Transcript for:
E-Commerce Operations Insights and Strategies

in today's video I'm going to cover absolutely everything that you need to know about e-commerce operations I really wish I had this video when I was creating the OD we did over $650 million in sales and it has been the most challenging part of my business marketing it's always been my specialty but operations simply because generally how e-commerce brands are created the founder is very creative they like product they can understand how to Arbitrage traffic and then they complete completely neglect the other side of the business so they're generally right brain orientated creative orientated but they're not process orientated but it's just such a negative thing and you really do need to understand kind of everything in this video if you want to achieve great things so we're going to cover things like planning we're going to cover things about product Supply Chain management Freight you name it for those that don't know me I'm Davey I'm the founder of the hoodie I also run daily mentor and in that I have over 57 fig Brands doing over a million dollar and they all struggle with this side of the business as well so that's why I'm creating this video I just wish I had it and it's going to help a lot of people so it's definitely more of a specialized more of an advanced video uh but I think it's going to really really help you out now I'm going to talk a lot about resources like spreadsheets and a Lot About 3pl Management these kind of things everything that I talk about today I'm going to use the w board but everything I talk about is in the free shop of our e-commerce cor so I will start building some templates out for you I've also started working with about 10 3pls that I trust and we've started to get great rates from them and I think that the 3pl side of the business which is the third party Logistics where a warehouse will actually ship your goods for you is probably one of the most difficult things to get right for Brands and you really need someone that you can trust so I've compiled a full list and if you just head to the description I'll give you instructions how to get that list and we'll introduce you and make sure that that's right so they are Affiliates as well uh but at the same time it we're working very very closely with you and they will look after you so to make you understand just how important this side of the business is we were forecasting to do something like $45 50 million uh in just like October November months and we had a provider for out on the logistic side of the business that completely couldn't ship any orders we had to turn off all promotions and then customers were getting the wrong products they weren't getting shipped at all and realistically we had no way to actually fix the issue because we had contracted this provider and they were just completely letting us down on the other side of the world in short we lost over $20 million in Lost Revenue in my opinion and that the BBC ended up running a story on us saying that I was a scammer which is absolutely heartbreaking for me because the customers that we have are just so so important and it made me really want to do this video simply because I don't want you guys to have to go through that I don't want you to have I don't want you run out of stock I don't want you to have a 3pl that can't ship orders I don't want you to have uh Freight Logistics companies when you're shipping stuff on the water completely mess up all of your timelines and get you lots of negative reviews simply because they've made the wrong mistake so that's all the stuff that we're going to cover today um so I think that let's talk about what operations actually are in it to put it really simply because you actually have not only operations in the general term but you also have marketing operations you can have Finance operations it's such a broad term and it pretty much encompasses all of business and I'll talk about the the subsection of operations that we're going to talk about today in just a bit but in short operations are we have the and by the way don't judge the handwriting I was very reluctant to actually use a whiteboard I was going to use the iPad but anyway we have inputs and then we have processes and then we have the outputs now this is pretty pretty much most of business the aim of operations is to maximize the outputs one of the key things is always just referencing the outputs how the customer experiences it because a lot of people will measure outputs and it won't actually affect the customer but realistically we're just trying to maximize the output for the customer and we're trying to decrease the amount of processes that we actually need through efficiency and we're trying to decrease the amount of inputs that we need because then we're basically getting more for Less processes you're trying to use automation to kind of decrease the amount of load that it takes within those processes and then you're also just trying to decrease the amount of inputs that are actually going in because that's going to decrease your cost as well that's basically operations as a whole and every single thing that we talk about today you know when it comes to forecasting how can we do more for Less these kind of things so just remember this formula so what are the fundamental departments that we'll be talking about today hey that wiped off pretty good so we're going to cover uh starting at the front we're going to talk about product now I could do a 2hour video on product it is such a large uh piece of the puzzle but I'm just going to cover it probably more from an operational standpoint then we're going to talk about supply chain so this is like more like getting the product to your uh Warehouse because then we have fulfillment and with in supply chain I'm probably going to talk about forecasting or planning some people will kind of put that in their own subsection uh as well it's kind of neither here nor there and then we probably got as well didn't really think about that we've also got customer service which I'll touch on briefly because I think it's a an important point of operation so we're going to cover each of these things obviously you order the product you create the product sorry you then order the product you forecast the product you fulfill it to the customer and then the customer gets customer service this is a very expensive process there is a lot of people that are required and it will scale up the amount of the amount of people that you actually need for this process will scale up as the business grows one thing to note if you are just kind of getting started with or charts you're generally going to have the SE o or the founder up here and then you're going to have you know the CFO over here then you're going to have a CMO so C CFO or chief executive officer for CEO Chief Financial Officer for the finance side of things Chief marketing officer for the uh marketing side and then you're going to have a COO so Chief Operating Officer and these are all of these departments here are going to be underneath this role generally