Henrik Müller-Hansen: 0:03

If something is smarter, faster, and greener it will eventually happen. And it is smarter, faster, and greener to produce something locally. And with the technological advancements, it's also going to become cheaper

Tom Raftery: 0:20

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. And welcome to episode 315 of the digital supply chain podcast. My name is Tom Raftery, and I'm excited to be here with you today sharing the latest trends and insights in supply chain. Before we kick off today's show I want to take a quick moment to express my gratitude to all of this podcast's amazing supporters. Your support has been instrumental in keeping the podcast going. And I am really grateful for each and every one of you. If you're not already a supporter. I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about supply chain. Supporting the podcast is easy and affordable with option starting as low as just three euros or dollars. And that's less than the cost of a cup of coffee. And your support will make a huge difference in keeping the show going strong. So to become a supporter, simply click on the support link in the show notes of this, or any episode or visit. Tiny url.com/d S C pod. Now without further ado, I'd like to introduce my special guest today. Henrik, Henrik. Welcome to the podcast. Would you like to introduce yourself?

Henrik Müller-Hansen: 1:39

Thank you very much, Tom. Yeah, sure. My name is Henrik Müller-Hansen. I founded this company, Gelato, which is, in a way a company traveling like the nomads, very light, very fast, not owning assets and, in some shape or form disrupting the global supply chain supporting e-commerce.

Tom Raftery: 2:01

Okay. How are you doing that?

Henrik Müller-Hansen: 2:05

Yeah. So if we go back in time, I was fortunate enough to work with, in my opinion, one of Europe's leading entrepreneurs. His name, was Jan Stenbeck. He unfortunately passed away, far too early at the age of 56. But he founded some companies that you know of Metro International, Vodafone, Tele2, MTG and in total, I think 70 companies. And wow. one of the things that he always came back to was that if someone is already owning a fixed asset and it is standing idle, if you focus on building the software to connect that asset to the consumer and the consumer demand, everyone will win. The consumers will have more choice. The asset owner will have a higher return on investment, and you will be able to offer the services without investing on the balance sheet. So, Jan Stenbeck called that way of building a company traveling like the nomad people. If we fast forward today, just to, before I go into more in details, we are about 350 people today. Last year we did roughly, 110 million euro in revenue. We are operating really globally, so we have, 18 offices around the world. And back in 2021, we were able to get a capital transaction of 240 million dollars going into Gelato at what people refer to a unicorn valuation. So what I would like to talk about today is why we're excited about the digitalization of the supply chain supporting global e-commerce. So you ask what does Gelato do? So, if we go back to kind of where I, I started with the software focus. What we've done is we've built a software platform that connects to about 130 production hubs around the world. Distributed across 32 countries. And if you look at that supply chain, there are many parties involved. So it starts with the companies supplying the products and the products we sell are mostly as of today related to Shopify customers, Etsy customers so it's wall art it's clothing, it's books, it's home decor, a drinkware and so forth. That's kind of the. At, at the heart of what we offer. Okay? So in order to be able to produce that across 32 countries and 130 production hubs, there is a kind of intricate complicated supply chain underneath. And as I said, it begins with just sourcing all that raw material. That's kind of the starting point for the supply chain. And then the partners, they go and they fetch the inventory and they bring it into the production. And after they produced, the software we have built also helps our production partners. And again, we don't own any equipment. So they own all the equipment, the pre-press, the post press, and the production. So after it's produced it goes into the packaging stations. And after that it's handed off to one of our roughly 40 carriers that we have signed agreements with. In that total value chain, there are roughly 700 different partners, 700 different suppliers. So then you can say, okay, why does this matter to a merchant? Why does this matter to an artist or a creator? Well, the problem we solve is we need to allow every person in the world to produce art products and then have that produced in the local market. Literally overnight. So if you are an entrepreneur from let's say Africa and you have this amazing art mm-hmm. And you want to reach consumers all across the planet, well, what they had to do before was to produce that many times locally and then at high cost and with high complexity, try to get that out to the people that she or he sold the art to. Yeah. Well, with Gelato, basically we've leveled that global playing field. So if you have some amazing art that you would like a person in France or a person in Canada or Brazil to buy well you connect to Gelato. Over various e-commerce platforms, such as I mentioned before Shopify or Etsy or WooCommerce and so forth. And then all of a sudden you have access to billions of consumers across the world mm-hmm. With local production, local distribution, which in short is just smarter, faster, and greener. So that's what Gelato does.

