. We need a system. you know, inventory is negative in QuickBooks. We can’t trust it. We’re wasting time in the warehouse. We’re manually making invoices ready to do it. What advice do you have for companies that are going to implement software? What can they do to make it run smoother?

Brian Sweat (35:02)
Yeah. So I have the strong opinion and belief that the first thing that generally fails, so ERP implementations have a ⁓ really high failure rate, right? And one of the biggest reasons is that they generally replace the whole system. So companies that are using QuickBooks, which absolutely, and I think we can all agree that QuickBooks really is the best in class leader for small business accounting.

Peter & Alex (35:09)
Yeah.

Brian Sweat (35:32)
So it does a great job connecting to your bank, connecting, doing your payroll, super easy to use. You can run it on your iPhone. QuickBooks is good for accounting. So number one is try not to throw out everything and change everything at once. So that’s why, I think that’s why we all exist is that it’s nice to find an integrated solution. Find something where you’re not having to replace your general ledger and your payroll and your accounts receivable and your accounts payable.

Peter & Alex (35:47)
Mm-hmm.

Brian Sweat (36:00)
your inventory system and your production system all on a Tuesday, that’s gonna fail. So I think the phased approach is good. ⁓ We will generally find companies that just start using Activate and our recommendation for implementation is get the core inventory, sales orders, purchase orders, manufacturing pieces in place. And then a of times we will still do paper tickets. So for the first six months.

you may want to still continue to print a slip, a pic ticket. So you may want to still print a pic ticket for the warehouse that’s on paper and then not do the mobile devices on day one, you know, because maybe you’re not really ready for that. So again, we like that phased approach, number one. Now, the other thing that I would be wary of, we sometimes will find consultants or even other software companies that will plan a one-day trip or they’ll come on site for two days.

Peter & Alex (36:43)
Mm-hmm.

Brian Sweat (36:58)
and you’re not going to be able to really rip the Band-Aid off and go live with the software in two days. It just doesn’t work. So I think we take a 60 to 90 day approach. So we take, we do the introduction calls and we make a copy of their data. We take a QuickBooks file, if it’s desktop, make a copy. If it’s online, we connect with a copy of it and let them play around. get a sandbox, see if you can get a copy of the software.

You know, usually you do need to buy the software first. You know, 20 years ago, everybody wanted a free trial, which is kind of a slap in the face to training. And I, I’m not on the training team here, but you know, there’s a reason why you have implementation and training services because, know, how are you going to learn to use this new software just by, you know, jumping into it? It doesn’t work. So, you know, you will need time, you know, you’re going to need time to set that up. We generally spend about 60 days with small businesses.

Peter & Alex (37:31)
Yeah. Yeah.

Exactly.

Brian Sweat (37:55)
to get a copy of the data, to do a mock connection to QuickBooks. And we call it a model company. So we model their data. We make sure that things look good. We get the reports ready, any invoice formats, put their logo on it, do all that basic stuff. And then try to go live in 60 days. And then after they go live, that first 30 days, so if you’re watching this as a customer, that’s the most intense.

It’s not when you first buy the software and you get trained, but it’s the day that you start processing your first orders in the software and just be prepared for that. But you need us, you need a team on call. Being there in the warehouse is probably not necessary for that. We do almost everything remote now and it works really well. After we’ve learned about the company, we don’t need to be there every day, right? And being on call, I think, for that three month period is what you should expect.

Peter & Alex (38:25)
Totally. ⁓

Exactly.

Mm-hmm. Mm-hmm. That makes total sense.

You had another way to ask this question. what should they do ahead of time? say, OK, we want to do this. It’s like day zero and the project’s kicking off. What are the things they have assembled to make the project go really smooth?

Brian Sweat (39:09)
just knowledge, right? So bringing the people that know about the business. So I think getting the right people involved in a project is the most important indicator of success. So I know the owner is busy, it’s holiday, he’s got kids in college, or there’s some excuse why he can’t take those calls. I think that’s a big mistake. So you need to have a discussion. The owner of the company, the operations manager, the general manager, whoever’s in charge,

Peter & Alex (39:10)
Yeah.