in most companies sometimes product might be split up sometimes customer service might be split up but generally this is what I would recommend now a big part of today's video that I wanted to cover is how can I convince these people how important this video actually is because all of my YouTubes that get good views are going to be me talking about Facebook ads me talking about ways to Arbitrage traffic all the sexy stuff that uh drives revenue and I think that there should be at least one to one videos for this side of things but because it doesn't get many views on YouTube Nobody Does it I'm trying to change that for us here but realistically if you think about if you think about your business as like a garden let's say when you plant seeds to become plants and to harvest them that is going to be like products or even like marketing activities now I like to think of operations as weeding eventually if you don't if you don't weed on a consistent basis on a consistent Cadence you're going to get so overgrown that all of the product all of the uh all of the other seeds that you're planting are not going to grow or you're not going to get as many crops from them so you really just need to focus on that I think the the main issues for the Udi I would say came from planning so I think it was the second year of our business we were doing about 25 million Revenue this was preco time so pretty amazing business growing already I was like yep this is going to be a really good thing then what happened was Co hit I remember sitting on my couch and we just launched YouTube ads just before it and I was like wow these YouTube ads are really working where we we're growing so rapidly my sales are up you know i' done $200,000 today and then I remember just every single like day after that for about 5 days I didn't even understand that I needed to order a ton more product because Co had actually hit and that was having a huge impact on e-commerce a lot of people might not remember but a lot of people are just thinking businesses as a whole were going to die because of this there was obviously indications that e-commerce was going to grow but I think that is like a fundamental huge miss that the planning side of the business we were just like spend more money spend more money spend more money and there was nobody within our organization that was incredibly good at operations and planning on a regular Cadence to go okay we need to order way more stock for this and redo our forecast and in hindsight if we have that operational role within our business it could be probably 30 40% bigger um because we would have actually executed really well during that period but instead we were just sold out entirely now I've mentioned you know people that have hired or certain roles within the business the or chart whatnot am I saying that you need to go hire all of these RS absolutely not I recognize that a lot of people watching this video maybe just to be a single founder you know you're starting to get a little bit of attaction or you're just kind of generally curious about the space when I drew this or chart down here you will be pretty much in every single one of those roles for a very long time at least until you're doing over a million dollars you you might contract a Freelancers for a couple of things but you need to be an expert in customer service product all of these kind of things so whenever I talk about all of these tasks and things that we need to do to optimize the business today you have two options you can learn it yourself which is why I'm teaching it or you can hire someone for it and eventually as your business gets to a certain point you will hire specialized people for each of these roles but in the meantime you actually need to just use generalist the other reason operations is so important is because in e-commerce you have very few modes anyone that for follows along with Warren Buffett he loves to talk about modes and one of his favorite modes asides from technology iCal you know uh Network effects is brand itself now we are in e-commerce on a race to build a brand because then we have some level of protection but there's actually kind of like I would like to call it a soft mode rather than a hard mode that you can actually Implement within your business to stop all of these drop shippers taking market share and that is systems and operations because if you think about it let's take Amazon versus eBay as a really really good example there's a book I think it's called the greatest business on Earth and there was a period where people were looking at eBay and saying that they are the best business ever huge margins they don't need to touch any product they basically get a cut of every single sale that's done in their business and operationally they don't have to touch anything they're pretty much just a software company at the same time people were roasting Amazon they were saying what a terrible business they've never made money they look at their margins they're investing so much Opex and capex into all of these sides of the business such as warehousing now look how it's flipped and this is because Amazon invested heavily into remember the equation the outputs for the customer and they created systems and processes that now nobody can kind of really catch up with uh including even careers themselves they're going to be the largest career network if not that if they aren't already so I think not thinking about a lot of this stuff that we talk about today as a huge asset to your business and the way that I look at this is let's say we've got brand a this is the aie and we got brand B so I shouldn't say these numbers are not the and then we've basically got uh and then we've got all of the costs of the the side of the business that I was talking about before we've got Freight we've got product cost we've got career cost and we've got let's say warehousing there's going to be more variable costs um that I'll talk about here let's say brand a that freight cost $5 um then let's say brand B their freight cost $6 now how is this going to happen so the freight side of the business if you're talking to lots of freight providers which I'm going to show you exactly how to do you're going to get better rates you can p them off against each other that kind of thing and then let's say we've got the cost of the product $10 $12 so realistically you can achieve a 20% incre uh in Better Price simply because you're negotiating with your suppliers you're comparing multiple factories maybe you're despec your product or something like that then we've got the career side of the business $5 and then $8 how could this happen you're working with a better 3PO with better rates very very plausible and you spent time actually negotiating with these these cers or even changing the actual one that you're using the actual track that you're using and then let's say warehousing it's a very small cost let's just say $1 and $2 because you've negotiated better 3pl so this product is now going to be $21 to get to the customer this product is going to be $28 to get to the customer this