Tom Raftery: 7:48

Okay, cool. How do you assure consistency of quality across all the different producers in all the different countries that you're operating in?

Henrik Müller-Hansen: 8:02

That's a great question, and let me tell you, it was quite difficult when we got started because what has happened, I founded a company and launched it back in 2007. And at the time, if I take a comparison the quality of the output, let's say you wanted to produce a wallart, the quality of that output was fluctuating widely. Yes. Let's just put it that way. But, you know, technology has this funny way of removing obstacles. And many times, much, much faster than you think when you start the journey. Okay, so if I look at the digital production equipment that we have connected to Gelato today, basically you, you have a factor of 100 to 300 in terms of increased output capacity. And at the same time, I would say that the quality by an order of magnitude has improved. And on top of that, you have costs that on average I would say, have gone down by 30 to 50%. So in many ways, traveling, you know, like a nomad tribe in this landscape of very rapid technological change. Has turned out to be one of our key advantages. And so quality in many ways have been supported. The increase of quality has been supported by the technology that the machine vendors and we're then speaking about Canon Ricoh, Fuji Xerox, Conica Minolta, Corning. Like all those machine vendors mm-hmm have truly, truly impressed Gelato and me with the way they've approached both capacity as well as quality consistency. But it's also if you think about you, you, you can almost think about Gelato as the Airbnb of production on demand. Okay. So. You know, we, we connect to all these amazing production hubs all around the world, and they go through a lot of filters. So they take care of what happens inside the production hub. But Gelato takes care of what happens before the production hub, meaning that all the digital files, which is what we send to the production partners, they are vetted, they are analyzed and assessed, before we ship them automatically through the algorithms to our partners. So we also have these automatic quality checks but now to the third really important element of quality in e-commerce, which is the actual delivery. So even if you have picture perfect quality on the digital file, And the production hub that you use produces the product, the t-shirt the wall art, the book in an amazing quality. If it does not arrive, it doesn't matter to the consumer. So if you think back upon the last, yeah, I mean unfortunately three, four years with Covid, the war in Ukraine, political almost unrest the, isolated landscape we're looking at, at the global level now. We're much more fractioned than we were 10 years ago as a globe, right?

Tom Raftery: 11:59

Sure, sure.

Henrik Müller-Hansen: 12:01

All, all of those things, the protectionism all of those things combined, actually makes the last part of the production and the supply chain really difficult to manage unless you're local. So that is, you know, quality has many metrics to it. Yeah. If you are this creator from Africa selling to a customer in Canada, Doesn't matter if the product is produced somewhere around the world in an excellent way, but it never arrives. So all those three components we've always taken full responsibility for those three components, which means that if you as a creator or merchant or global e-commerce store use Gelato, the quality no matter where in the supply chain, it is our responsibility from A to Z. So you can say you can run, but you can't hide. Mm-hmm. And with the consumer review reviews that are easily accessible across the planet you can go to Trustpilot, you can go to Shopify, you can read what the customers are saying about your services. You really need to take a lot of responsibility in all parts of that supply chain. And that's really the way I look at quality and, the importance of quality and how it played to our advantage with a local production on demand model.

Tom Raftery: 13:45

Okay. And I never asked you, you know, what's the origin story? Why did you decide to set up Gelato? And it's an interesting name. Where did the name Gelato come from?

