Oh, supply chain. You’ve really done us dirty over the past couple years. Thanks to a global pandemic, supply of countless goods has been impacted. Were you looking forward to a new oven last fall? Sorry. You probably still don’t have it.
The good news is that we have people like Fulcrum CEO Sunny Han working on it. In this clip from the “Strengthening the Supply Chain With Sunny Han of Fulcrum” episode of The tech.mn Podcast, Han talks about the advantages and disadvantages of a decentralized supply chain, the “bullwhip effect,” how the mistakes of past companies taught him a lot about business and humility, and a lot more.
Sunny Han 00:00
I’ve always wanted to organize groups of people, whether that’s being the captain of the math team or trying to get a group of people to play World of Warcraft together and take on challenges.I think there is always a part of me that wanted to do cool stuff. And that always included convincing people and motivating them and organizing them. So, I think that part always existed. But I would probably call myself risk averse. I’m supposed to give a welcoming little speech to the Launch Minnesota board tomorrow, and one of the subject matters is talking about why I want to help the startup community here. And I think one of the things that is really unique about Minnesota is that I don’t actually think that we have a lot of risk aversion. I think we have societal risk aversion; we’re afraid of other people judging us, or we hear too many times, “Well don’t do that. Just go work for some Fortune 500 company.” I think there’s a lot of individuals that otherwise would take a lot of risks and should be entrepreneurs. But I think the environment might talk you out of it. So, I think I probably suffered from that too. And for whatever reason, realized that I wanted to start my own thing. But for a long time, it just wasn’t even a thing that I thought about.
Casey Shultz 01:15
Fulcrum is your third company. Were your other two companies also in manufacturing? How did you end up in manufacturing?
Sunny Han 01:23
I worked in consulting for a while. And the firm that I worked with dealt specifically with small businesses. So, I was able to see hundreds of different businesses… in transportation, in manufacturing, in logistics, in a lot of different places. And the first two companies were in transportation logistics, and the second one was in financial analysis. So there are always a lot of ideas just based on problems that I saw.
I think the mistakes I’ve made in the past ones are just trying to rely all on myself, or being greedy or selfish about equity, or about a company bringing a partner on, trying to avoid venture capital when that’s what we needed, or not knowing how to handle some basics in business and negotiations and collections and getting cash in the door and things like that.
I would say those first two experiences were very similar to what we’re doing here. Those were mostly a training ground for me to cut my teeth and also to learn a little bit of humility, too.
Those were mostly a training ground for me to cut my teeth and also to learn a little bit of humility, too. – Sunny Han
Casey Shultz 02:23
Is Fulcrum focused only on working with us based manufacturing companies?
Sunny Han 02:28
About 15 percent of our customer base is international. So, in Malaysia, Australia, England, and all over the world. But we primarily target, from a marketing standpoint, U.S.-based manufacturers. The goal eventually is to go in or internationally. But I think the market here in the United States is so broad and so large that we’ll spend quite a bit of time cutting our teeth on that.
Casey Shultz 02:52
How do you think that the United States competes in comparison with the global manufacturing?
Sunny Han 03:00
I don’t know how philosophical you want to get on this. But I think I think about this a lot. It’s something that I think about every single day in every little nook and cranny of time that I can find but part of it. I think it boils down to whether you believe that a society of freedom is the future or not. And I know this is going to sound like a weird hipster tangent, but if you look at China, they have the opportunity with a planned central economy to be able to say, “This whole city is manufacturing.” And down the street is a CNC machine shops, and up the street are the rubber extruders, and there’s a glass manufacturer, and everything is within a seven-mile radius. There’s just an incredible amount of efficiency that you can gain there. There’s skilled labor. You can push people around in different ways. There’s a lot of things that you can accomplish when you have a lower amount of freedom and a higher amount of authoritarianism.