brand now has a whole another $7 that it can spend on marketing which is a lot let's say even like we've got a $50 C God that is not a five sorry about that that if you've got a $50 CAC you know they're going to be making 14% more profit they could spend that on uh team they could spend that on so many other things simply because they have spent time uh optimizing the inputs of that uh operations so one thing I should say this formula that I just covered there we're going to cover it in detail in just a little bit cuz I'm going to explain what customer acquisition cost is those kind of things I don't want to keep it too basic today I want to make sure that this is very valuable for brands that are actually scaling as well um but let's get into our first kind of actual subsection of what we're talking about today actually our actual department and we will go through everything that we can do to optimize that operational Department um and streamline the business so the first Department M we're going to talk about today is product Now product is such a large topic as I said before and depending on the type of store that you have let's say you're a clothing store and you're launching multiple skews in terms of uh different sizes and different colors versus a one product store where you've just created a product and it's starting to scale wildly different the amount of work that it's going to take to manage suppliers manage the product development but in large part the main M place that I see people make mistakes here is the first thing is Tech packs a tech pack is short for technical pack and it encompasses every single detail of your product now the typical process that you probably have seen even on my videos is you go onto Alibaba AliExpress or you know if you're more advanced you'll go to a trade show and get the supplier details and you'll say hey I want this product and they'll give you the price and they'll send you a sample that is really risky uh because there's so much ambiguity about what that product is like on the AliExpress listing or Amazon listing compared to what you're actually going to get delivered so for example when I first started caling blankets I think we did $10 million in its first year did about a million profit so it was gr very quickly the TR it was largely based the trend it was just really really hot then um so our customer list was growing very very quickly I would go into Alibaba and I would say hey I want a th weighted blankets just in Gray and then the container would rock up after shipping for 20 days on the ocean and 3 weeks manufacturing even longer and we would open it up and we would open a box and be like wow this is beautiful and then we would open another box and it was a whole another gray and then we' open another box and it was a whole another gray and then none of them would weigh the same either for a weighted blanket that is extremely problematic and the the issue isn't is a product okay because often the supplier is saying yeah this is is still a great product which probably it is but the issue is when you're selling a product based on how it looks and feels and people are buying two of the same product and they're arriving and they're completely different and this is what a tech pack solves a tech pack is a document which I'll I'll put a link to uh example Tech pack and I'll also just put one up up on the screen here so you can kind of visualize it but it covers every single every single part of the product so a tech pack includes one a complete drawing so the complete drawing is going to be so that people know exactly kind of what the product looks like and for clothing this is really really important because if you've got a hoodie with a print on the front and then they don't look at that drawing H because they don't scroll down to the bottom to where it explains that there's a print the the drawing just clears everything up so the complete drawing pretty obvious what it is you just want to make sure it looks pretty accurate it's got the right prints on it the right kind of size the shape the right colors approximately but it's not going to be the be all and end all because it's the similar situation to just like a product photo it's not specific up then we're going to have the Fabrics now you're going to have things like uh the GSM which is basically the thickness of the product which is uh the density uh the softness these kind of things and realistically in the process of creating the product you're going to want if if it is the there is fabric components you're going to want to get strike offs so these are if there's a print on the product they're going to print on the right Fabric and they're going to send it to you or they're just going to send you a big kind of folder with all of that different fabric types and you can kind of select one from there now you're going to want to keep this Fabric and put it into the TCH pack in terms of the details of it you want to going to keep one on your side but GSM really clears things up because I'll give you an example we we getting complaints that our oodies were too thin and like what's what's going on here and all we had to do because we had a tech pack at the time is we cut out the designated amount of size of the fabric we weigh it of these products and we show that our supplier was actually undercutting and using the wrong fabrics for it we could get rid of those products out of the market and we could and the supplier replace them all without the tech pack it's going to be very hard to prove how you know if they are undercutting on the fabric side of things the other thing is you're going to want to put specifics about how to treat the Fabrics so like if you wanted like an acid wash or something like that you can probably put that within the fabric section the third one now I think this is most important for fabric uh for clothing brands as well is you're going to want measurements and we're going to talk about this a little bit more but measurements will especially for things like T-shirts if you don't have the proper measurements on the sleeve on how it fits on the front versus the back the product is going to fit completely differently and you're going to get a lot of complaints and even when you're switching suppliers these tag packs are going to be essential for you to send them to a second supplier so that you can get a quick quote and actually yeah actually transition suppliers easily so it's well worth the investment and then fourth we've got graphics fifth we've got like the hardware you know Zips all of these kind of things different Pockets you just want to kind of zoom in on those there's so many different ways to do Tech packs and lots of people will give you different ways realistically if you have most of these things you're going to get rid of probably 90% of your uh actual supplier errors and you probably also want to just add some reference so just some reference pictures of all of the samples that you have as well will keep it organized now I know I'm recommending you to create these uh Tech packs but it is quite a specialized