Mm-hmm.

Brian Sweat (39:38)
doesn’t need to be in the nitty gritty. They don’t need to set up parts and part categories and things like that, but they need to make sure the direction of the business is clearly communicated to the software implementer. So who’s setting this up? What’s important? We have companies, not every company needs to track every single feature that we have in the software. We have food companies that are not tracking the best buy dates and expiration dates, which is shocking, but they’re like, that’s not a problem for us.

You know, our contract manufacturer takes care of that. We have it all in file, not a big deal. But I would have approached it like, you need this, you need that. And until you have those conversations in small business, it’s just, there’s a spectrum of needs. And so starting with the top, think is the most important. So if you’re the owner, you need to be involved in those early calls. But after that,

Peter & Alex (40:28)
You’re saying you don’t want the

owners like nephew who’s really good at computers who’s going to be the summer student for the number of times we’ve seen that Peter like where they yes they they you know we don’t need a computer expert we need somebody who’s an expert in your business. You said the owner or maybe a plant manager or purchasing manager plan like. Yeah it’s just ⁓ drives me crazy.

Brian Sweat (40:32)
⁓ yeah, that-

That’s right. That’s right. Yeah.

But then the second part, we talked about this earlier, the second part is do not wait until you have a perfect inventory count. Don’t wait until it’s a slow time of year because it’s never going to happen. We’re always busy, we’re always slammed. There’s never a good time, so rip the bandaid off, get the software in place, and just start. Just start setting orders in the system and start working with it because…

Peter & Alex (40:56)
Mm. Right.

Mm-hmm.

Mm-hmm.

Brian Sweat (41:14)
You know, we have companies that have delayed because they’re trying to get that product list perfect and you’re buying the software, you’re setting up the system to help you manage those products and that inventory. There’s no, if your inventory was perfect, why would, why are you even talking to us? Right? Yeah.

Peter & Alex (41:24)
Yeah, exactly.

Exactly. Yeah, yeah,

you want to build that momentum, right? Like get it in so that it can start helping you. You can taste some of the, you know, some of the benefit and then that gets you some momentum to carry the rest of the way.

Brian Sweat (41:41)
Yeah.

And if you’re using QuickBooks, if you’ve tried to clean up QuickBooks after you’ve had all these messes, I mean, that’s a huge project in itself. So I just say, throw it away. Just get the data into our software and get rid of everything that was in QuickBooks. We’ll mark that inventory as inactive. We’ll zero it all out. And we’ll just start using our software going forward. And then six months from now, by year end, you’ll have forgotten how messy it was before.

Peter & Alex (41:50)
Mmm.

started new.

I love it. I like I’m looking in the mirror. I’ve said the exact same thing. So good.

Brian Sweat (42:14)
I feel like this should be common knowledge. Like it’s not that difficult, right? You just need to start, you know, I there’s a lot of inspirational videos out there, right? Just, you know, start today, you know.

Peter & Alex (42:16)
Yeah. Yeah.

⁓

It’s never a good time to get a puppy. So let’s all just get puppies right now.

Brian Sweat (42:29)
No. No, so I’m in Texas where we have a lot of heat, right? And you

know, there’s this like Chinese proverb, right? That’s like the best, you know, when’s the best time to plant a tree was like 20 years ago. And the second best, right? That’s true. And yeah, the second best time is today, like now. So

Peter & Alex (42:39)
Yeah. We need some trees right now.

Yeah.

Yeah. Love it. Cool. Well, Brian, thank you so much. It’s been ⁓ been a pleasure having you on and really appreciate the time. Yes, great.

Brian Sweat (42:55)
Yeah,

I really appreciate joining you guys and really look forward to this relationship. Bye, guys.

Peter & Alex (43:00)
Okay,

can actually hang out. like now we just stop recording and I