Phil Rich: 0:03

We sell all kinds of things that people don't need. They don't need them, but they love them. They want them, they want to create art music. They want to share that music with others. And, I think that's what makes this industry different. And, and in my 25 years, I've been around the same people for that long, people love being in this industry and they tend to stick around, even if they might move from one company to another, they're just really passionate musicians or they're passionate about audio

Tom Raftery: 0:33

Good morning, good afternoon, or good evening, wherever you are in the world. This is the digital supply chain podcast. The number one podcast, focusing on the digitization of supply chain. And I'm your host Tom Raftery. Hi everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery and with me on the show today, I have my special guest Phil. Phil, welcome to the podcast. Would you like to introduce yourself?

Phil Rich: 0:58

Yeah, thanks. Tom's good to be here. My name's Phil Rich and I'm currently located in Fort Wayne, Indiana in the beautiful Midwest of the US. And I'm the chief supply chain officer for Sweetwater Sound.

Tom Raftery: 1:12

Okay. And for people who might be unaware of Phil, what is SweetWater Sound?

Phil Rich: 1:18

Well, Sweetwater Sound is primarily an e-com retailer of musical instruments of all kinds. And pro audio equipment sound, reinforcement lighting. You can get your, uh, guitar from us, your amplifier, you can get lighting for your stage. You can get your PA system and you can even now buy trumpets and saxophones and other fine instruments from us. And we're the largest E eCom retailer musical instruments in the Western Hemisphere.

Tom Raftery: 1:48

Oh, wow. And so are you selling just on the continental Americas or do you go outside to Europe or Asia or where are you selling?

Phil Rich: 1:59

No, We really do stick to the US market. That's our primary market and no real drive into anything outside the United States at all.

Tom Raftery: 2:07

Okay. And as the chief supply chain officer for Sweetwater Sound, what does that role entail?

Phil Rich: 2:17

That role entails a a whole lot of fun stuff. so it's everything from our merchandising department, all of our buyers forecasting and planning, pricing strategy. To our fulfillment center that's, right here in, on the campus in Fort Wayne and includes opening up a new fulfillment center out in the Phoenix area here in just another month or two.

Tom Raftery: 2:42

Okay. Cool. And how does the music eCommerce business differ from other eCommerce businesses or does it?

Phil Rich: 2:53

Well, you know, I haven't worked in those other industries. We have vendors that are in those other industries like a Bose corporation or Apple or JBL and some of the brands that we sell, but I've been in the industry now for 25 years and it's a passion based industry and I'm sure there are others other passion based industries, you know, that people are really into sports and all kinds of things like that. But we just, we sell all kinds of things that people don't need. They, don't need them, but they love them. They want them, they want to create art music. They want to share that music with others. And, I think that's what makes this industry different. And, and in my 25 years, I've been around the same people for that long, people love being in this industry and they tend to stick around, even if they might move from one company to another they're just really passionate musicians or they're passionate about audio or live stage performance or something of that kin d I think that's what makes us different than maybe selling shoes or selling washers and dryers. Or even televisions, if you come to us to buy something, chances are, you're a musician, we're a musician. We're talking about it. We're smiling. We're having a great conversation. And we love that about the industry. It's a wonderful thing.

Tom Raftery: 4:10

Does that include yourself?.

Phil Rich: 4:12

It does. It does include me, yes. Yeah, I've been a professional guitar player since about the age of 19. I mean, how do you define a professional musician anyway? Right. Like in my opinion, it's somebody paid you to play, like you played a bar and got paid 50 bucks or you're doing something. And for me that was about six or so years playing guitar for the Navy band all around the world. And that was playing guitar four or five gigs a week, for many, many years in a row. So that's, and I continue to do that today. I don't gig quite as much, but yeah, love playing it's part of my life.

Tom Raftery: 4:51

Okay. And to your point, being a professional in the industry you are in, but very few people who are in the automotive manufacturing industry for example, would be professional drivers. So it's a very different, it's almost vocational isn't it?

Phil Rich: 5:09

that's a great way to put it. And it goes down into our suppliers too. The folks that make the microphones and the guitars we sell they're just super passionate about it. They use it. They're some of them are just some of the best musicians you'll ever meet, you know, in your life. And so it, it runs through the entire industry and that's really exciting.