skill and it needs to be very very accurate so if you're struggling with this or you don't currently have one for your product you can just go onto upwork and you can send the product to the uh artb person you can write in a fashion designer or a tech pack creator you can really write in anything based on your product and they will be able to manufacture one for you and I think that that's a really good freelancer to have it shouldn't cost you more than 200 bucks but it'll be a really good asset now this is generally for Tech Styles uh but all products are going to have some form of tech pack it's just going to get way more complicated when you're looking at more like Hardware uh things that are injection molded all of that kind of stuff but everyone should have a tech pack one other thing that Tech packs will allow you to do which I see a lot of people struggle with is grading so grading is taking sizes from small medium to extra large those kind of things so having these measurements here and working with someone that understands grading will just give you a really really good product and avoid crazy mishaps where your extra large just doesn't work and one final thing sorry I forgot is you're going to want your labels as well uh so making sure that you have your company name all of that kind of stuff because some regions if you don't even have your company name on the product itself or it's in the wrong position the swing tag SL label uh you can actually get huge finds as well so that would make sure that your supplier does it right this also includes things like packaging as well be very very clear for the supplier if you've got unique packaging so once you've created this Tech pack the next part is how to manage the suppliers and how to get the product realistically as I said before you've got a few ways to create the product typically firsttime Founders they will actually Outreach to their supplier to create the product with the supplier this is good because it's very cost effective it's very bad simply because there's nothing unique about your product and anyone can launch the product also your supplier actually owns that IP unless you can get something like exclusivity which is a relatively hard to do unless you're doing huge volumes this is why I often recommend that if you have a little bit of experience already in the field in acquiring customers you should be actually working with a product designer fashion designer product agency that specializes in physical products to create this product in the early stage and then work with the either the supplier or these localized manufacturers to create the product create the techb pack and then go out to multiple suppliers to kind of get pricing now one of the main mistakes that I see people make managing with their suppliers from an operational standpoint is they use a lot of different forms of communication and this is one of the strongest things that Alibaba has ever done is something called trade Assurance so typically it was very back in the day it was very hard to even transfer money to China and it was very very easy to get scammed as well what I really recommend people to do to make sure that they supply chain is very very dialed in and there's not too many mistakes is always using the trade Assurance option within Alibaba if you communicate all through Alibaba through the messages there and you have a tech pack when a product arrives and it is incorrect you can easily prove that they have provided the own product based on previous Communications and the tech packs and POS which we'll talk about in a sec and you can get your money back but this is this kind of brings me to uh the other side of the supply management which is the legality side we talked about a little bit about them owning the IP that's problematic sometimes unavoidable but realistically you want to kind of come to terms with the supplier around things like refunds what happens if the the product rocks up and it's not the same well how much tolerance do you have for them shipping incorrect quantities what happens if they claim they've shipped the right quantities but haven't so I'll add a list of all of these things to consider with your supplier as well uh these are the conversations that need to happen prior to you actually sending them 50 you know 20 grand uh because it's really really important one option that you have with that side of things is to get a contract in place now typically I like legally everybody is always going to recommend that you get a contract and I do recommend it as well but I have operated without contracts before and the truth is a what especially when you're first getting started the the suppliers within China are not going to want to deal with contracts at all but eventually when you get to a point you're going to want a contract that's signed and agreed from uh from both parties about all of those things that I just mentioned this contract is especially important if you have a very unique product because you need to protect your IP uh you can't just send a product over to China because as soon as it works they'll just sell they'll give it to other factories and multiple people people will be creating your product so if it's a completely unique product get the contract if not you might need to operate and build some good faith and build some relationship with the person before you can even negotiate a contract realistically when you're talking to your supplier um and let's let's say you've got the tech pack to the person or you kind of know that you want to create that product with that supplier you got a few main points that you want to discuss with a supplier on the on the product side which is going to be imperative to the rest of the operational process which is the first is M oq which is your minimum order quantities really important you can't order 20 products of a custom product that's not going to happen you're going to have to order a lot two you're going to want to understand the price and then three you're going to want to understand lead times now this is the time that it takes to actually manufacture the product not the time to ship the product cuz that's within the supplier's control typically teally we might want to work with a supplier that has a higher price but they have lower mqs because you don't have the budget to do it or maybe you really want to work with someone with uh you know Udi can sometimes do this will pay for the higher price for the product but simply because they have lower lead times which allows us to manage cash flow better I think I really would just want to highlight this side of things because I see a lot of people they create the product and they're like let's go let's uh I'll order it in they don't consider the UN economics of their business and this first negotiation stage of the product even if you're a relatively experienced business with like 5 10 people is often even like I've seen businesses with 50 people where this price negotiation just doesn't get considered within the rest of the business so if I created an Udi that was just so specked