Taking a third-party logistics operation from cash burn to breakeven, for Skulogix

The problem

Skulogix was a third-party logistics firm in Toronto handling warehousing and order fulfilment for a roster of small independent brands selling into big-box retailers. It was burning cash.

The thing eating the margin was not logistics. It was compliance. Every large retailer published a vendor manual specifying how to label a carton, how to structure the electronic shipment notice that had to arrive before the truck did, and what the penalty was for getting it wrong. The penalty was a chargeback: the retailer keeps a slice of the invoice. Small per shipment. Ruinous in aggregate.

The brands could not do this themselves. They had a founder, a VP of sales, a couple of fulfilment staff, and a retail relationship that a single badly formatted barcode could end.

What we did

We built the pipeline that absorbed the bureaucracy for all of them at once.

Orders came in from a brand’s own system, got reconciled against that brand’s inventory feed, got batched by retailer, and came out the other side as that retailer’s shipment notice with the right structure, the right carton labels printed straight to the thermal printers on the warehouse floor, and the right invoice. Ten brands running in parallel through one pipeline, on the same pick-and-pack staff.

The per-retailer rules lived in one place and were written once. When a retailer changed their manual, which they did every quarter, we changed one thing rather than ten.

Eleven integration projects across four years, about three months each, usually including migrating a brand off whatever they had been using before. A four-person management team. Eight developers and three outside consulting firms.

What happened

The company went from losing about $4M a year to breakeven on about $10M a year in revenue, in roughly two years.

None of it looked like a turnaround. It was carrier rates renegotiated, a storage-cost comparison run against three carriers, weekly reconciliation queries hunting rate leakage, and a dimensional-weight rules document rewritten every time a carrier moved theirs. Each one a small win. Two years of them added up to the difference.

What it cost them to find out

Two years of chargebacks before the pipeline existed, and the customers that leaves. A small brand that loses a retail relationship over a label does not come back to explain why.

What we got wrong, and where this does not apply

The platform rested on knowledge that lived in about four heads. There was a succession plan on paper, but the people who could actually rebuild an integration from cold were fewer than the org chart suggested. Bus-factor work is the work nobody does until the bus has already happened.

The analytics library was a folder of ad-hoc queries organised by client. Some ran weekly, some ran twice ever, and the folder could not tell you which. Every analytics library built since has a runs-per-week column on the index.

What a turnaround actually consists of, on Jeff’s personal site.