Tom Raftery: 5:27

Okay. And how did, the likes of COVID impact the music industry, because a lot of live venues obviously had to shut down. Did that impact you guys? Did it impact you positively or negatively? Or how did you see demand for example?

Phil Rich: 5:47

Well, when COVID came around in March, was it of 20 now? It's been going on so long. I can't remember when it

Tom Raftery: 5:55

In March, March 20.

Phil Rich: 5:57

Yeah. When that came around, besides the effect it had on our company and our people the effect that it had on the business was the business sort of died off for about six weeks. Really just almost nothing was going on. And then all of a sudden there was this massive surge business for us. It was like after six weeks, hundreds of thousands of people, all of a sudden decided that they wanted to start playing guitar again, or they wanted to start playing drums again at home, or they wanted to start playing keyboards again at the, so those categories really went bonkers and the live sound categories really fell sharply that's really fell off the edge, but the net effect on the whole industry was, it was significantly up, but the industry actually grew probably 10 to 15% through COVID. Which is a little bit unusual growth for the industry. The industry's been pretty steadily sitting around the six and a half to$7 billion mark for, several decades. and it grew up to well over 8 billion through COVID. And now in the last I'd say since last summer, the live sound industry is really resurged and that did catch some of our suppliers off guard. They didn't know when the resurgent was gonna happen. And so when it did there, there's just a tremendous amount of demand and there still is a tremendous amount of demand for live sound reinforcement.

Tom Raftery: 7:20

Okay, so a bit of a bull whip effect as they call it.

Phil Rich: 7:24

Yep.

Tom Raftery: 7:25

And how, because you guys care so much for the devices you're selling, does that impact on how you treat your supply chain?

Phil Rich: 7:37

It's an impact how we treat the supply chain. There's a couple of logistical considerations in there as far as, heat humidity can affect a lot of instruments. It can affect drums and guitars they're made out of wood and as one legendary guitar maker said in our industry, a guitar doesn't realize it's not a tree anymore. So when humidity gets around guitars or lack thereof, they can dry up, they can shrink or they can swell and all kinds of strange things can happen. So, we keep our warehouse right about 50% humidity in 72 degrees all year round. And we have to be, cognizant of how those instruments, travel back and forth from the vendor and to our customer. So we label certain things in the cold winter months, and we put a sticker on guitars and say, Hey, please, don't open this for 24 hours. Let it acclimate. And we take a lot of care in inspecting all the guitars we get to, we open all of them up once they come from the manufacturer and we check 'em, we make sure that they travel well to us. We return them to factory spec. We make sure that, you no weather impact or shipping impact happened to them. Cuz we wanna make sure our customers get, a really fine instrument when they open that box.

Tom Raftery: 8:54

Okay. Cool. Cool. And your suppliers, I mean, you mentioned some of them there, the likes of the Bose and the Rode and the JBLs and et cetera, are they all big companies like that?

Phil Rich: 9:08

Oh no, there's probably about a couple, a dozen that are companies that are decent size, and then you pretty quickly fall into the, I'd say sub 20 million. And then very quickly after that, you're falling down into the under 10 million size down. We buy about a little over 1200 brands from about 700 different vendors. And a lot of them make little specialty items, like right here on my desk. I have this little device here. This is called a Capo and this, you put on a guitar and it, kind of changes the overall tuning of the guitar. And this is probably, you know, a$30 product and we've got little guys in Nashville that make a special one , and a little company in LA that makes a special one and people are real passionate about that. And then we've got small companies that make just handfuls of microphones. So little company down the road from us here in Indiana makes really beautiful leather straps so we try to have the artisan categories, and then we have the big brands too. So it's really that, that also, I think, reflects on the passion of the business we love the artists inside as love as, much as we love, the big companies that make the, uh, Fender Strats and the Gibsons and Les Pauls of the world too.

Tom Raftery: 10:22

Nice. Nice. And what are the challenges of dealing with such a wide range of suppliers?