A lot of the challenges that we face in America are the result of us having an economy that is primarily freedom driven. Small businesses power a lot of our economy from a manufacturing standpoint. They start businesses where they’re from. They are all over the country. Now, we have some concentration in the Rust Belt and things like that. But people tend to live where they want to live. And they have skills based on the jobs that they have. And we have this really robust, agile, adaptable, decentralized system. But that takes a lot more coordination, a lot more effort, to achieve the same thing a lot of different ways. So, I think we can compete in a lot of different ways. But in the high volume, economies of scale, we have a big barrier there. Not just from labor differences between us and China, but also just in the way that our country and in our government set up.
A lot of the [manufacturing challenges] that we face in America are the result of us having an economy that is primarily freedom driven. – Sunny Han
Shacarria Scott 04:44
There’s a lot of supply chain problems right now. Do you think that’s making people think about manufacturing in a different way?
Sunny Han 04:56
I think certainly more so now than ever. The average person is more aware that their stuff gets made somewhere and has to get to them in a way that isn’t just from Amazon. I think in manufacturing, there’s this concept called the bullwhip effect, which is that as supply chains go under stress, you have these ebbs and flows where a big shock of the supply chain is going to take years and years and years to really resolve because you’re kind of redistributing things around to different places. I think people are realizing that it’s okay to buy a much smaller quantity of something more often, source it locally, have that production delivery happen within a couple months, instead of waiting, you know, seven months for an entire container full of something that come overseas from China. I think there’s just a difference in mindset. And I think that’s helping to put more work in the hands of Americans and American manufacturing, and not just Americans — French manufacturers in France and things that are sourced locally. I think there’s a huge amount of environmental impact that people don’t really realize. That we can save in making things close to where they’re used instead of shipping things to China and shipping it back. And I don’t think this is a disparaging moment against China either. I think there’s a lot of things I disagree with philosophically, but I think China is going to have an economic problem where they need to build stuff for themselves to use there as well.
So, I think the shift has always been happening very slowly. And I think COVID has really accelerated it quite a bit where we have this big paradigm shift that’s about to start cracking very soon. But overall, I think that the average consumer has very little ability to kind of impact these decisions. These decisions are kind of more micro/macro-economic within the companies that are doing the work,
Casey Shultz 07:04
Has COVID really shined a light on the weaknesses of a centralized supply chain? I think the iPhone is perfect example where all the tiny pieces are made within 15 miles of each other. And that’s the power of why a lot of these electronics are made in China. Whereas if it was done in the United States, it would be dispersed across the country. But the challenge there is when we have a pandemic come through like COVID. Now, we’re seeing the ripple effect of these products not getting manufactured at all, whereas if it was decentralized, yeah, you might have like a supply chain hiccup here or there. But enough goods would still be in manufacturing or being produced so it would have a smaller impact on our communities. Do you think the pendulum is going to swing toward a more decentralized supply chain?
Sunny Han 08:04
I think long term that’s where everything is headed. I think we see that just with production quantities going smaller and changing more frequently. There’s a different car model every year now for most car manufacturers. But I think for the iPhone, specifically, there’s always going to be some products where it’s so popular and so prevalent that you want to control the quality of it. You want the iPhone that exists in New England to be the same one that exists in Brazil to be the same one that exists in Australia. It really is much easier to do that if you can control within one facility or one set of facilities.
I think some of the ways that technology can help is to help improve quality and still decentralize it. But it isn’t how people think. There’s no belief of it, and the risks for a company like Apple to try it out and then have a bunch of iPhones not be to spec and have a bunch of PR backlash and consumer backlash. It isn’t going to be led by Apple. It’s going to be led by smaller product companies that are maybe selling something through Instagram; primarily ecommerce-only businesses that that are in smaller production quantities. I think they’ll be able to scale their operations up much faster than what it took a long time for Apple to get to where they are now from an infrastructure standpoint. I think really where the change is going to happen is with newer products and newer companies that are just going to have to be more decentralized in order for them to get there. Right now, if you were to make a new product, you probably would have to buy components from seven or eight different vendors. And while it seems like a pain in the ass, I think there’s an embedded value there that they’ll realize in the midterm. Maybe not in the short term, but over time.