out it had you know inflatable arms to swim in or something stupid like that or it had elect ICS in it let's say speakers in it its Hood chances are you know that would sell it would definitely sell at $20 $30 but the truth is the price of that product is going to be more like $50 $60 so therefore I would have to sell it for $200 it immediately rolls out that product from being viable so this price negotiation stage is important for if you've got multiple stakeholders with the business to be considered about what you can sell for now one operational tip that I have uh at this stage of the business let's say let's say you've placed the order I'm going to give you a few more supplier tips but a really really great operational thing that you can do at this point is put the unit economics within both your purchase orders but also on on the Shopify side while we're talking about price I think this is a really important part where I see most people go wrong on their operations and fight outside of their business is they don't actually understand their unit economics and they do not track profit on a daily basis tracking profit on a daily basis is fundamental to your e-commerce business and if you don't understand the true price of your product even like and you can start calculating it at this stage then you you there's a good chance that you're going to spend and you're going to forget that you have tax on the product sales tax and then you're going to have to spend all of your profits eventually and fix your books it's just an nment so how do we make sure at this stage that we have that that we have a viable product and how do we optimize the rest of the process that I talk about today to make sure that uh you know we we're not actually losing money on orders so your unit economics of your product is going to be you've got your cost of product so this is just how it how much it costs to manufacture then you've got the freight know we talked about this before then we've got the career then we got storage then we got duties now Duties are very different from sales taxes and you need to understand the actual uh cost of the duties for the region that you're importing into for example importing from China to the US depending on the products will have different duties for for that side of things and that is we're not going to get that money back it's not like sales tax where if we charge $10 to the customer and then we spend $5 we get the different we have to pay the difference in in that region for sales tax it's just not like that it's it's basically a some cost um when you you'll see that I don't actually have uh the the sales tax within this calculation because I'm actually removing it from the calculation we're calculating all of this this side of the business at this stage uh excluding all of the sales taxes now what that will allow you to do is you'll get this uh you'll get this number and you can one put it in your purchase orders but two you can put it into the back end of Shopify which will allow you to create daily profit reports that include all of these side theide of the business then what happens with most reporting tools so triple well I'll leave an affiliate link and an offer in the description uh for you guys to look at that but realistically because we understand the true cost of the product then basically all of these other apps include marketing so these which is a variable cost on a daily basis because this will change based on how much you spend and then as also as well you've got I guess payment fees which is again going to be probably considered within all of these automated tools or you can just build a simple spreadsheet to to track this so while we're on this price thing I think I probably should have explained it a little bit uh earlier but I think probably one of the main operational and financial mistakes that I see e-commerce break uh e-commerce Brands make is that they are not tracking daily profit daily profit needs to include a lot of metrics and it starts at the supplier level right like cuz we're we're getting the supplier uh costings but let me just show you exactly how to calculate this and how to track on a daily basis because everyone needs to be doing so to calculate our profit per product sold we have the uh sale price of the product minus the cost of the product and that is what we were talking about before that supply cost that you've now got from them then we're minusing the freight as well um which I'm going to talk about how to calculate the freight uh costs but basically we have one big large container we putting 1,000 products into it and it's costing us $11,000 then it's got to be $1 per unit there as well so a generally smaller cost unless you're shipping something like Furniture if you're using C Freight where Freight can add up a lot is obviously if you're using air freight uh which is much much quicker but can be quite expensive then we've got the career cost to the customer which is you you've you basically got all of your 3pl costs here but we can separate it out to more so the Pak pack as well so this is just getting a little bit more granular as well and then you've got storage which you can also calculate but it's quite a a minuscule cost as well now the other big metric that you have here is you've got two other things I'm going to put them on a different line and explain why so you got minus your marketing which is your customer acquisition cost uh which you'll see in Facebook or I explain that a little bit more and then you've got your payment fees now you can see these are all the operational costs that we've been talking about today that we're trying to optimize these are what we refer to as oh sorry and then we've got one other thing which is our duties as well so these are all the operational costs these are what we call variable costs by the time the product arrives at your Warehouse you should have no question about every single one of these metrics these even this one you can kind of approximate marketing is going to be uh you're going to have to make some assumptions there and generally we want to make sure that we calculate the all of these side this side of the business and what we're going to do is we're going to put that into the back end of Shopify where it says clost per product in in Shopify what this will allow you to do is use all of the reporting within Shopify or you can use something like triple well I'll leave the link for the description in the description for them uh I highly recommend those guys that it's does all of this and automates the reports or you can build some free custom reports as well using looker um and integrating there or you can just use a simple Excel spreadsheet where you're inputting all of these costs on a daily basis the variable costs on a daily basis to calculate your net profit but realistically the way the reason why I recommend putting all of these costs into Shopify is because yeah we can just integrated so simply with a tool like triple whale and they then integrate with the marketing channels for us on a daily basis we say how much have