Henrik Müller-Hansen: 14:00

Yeah, if we go back to the origin of Gelato, I was at a quite young age, at the age of 30, I, I became CEO for a company that Jan Stenbeck founded Tele2, which was a Pan-European telecom operator. Yep. And I became CEO at the time, this was back in 2003 we operated in about 20 plus countries in Europe. And I became the CEO of Tele2 Norway. Okay. And that at the time was about 150 million dollars. We worked with growing that and in a, in a very customer obsessed way. We were able to double the size of Tele2 Norway in about three years and turn it into profit. But at the same time, Tele2 grew larger, and larger, and larger. And with that which is very difficult to avoid it became more and more bureaucratic. Mm-hmm. More and more slow moving. Sure. And more and more political in a way. And one of the things I'm not good at is being a politician. And I never. I never enjoyed being part of the, the latter journey of Tele2 so I decided to resign and I actually did not have a clue what I should do. So I resigned in January, 2006 and I had to stay on for six months and I remember when I called my mother and said I resigned and, and she started to cry and thought that I would get a gold watch if I stayed on for another 30 years. But the world has changed and, and now I am old, but, but the generation that we are from, and you, you don't stay in the company for 30, 40 years. So. Anyway, I, I I started to think about, okay, what should I do? And I looked at a couple of metrics that I wanted to be in place for the industry. The problem that the industry was faced with, and basically it was the industry should be over capitalized. The industry should be truly, truly global. Mm-hmm. It should be large in size. It should be inefficient meaning with software connecting to the assets, the fixed assets in the industry, we could provide a higher degree of efficiency, lower cost to the consumer, and a better offering. And so then I found, and remember this was at the, the stone age, so back in 2007, right? So. I found three industry, so the first one was antique. And I figured, you know, antique goes really well in macroeconomic upturn because people have money and then really well in macroeconomic downturn because people don't have money. But the problem was they didn't know anything about anti, so it was too risky and I said no. And then we came to optician. The contact lenses, the glasses. And I figured it was, it, it ticked all those boxes. But the problem was my wife she really wanted us to stay in Norway and she worked at the equivalence of Unilever here in Norway. So, yeah, I had to stay in Norway. So you can't really successfully go into contact lenses, glasses if you don't have a really strong economies of scale in the market you start off with, right. So took that off the table and then I came to printing and I, you know, thought like everyone else printing is dying. Mm-hmm. But actually printing is one of the most dynamic and fastest growing industries in the whole world. If you focus on digital printing. Yeah. Meaning the digital machine. So when I started in 2007, digital printing was about $80 billion in size. Right? Offset. Offset, the old traditional was about $700 billion, so $800 billion in total, which is gigantic. You compare that with online music, you know, with the usual suspects like iTunes, and Spotify and so forth. That whole industry is roughly $15 to $17 billion. So we're speaking about an industry that's basically 50 times online music, which I could never have guessed mm-hmm before I started to study the industry. So anyway, it ticked all the boxes, like it's massively overcapitalized. The capacity is six times larger than the demand. It's very, very hard to find great software solutions in this industry. It's very difficult to find a global network that you can use if you're a global company. And I remember that from Tele2 because when we ordered marketing material, marketing materials, we had to, you know, order it two months in advance because it cost a fortune and it took too long time. Yeah. So the more I looked at this industry, the more interested I found it to be. So, you know, and then I read an article in Business Week which said printing for peanuts and making the world's highest profit margin or one of the world's highest profit margin. And it was about this new trend with the digital printing, which was with the new production technologies, you can reimagine supply chains in the digital printing space. Sure. Because basically it can take a single order. Of a single creation or artwork, and you can produce that at economies of scale with profit, which was unthinkable, you know, just going back to 2000. So you had this very rapidly improving digital production technology that we're being plugged into the supply chains. And we knew from Tele2 two how to build software. So we decided my wife and myself to sell everything we have, which was two cars and an apartment. And we invested everything down to basically $5,000 two years into the journey when I accused my wife of being financially irresponsible because she bought a cafe latte and, and she said, she said, we need to have a different discussion, Henrik. So. So basically that's the starting point. I, I wanted to, you know, apply everything I've learned working with Jan Stenbeck and with kind of philosophy of traveling like the nomad people, light and fast without any attachment to fixed assets and making the whole greater than the sum of the individual parts. And I think the world we now live in and at the stage Gelato is in the growth in e-commerce that we stand before coupled with the challenges of producing in one country and shipping, shipping that across the planet, we're at this very interesting intersection where I think the relevance of the digitalization of this supply chain that we have done now over the course of yeah, one and a half decades. Mm-hmm has really not since I founded the company, been more relevant.