Phil Rich: 10:30

Yeah, lots of challenges there, especially just communication technology, our vendor requirements for shipping all kinds of things, you know, when you have a, a company of three or four people you, and you try to train them on how to use your B2B site and enter tracking numbers and verify POs that's a little more difficult because they all might be working on making the product. And then one of them takes a break and does their admin work. And then, and there's even challenges with big companies too. You can imagine a company on an SAP or a company on some big software system that kind of limits, and it actually it's great for them, but it can limit the kind of information that they can easily download. And so that can be a challenge when you're ordering tens of thousands of lines from a vendor like that. And just trying to get the communication to go back and forth. That can also be a challenge.

Tom Raftery: 11:23

Okay. And being an e-commerce company you're direct to consumer. Right. So that means you're competing with the likes of Amazon. How do you differentiate or how do you say to people come to us and not Amazon?

Phil Rich: 11:40

Well, we kind of look at the industry and as having segments of retailers that you can look at. And on one end of that spectrum, you have all these mom and pop dealers, you know, and there's, a few thousand of those out there and they're in every town USA, you know, across America, there's mom and pop dealers. Then you've got, people that have been in the business for 20, 30, 40 years. And they really want to help you, but they have a very limited selection. You know, they're a small store. And on the far end of that, you got Amazon who you never speak to a person and they, and if you want to, if you have any kind of purchase at all that you need to consult with somebody on they're just not the place to go. So we sit right in the middle where we have the massive selection that. but really the best selection of products I think in the world. And we've got hundreds and hundreds of highly trained sales engineers that can talk to you about whatever it is your need is. You know, whether you want to talk about the first guitar for yourself or your kid, or you wanna talk about a giant recording system, you know, or you wanna make a spare bedroom in your house recording system, or you want to buy stuff for your church. Or your school, we have people that can talk to you about all that. So we like sitting right there between those two. That's really a perfect fit for us. We're the only ones that sort of sit there and provide the, and Amazon really doesn't even provide a very big selection. They're really more of a, they sell a lot of convenience products like consumables and sort of, very entry level type musical accessories. So, you know, Amazon can dominate on a very few products over here and the mom and pops can provide that lifetime of service in your local neighborhood. And know, we kind of do everything else in between.

Tom Raftery: 13:32

Okay. Okay. And you mentioned, I mean, you have your warehouses and, or your fulfillment centers and they're at, X percent humidity and Y temperature. So to try and differentiate from Amazon, do you have anything in your shipping and logistics that sets you apart?

Phil Rich: 13:52

I really think that we do. And that's really the quality of the packaging. We take really great care in packaging up products to ship, to people's doorsteps and, probably, yourself. And most of the people that listen to your show have bought something from Amazon

Tom Raftery: 14:11

Yep. Yep.

Phil Rich: 14:12

and it might come in a very odd size box for the size of the product with maybe one pillow in it. And those two items are sort of floating around in the box and banging around. And I think that's probably what people have come to expect from Amazon. So we're not really too shocked by it anymore. But we really try to. You know, our goal is that every box has a shake test that we do. And we just don't wanna hear anything moving around in it, or feel anything moving around. We want that, that product to be to be well packed. We put, a hand signed thank you card in the box. We're asking customers for feedback and, and we've always added for the last, 43 years, we've always added a little bag of candy to every shipment that we send out and people love that. And we get love letters all the time from people whose spouses love the candy. So they get to order more stuff from Sweetwater. And we also, you know, we've gone through an extensive, environmental study with all of our packaging. You know, we use very easily recyclable envelopes and we try to use the most environmentally friendly materials that, that we possibly can in our packing process.

Tom Raftery: 15:18

Nice. Nice. You are, as you mentioned at the start based in the US selling to north America, primarily and almost exclusively, but the products that you sell can be manufactured anywhere globally. Has the whole supply chain snafu that we've seen in the last two years has that impacted you guys importing stuff access to the, I don't know, is it guitars? I mentioned I'm using a Rodecaster to record this, that those are manufactured in Australia. For example has all that impacted you guys?