you spent on marketing it will probably pick up all the payment fees as well and then it will tell you exactly it will just assume all of these costs are consistent and it'll give you your daily profit where I see people go wrong with this is one they fail to calculate these costs the freight career cost and the 3pl costs and then they also stuff up the tax side of things so duties is a sunk cost duties isn't the same as sales taxes if you're importing over a certain threshold into a certain region such as China to uh China to the to the United States they're going to be duties depending on the product category of course whereas Australia uh China to Australia there's the Free Trade Agreement so you're not going to pay duties there so you need to understand those costs the other thing that I see people make is they fail to incorporate sales taxes somewhere so I'm assuming all of this stuff is excluding sales taxes okay the other place I see people go wrong is the sale price you need to make sure that in the back end of Shopify when you're setting this up that you're considering and you have the check box that the uh sales taxes will be charged to the customer then you just need to make sure that it's feeding through to any other reporting so you basically are including uh GST or sales taxes in all of these equation or not including it just make sure that you've considered that within this so you're actually getting a proper uh profit uh over here so back to the product development process I'm going to explain one of the most critical tools that you can use which is called a critical path uh I me critical I'm critical but realistically this is something that you need to get familiar with because it's the best way to align teams but it's also the best way to ensure that you're efficiently doing everything as well as possible you're bringing products to Market you're handling the development process uh as as efficiently as possible before I explain what a critical path is I think it's worth noting that in the fashion process or any product development process you're going to have as I said before you're going to have to get the strike offs the prints then you're going to get a first samp then you might get uh a finalized production sample there are so many stages of this side of things and then you'll get what's called a QC now a QC is where a quality control agency will actually go to the factory they'll use your Tech pack again as a reference and they'll weigh the product they'll measure the product they'll do all kinds of things they'll check the panone color and I highly highly recommend that every single uh first time that you use a manufacturer even the second or third time that you're using a QC agent to go check the product now again one of the best things about Alibaba is they have an inbuilt QC function where you can just say hey send a QC agent out to this order or you can use any of the other ones like SGS it's quite expensive and big but they do compliance as well so I highly recommend first time you're using it get a QC agent but you can see all of these steps of the process and if you fail to get the sample on time you might fail to to get the product on time you might miss Christmas trade period and then you'll get stuck with all of the product come January February the way that we solve this is a critical path so in short a critical path the main things that we need to know is first we Define every single step of the process and you can do this with your team member or you can just write it out the second step is we're going to sequence all of these events in the correct order now you can use a project management tool like aana I use monday.com really impartial about which one you use they're all pretty much the same you can use notion but you really want uh some people use Excel as well you just want all of these things visible all of every single task and in the right order and then you're going to define the time it takes to do them so for example getting a sample a sample being shipped from China might take 5 days from DHL every single granular part of the process needs to be defined within this critical PA then what we can do is we assign dates to them so let's say we're going to do a hoodie launch for this product we bring up our critical path and again you don't need to make this template every single time but you generally understand what the critical path is and we might change a few things like the the time that it's going to take for this product because it's going to take a little bit longer but we can then because we know how long everything's going to take we can set dates to every single uh step of the process and this is why sometimes project management tools are really good we can set reminders when something has gone over due on its estimated date and then what that will do it will either push all of the future date forward or there may be some overlapping uh overlapping times that create a a little bit of flex or uh it's referred to as actual slack so then all we need to do is monitor on a daily basis and typically these other project management tools a lot of people are going to be able to edit these sheets and change things you can get your suppliers to edit them as well if you want typically I don't recommend that because the suppliers can manipulate things and then you can't actually see it so one person kind of monitoring and owning this process each step of the way is really important so I highly recommend uh assigning roles as well the good thing about these project management tools as well is you can yeah just set up notifications when something blows out uh to notify the person that is responsible for it so they'll get a notification they can change the rest of the process or just notify the rest of the team now if we follow that critical path all the way to the end of the process we're probably going to get well not all the way to the end but on the supplier side we're going to come to something it's called Place AO which is just Place what's called purchase order before that stage though you're going to have you you're going to ask the question how much product do I order now typically I see this being the most challenging part of a lot of e-commerce businesses and this is because you know typically in the industry some of these big box retailers and stuff like that they will have variants of their forecasts of like what they think they're going order uh what they think they're going to sell to what they ordered of like 5% but realistically if you're selling out consistently or you have huge fluctuations you don't get to get anywhere close to that we miss forecast by 50% even where where you growing growing quite rapidly or have some level of stability so understanding how much product to order is really important when you're first ordering the product you're generally going to be using other products that are similar within the space or your best guest based on your marketing activities just recently that being said forecasting is just the most essential part of the business because if you get it wrong