Tom Raftery: 22:18

Yeah. Yeah. Yeah. Yeah. I mean, it's a, it's a great sustainability story as well. You know, I'm a, a hobbyist photographer, so if I had a mind to, I could set up, as you say, like an Etsy store or something like that, and then use Gelato to start selling prints of my photographs globally. Right.? That, that's what you're telling me.

Henrik Müller-Hansen: 22:42

Exactly, and, and I'm, I'm conscious also that Tom, I did not answer how the name Gelato came about, but

Tom Raftery: 22:48

I was coming back to that.

Henrik Müller-Hansen: 22:50

Yeah. Okay. Should, should I, should I go back and just give you a quick one on, on? Yeah why the name Gelato?

Tom Raftery: 22:58

Is it, is it your penchant for uh, Italian ice cream?

Henrik Müller-Hansen: 23:02

Yeah. Well, my wife is half Italian, so you might figure, but no well, you know, We started off as a B2C brand under the name Optimal Print, which is a very mechanical name. And then back in 2012 we read an article about how Amazon had moved into APIs. Okay. And we felt that, you know, why don't we do the same? And so basically opening up the whole supply chain so that everyone can access it through APIs. Well then we wanted a new name, right? Mm-hmm. Because we were no longer a B2C company. So again, one of the things I'm not so good at is naming. So I thought for a long time, and I came up with a name Source Logistic, and it couldn't be logistics because source logistics.com was taken. Ah. And so it became Source Logistic and, and many people around me said, it's probably the worst name they've ever heard. So, I went online and I look after now who is best in the whole world on naming, and the name that popped up over and over again was a man named David Placek and he has a company in Silicon Valley Lexicon Branding. And Lexicon Branding are behind brands such as Blackberry, Pentium, PowerBook, Azure or Azure. So really, you know, obviously they're much better than I was and am at naming. So I pinged David and he so happened to be in Paris at the time working for Loreal. Okay. And I told him about this idea about, you know, a company that every human being in the world could access and produce whatever they want, where they want it, when they need it in all countries around the world. And, and he really triggered on the concept, the idea, he became really energized. It didn't decrease the invoice, but we got his complete energy. So, eight weeks eight weeks into that project, he pings me and he says, Henrik, we know the name. So I said, okay, tell me. And he said, it's Gelato. And I said, no, but seriously, what, what, what is the name? And, and, and David says, no, seriously, it is Gelato. I was like, now you need to help me understand. Well, there are a few reasons for it. So first of all, Henrik, every person in the world loves Gelato. Mm-hmm. Secondly, imagine yourself coming into a gelato, really beautiful gelato shop, all the colors, and now you think about the industry. Think about the print industry with the same pallet of colors, right? Mm-hmm. Thirdly, when you buy gelato, you should consume it now. This industry should consume Gelato now. This industry needs Gelato more than ever, but fourthly, and this is the most important, Henrik, no one will forget and that's why you paid me. So, then that was the story behind Gelato. And to your last question there. So how, how can I use Gelato? And going back to David Placek in Lexicon Branding was basically the story you just said that triggered David Placek's interest in Gelato. He also triggered that idea to level the global playing field so that a single individual like you, Tom, who happens to be a hobbyist photography or photographer can reach the world and support consumers that wants to buy your art all across the planet with local production, local distribution. So it's really in a way democratizing the access point for any person with a business idea. And if you think about where we're going and what this will transform into, it's more and more a platform, a global platform for a person like you, Tom to not only produce wall art for example or clothing, but also with new technologies, and I'm in particular thinking about 3D printing and additive manufacturing as these new production technologies come to market mm-hmm, we are approaching a world where most of what you have around you should and need to be produced locally. Yeah. And. You know, there, you spoke about the sustainability aspect and there are so many dimensions to why digitalizing the global supply chain for e-commerce is so important and under the sustainability umbrella, you have E, you have S, and you have G. Yeah. You have environmental, you have social, and you have governance and if we just look at the environmental aspect of using local on demand production, you produce only what you need when you need it. So you, you don't have to guess volumes. This is one of the biggest challenges, I would say with, if you take the textile industry, the apparel industry that you're producing in a country far away. Yeah. You're trying to guess the demand of a t-shirt. And then you ship that out to not uncommon a hundred countries. And you know, two things. You're either gonna produce too much or too little. So why take the risk, right? Why take the chance? So you produce too much, which results in a massive landfill and a huge waste caused by the lack of marrying supply and demand. Sure. But there is another environmental benefit to this, which is that when you produce locally, you radically reduce transportation distances. Hmm. And we're not speaking about like a 10% increase or improvement. We're speaking about, you know, a 90% to 99% reduction in transportation business. And eventually as we grow the network, both these element will be more and more empowering for Tom, the photographer. Mm-hmm. Because you will be able to access more products more locally with shorter and shorter transportation, distance. So that's the E On the S, you have two aspects of the social dimension. The way I look at it is you have Tom, the photographer, who all of a sudden can make a living. And I'm not suggesting you stop this podcast Tom, but you know, you can make a living selling your photos to the world. Mm-hmm. And we come back to this level, the global playing field. The other dimension is of course, that from a production partner standpoint, we allow the production partners locally in the southern part of England, in the north part of Bristol to get access to global e-commerce volume from the customers in England or from the customers in Brazil. So the local production partners that we have in 32 countries, they get to produce what the consumers in their country is buying from the global e-commerce players. So it's a very interesting kind of social economic journey that we can be a part of. And then lastly, on the governance aspect, that this, of course, speaking about supply chains and speaking about the digitalization of supply chains, I mean, the governance aspect of sustainability when you bring production locally into some countries that have higher risks than other. Mm-hmm. For example, when it comes to child labor or not using good chemicals in the production, we work really, really hard to constantly raise the bar and improve our control over the governance aspect of the network. So from a sustainability aspect, we very broadly speak about sustainability, but it's helpful to break it down into E, S and G and yeah, that's what I just did.