Phil Rich: 15:57

There's really only one brand where we bring in direct containers from Asia. So our supply chain really looks like hundreds and hundreds of vendors. That are in the us and probably a hundred or more easily that are based outside of the us all, if any of them do manufacture outside the us, they're all bringing their own inventory into their warehouse via their containers. Of course we feel the effect of that because, a chip factory just before COVID came along in March. But a few months before that, a really important chip factory to the industry located in Japan, burned to the ground. So now you have these two things happening at the same time. One is a massive chip shortage. People have heard about that within the auto industry and with the electronic industry. And that's not news to them, but probably what they wouldn't know is that lots of keyboards and electronic drum sets and digital consoles, they have a lot of chips in them. And a lot of products just aren't being manufactured at all and haven't been manufactured for a year or more in our, industry. and that's also a constrained supply of some products that continue to be manufactured, but not nearly in the quantities that, that people demand. And we've definitely were impacted by, the ports and containers. And if our vendors don't get it, then we don't get it. So absolutely our back order, reached an all time high, probably six months ago. Just an incredible amount of business that our customers are waiting for.

Tom Raftery: 17:27

Okay. And you mentioned sustainability in relation to your packaging. Are there any other sustainability initiatives that you are undertaking and is it something that your customers are asking for?

Phil Rich: 17:39

Well, I think from, probably one of the biggest ones right now is we're outfitting the roof of our, fulfillment center with solar panels. And it's a lot of solar panels and that's not really something that affects our customers directly, but that's something that we're really proud of. I think the other big initiative is, we're gonna open this fulfillment center out in Arizona here in about 60 days. And that's got a pretty big environmental impact on our customers because it's gonna serve probably 30% of our customer base. And a lot less fuel is gonna get burned a lot to get the product to them. I think there's gonna be a really positive environmental impact on just from opening that facility out in Arizona.

Tom Raftery: 18:23

Cool. Cool, great. Phil, we're coming towards the end of the podcast. Now, is there any question that I haven't asked that you wish I had, or any aspect of this that we've not touched on, that you think it's important for people to think about?

Phil Rich: 18:36

I know you've asked a lot of good questions. I can't really think of one that, uh, in regards to supply chain,

Tom Raftery: 18:43

And the music industry. I mean, it is, a very unique industry. I, you. Said it a couple of times already, the fact that it's something that touches everyone. We, , we, as a, a species, have some weird affinity to music. I'm not sure if anyone knows why, I mean, birds sing not for the same reasons. They don't, I think do it for enjoyment and entertainment the way we do, they do it as a form of, being territorial and maybe trying to attract a mate. Maybe that's part of why we do it too.

Phil Rich: 19:19

And you bring up something interesting when you talk about the human species and things that we're attracted to. And, uh, economic times are a little weird right now. And I've been through the previous downturn back in the late two thousands. And the folks that have been in the industry for decades longer than me have experienced the same thing. And that's when an economic downturn happens, there's two things that tend to continue to do well. And that's the sales of musical instruments and alcohol. So there's your human species element as we love music. And I think maybe we love to gather together and drink beverages together. So,

Tom Raftery: 19:59

I can sympathize with that. I'm, I'm a big fan of music and I'm a big fan of beer in my case being Irish. But yeah,

Phil Rich: 20:05

Yeah. And you know, you think about some of your favorite musicians. I, I really don't think any of them made a record or wrote a song without some kind of influence of alcohol probably, but not that I condone that, not saying that at all, but the two industries do seem to be a little bit Bulletproof because people are just so passionate about it and, that does make it a special industry.

Tom Raftery: 20:24

Cool. Cool. Phil, if people want to know more about yourself or about Sweetwater or any of the topics we discussed today, where would you have me direct them?

Phil Rich: 20:34

Tom, if they wanna know more about Sweetwater, they can go to sweetwater.com and, if they like to reach out to me, my email is Phil underscore rich at sweetwater.com. I'd be happy to hear from them.

Tom Raftery: 20:46

Fantastic. Fantastic. Phil. That's been great. Thanks a million for coming on the podcast today.

Phil Rich: 20:52

Thanks Tom, for having me, it was a pleasure.

Tom Raftery: 20:55

Okay, we've come to the end of the show. Thanks everyone for listening. If you like the show, please, don't forget to subscribe to it in your podcast application at choice to get new episodes, as soon as they are published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.