let's say you've got a successful business and it's growing and growing and growing and you start expanding skews so you're like I want a black blanket now a gray blanket a blue blanket skew expansion and ordering too much stock all of your money all of your profits will go set into inventory and you will no longer have any money to acquire new customers or even pay your taxes and it's actually an existential risk to your business so getting this wrong on the low end because they have no stock let's say is going to give you $0 Revenue which can also send you out of business if you've got uh lots of fixed cost getting this on the high end and ordering way too much inventory will also send you out of business so realistically we should be looking at this on a weekly fortnightly or monthly Cadence and I'm going to show you exactly how to do it all forecasting is is we're trying to find one of two things actually we're trying to find both sorry is at what date do I reorder which is basically a replenishment day and then two how much do I order seems pretty obvious right but there is a lot of variables that we need to consider and I'm going to have to speak generally because you know something like the Audi where we have a whole dedicated team member looking at every single SK every single product we've sold the last four years of history is going to be very different to someone just starting out a business but speaking generally I think there's a few main things that we need to do the first is we can look at uh certain tools that we can use now I use Excel and I've tested did some very very expensive demand planning tools but because our team a lot of people need a lot of flexibility within our company we just continue to use Excel if you went to something like War they're going to have a software for this like a big Supermarket uh at the same time there's also inbuilt uh Inventory management Tools in certain erps like uh net Suite those kind of things but I still we always seem to end up back at Excel the problem with this is that if you don't have a dedicated team member and you're just a single founder and you're trying to build out these forecasts yourself some people really struggle with Excel formulas and I I still believe that there's a lot of opportunity for uh a Shopify app to solve this especially with AI I've tested a few of them but the one that I keep coming back to and recommending is inventory planner I started using this probably 2 years ago I'll leave again an affiliate Link in the description uh they they're not paying me to say this it's just I just randomly signed up to their affiliate knowing that I was going to talk about them because I really do think that they allow us to do the the next steps that I'm I'm going to talk about realistically any of these tools all we're trying to do is get visibility and Clarity on previous results so that we can make certain assumptions about the future and the best way that you can do that is the first set of things where I see people go wrong is they select the wrong dates so let me explain that the selecting a period let's say let's say you're kind of out of stock for half a month or then you're in stock for the rest of the 15 days I'll see people grab those 30 days and forecast out the next 90 days based on those numbers not not recognizing that they were extremely out of stock in those those 15 days so realistically it would have been a much more accurate Way by grabbing the 15 days that they were in in stock and extrapolating that out because this is really what forecasting is all about we're trying to compare year on year or month on Monon sales and make certain assumptions about the future so if you've got less than a year of business or you're even less than 2 years old and you've been growing quickly realistically you're going to be looking at month- on month so let me just draw a little bit of an example here if we graft out our uh sales for our product let's say January February March oh that's a b March April May and then we look at this skew over here let's say skew one let's just say that's a black a or something like that and we say our sales for this product is 100 in January and a lot of the tools or you can custom build this in Excel will show this let's say we do 120 like 145 175 so that's a about a 20% growth rate if we looked at that and graphed that out we would assume that it's going like that that's uh 20 about a 20% growth rate we could assume that March is going to be something more like that because it's quite a linear slightly exponential line this is the easiest scenario to forecast we're looking at month on Monon revenue for that particular skew and making an assumption about the future month where things get really really difficult is when there's something called seasonality for our product and all e-commerce businesses well 90 95% of e-commerce businesses are going to have huge seasonality because of Black Friday and these other promotional events so if we come back here what is a very likely scenario or forecast that we need to be able to visibly see to predict is we've got July August September October November always freaks me out that it says Jason we might have 200 210 you know 205 and then we'll have 2,000 in October when Black Friday Stars the kick and we might have 4,000 in November so this is definitely not a 20% growth rate this is more like this this and then come December it'll just drop straight away or as soon as the cut off date so we have a cut off here of Christmas Shipp shipping time of course so realistically we need to be able to predict these periods because these periods are eventually where you'll make 80% of your profits for the year and if you stuff this up it's just game over for you and this brings me kind of to my next thing that we need to be able to do within these forecasting tools which is apply a sales grow rate and if you're using inventory planner it's really good because you can go into the the revenue side of things and just on a monthly basis say I'm going to grow 20% 30% 40% I'll leave a template for this as well so you can do it in EXL um but again it is really uh it can just break every now and then but we applying a growth rate now how do we find seasonality because this is the the main factor if we're very new business we can use something like Google Trends and we can write in beach tent and we can see where it spikes because the other main seasonal thing that's going to happen asides from promotions or holiday gifting is going to be the nature of your product what is it's obviously when it's winter we sell a lot more wearable blankets beach tents we're going to sell a lot more during summer so you need to understand and you've got Northern Hemisphere and southern hemisphere is oppos polar opposite with seasonality so you need to understand that for say something like a winter product if we had July here our sales might come down and then come back and then there might be a bit less of a spike in this October November these are the things that you just really need to be thinking about and this is why I I highly