Tom Raftery: 32:37

Okay. Super, super. And you mentioned in passing briefly there, additive manufacturing, 3D printing. Have you plans to move in that direction as well, or are you just gonna stick with the two-dimensional printing for now?

Henrik Müller-Hansen: 32:51

Well, you know, some, some times I get the question like, where are you in 3, 4, 5 years? And I also say that I, I don't know where we are then, but I hope that before I die, before I leave this planet, we have been able to give every person in the world access to the opportunity of producing what you need, where you need it, when you need it. And this what you need, that of course entails a journey towards additive manufacturing and, and 3D printing. I happened to spend quite some time last year traveling the world and visiting different 3D printing hubs. And although what has happened in terms of technological advancement during the last, I would say just five years is hugely impressive. Mm-hmm. We still have, the way we look at it the way I look at it in Gelato, kind of two major challenges before we can truly roll this out. The first one is it still takes too long time to produce a product. And you know, it was not uncommon to hear that this product took six hours to produce, that product takes nine hours to produce. So, so that's one aspect of it. Mm-hmm. And in the fast moving e-commerce world, and you can imagine Tom going into Christmas with a peak volume and you over promise and underdeliver the whole supply chain falters. But I also think that there is another problem, or I, I don't want to call it actually problem, but a time bound challenge which is the post press part, meaning, okay, what happens once you have produced the 3D item? So let's say you produce a jewel, let's say you produce sunglasses. The amount of time it takes to polish that. To bring it to a quality level that is sellable and impressive. It's just not dovetailing into our business model as of yet. But when you think about what has been accomplished the last five years and you think about what will happen, the coming five years, I'm hugely energized by what that can mean in terms of e-commerce, in terms of leveling the playing field in terms of sustainability local production, local distribution. So I, I think, well, at least from my perspective if something is smarter, faster, and greener it will eventually happen and it is smarter, faster, and greener to produce something locally. And with the technological advancements, it's also going to become cheaper. So it's a matter of time. But now we come back almost to where this podcast started, Tom, which is, this is the advantage of traveling like the nomad people because once we see a technology take off, we can connect to the fixed asset owners and get going. Sure. And so we are in a way, staying very observant, very curious, and very energized about where 3D printing is going and the opportunities it brings to the merchants or the photographer Tom. But it's too early for gelato to truly roll out and commercialize for now. But as I said before, technology has a peculiar way of nullifying and making your conclusions today irrelevant tomorrow.

Tom Raftery: 37:04

Yeah. Yeah, yeah, yeah. Never say never. We're coming towards the end of the podcast now, Henrik. Is there any question that I haven't asked you that you wish I had or any aspect of this we haven't covered off that you think it's important for people to think about?

Henrik Müller-Hansen: 37:21

Well, one thing I, I think we can just briefly mention is where are the trends taking us from a supply chain perspective? Great. And if you think about the trends you look at the consumer trends. Consumer generated content is growing exponentially. Yeah. And that, why is that important for supply chains? Well, it's important because it's really hard in the old world to produce a single item, with a single artwork cost efficiently, with predictable quality and deliver that all time. So the consumer trends is in a way pushing local production and local distribution our way. Hmm. The other trend that I find fascinating, we touch upon it a bit with the 3d printing question you asked me because, what I am seeing and when I speak to the machine vendors, Canon, HP, Indigo, Ricoh, and so forth, what they are doing is very impressive. So every single day, more and more production capacity opportunities is coming your way. The merchant's way, the photographer Tom's way. So the machine vendors is really helping the global supply chains to become efficiently local. Right. That's the second trend. The, the third trend is this sustainability trend that we discussed. I mean, I read recently in a McKinsey study that in the millennial generation, 80% wants to pick a company that has sustainability mm, very high up on the agenda. So whether you embrace a more sustainable future or not is kind of irrelevant if you want to build a successful business because you need to attract top talent. And top talent cares about sustainability. Yeah. Also the consumer cares about sustainability. So the E, S and G we spoke about earlier is being propelled by local production, local distribution. So sustainability will drive demand towards Gelatos business model. The fourth trend is legislation. I mean, EU is now saying that by 2030, this is seven years away, we should reduce CO2. Yeah. Well, six, seven. But, but regardless the interesting number is 55%. So 55% CO2 reduction in six, seven years, how are we going to accomplish that? Well, it's my belief that you will never be able to accomplish that unless you bring production and distribution to the local market where the end recipient is living even to the local city. Now, if you, if you extend it, EU says that we will be a climate neutral continent by 2050. So all the legislation is pushing demand our way. And then lastly, and you know I hate to say this, but the world is getting polarized. And with polarization comes bigger and bigger challenges of shipping products across borders. Who would ever guess five years ago or 10 years ago that we would be in this situation? So also, and, and this is actually unfortunately if I think about my three children unfortunately also that will drive demand towards Gelatos business model. So those five trends with those yeah, I, I believe we've covered most of what we've aimed at covering Tom.

Tom Raftery: 41:33

Lovely. Great, great, great. And Henrik, if people would like to know more about yourself or any other things we discussed on the podcast today, where would you have me direct them?

Henrik Müller-Hansen: 41:44

Go to gelato.com of course. Quite obvious read there. If you want to reach me or anyone in the gelato team, go to LinkedIn. I answer quickly and I welcome any request because we live in a globalized world. And I know your audience is global. So, yeah, please reach out if you have any questions comments or would like to speak to us. And then also, Tom, thank you so much for having me on your podcast.

Tom Raftery: 42:13

Oh, thank you so much for coming on, Henrik. It's been a fascinating episode.

Henrik Müller-Hansen: 42:17

Thank you.

Tom Raftery: 42:20

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, simply drop me an email to TomRaftery@outlook.com If you like the show, please don't forget to click Follow on it in your podcast application of choice to be sure to get new episodes as soon as they're published Also, please don't forget to rate and review the podcast. It really does help new people to find a show. Thanks, catch you all next time.