recommend when you start to get some traction let's say you're you're doing some decent profits you're paying yourself a wage hiring a someone that actually understands and can spend time to look at this thing on a weekly basis is just it's just going to pay dividends it doesn't need to be a full-time uh forecaster or demand planner or merchandise planner it can actually just be an operations manager that one is able to handle this and bring their assumptions to you as a founder or you just need to own it yourself so once we've considered all of that and we've applied our growth rate one thing that I remember what we're trying to find out we're trying to find how much we need to order and when we need to order it to manage cash flow uh as best as possible so how do we what some other things that we need to consider and put into both our tool or or our spreadsheet so we you can get this the first one is your lead times which we talked about before from your supplier if you put in this tool that it takes 100 days to get the product it's going to want you to order much quicker because it's going to take a lot of time to actually get the product the other thing you need to assume is the days of stock this refers to how much stock you are actually going to want to hold on to in terms of your current sales velocity so if you're selling 100 products uh a month and 30 days in the month then you're selling about three products a day that is your daily sales velocity your monthly sales velocity is 100 products the days of stock simply says that that's how many days of stock that you have available to sell at the forecast that you've kind of assumed some tools are a little bit different here there there's going to be kind of two metrics first of it's like the current days of stock this is the how much inventory you have but then when you're actually using some of these tools you also need to put in how much inventory you actually want the typical days of stock it really depends on Industries and the age and and uh variability of the business the volatility of the business sorry will be 4 weeks 8 weeks or even 12 weeks so you want to consider how volatile your business is but also how much money you have to actually invest in inventory to calculate that number and then the third thing that some people uh ask for or consider most people do is Safety stock as well this is just a number that if you made a mistake here with the days of stock lead times or uh sales really kind of picked up you have an element of buffer you can probably just put 5 to 10 days or something like that for for this metric but realistically if you're adding a little bit of buffer on your lead time which you should be should be taking your average lead time uh in case things are kind of going wrong there and you're uh giving yourself enough days of stock and outlaying the right amount of capital there realistically the Safety stock shouldn't shouldn't come into play then once we've input all of that we should get a uh sells out in when your product should sell out and then also a replenishment amount once you know that you can go ahead and place your first purchase order now the management of POS is one of the main operational mistakes that I see e-commerce Founders made and it's because it's a it's a relatively simple system for those that don't know a purchase order is a agreement between basically your own supplier somewhat of agreement it's basically just an invoice you're saying I want this product this price these quantities I want it shipped here here uh and and a couple of other details as well but typically lots of people either are creating poos and they're just creating orders on Alibaba and ordering them or they're not making sure that the PO is utilized across the rest of the company because a PO is going to affect Finance because they're the ones paying the invoices it's going to uh affect the operation side of the business business so even the stock side of the business because if uh certain products are going to come in at certain times that's also going to affect marketing as well because they're going to want to push certain products when they come in and want to understand when they're going to come in then you've also got customer service as well imagine if you discontinued a product or if you had a PO just about to land but you're actually refunding customers absolute disaster so visibility and accessibility of these POS and the management of them is critical and there's multiple ways we can we can skin this and I've seen some some really good systems in place side small side note this is where an Erp comes critical for Brands doing over 30 over $50 million because an Erp is going to handle 90% of the things that we talked about there's two that I recommend not paid to say this at all net sweep but it's very very expensive and I've heard good things about fulfill. a lot of people I respect like Ridge wallets these guys are raving about this Erp because they uh they they can be so expensive they're over 200 Grand we probably spend well over that you know upwards of a half a million dollars to get this in place but the good news is there are some cheaper Solutions in the meantime when you're just starting out to keep organized in this area such as using either your accounting software or using inventory planner itself to manage the POS the issue with this is that we are going to need a second place where all of the roles that I just talked about customer service marketing they need to be able to see the POS and POS can change a lot as well uh often a product will will get an order at the 3pl and they'll be you know it'll be missing 500 500 units of a certain sko or less if you got big products and that creates complications also might already tell you that that you're missing that product and you'll still ship the order anyway so what I recommend is having two systems first you've got the PO system which should be on your accounting software such as zero or myob or anything like that you're sending off those POs there and that will then match up to the deposits that you're making to your supplier and also the the final payments to your supplier but then you also have a second either Google Drive or air table a Google sheet that all of your team can access and see all of the POS and on that sheet we're really going to want to make sure that we have multiple things to create the sheet once the PO gets placed we're going to copy across the what products are there on a skew level we're also going to copy up how many we're also going to have uh the p number as well now once you've got all of this stuff in the sheet and you've created the PO we can then do uh work with our Freight Logistics now this is a a bit of a tricky situation for some people that don't understand it a freight provider is basically a company a logistics company that manages spot on a cargo ship on a a container ship and they organize the container to be shipped from your supplier to the warehouse that you're talking about like your 3pl or even your home the best process for this is firstly you need to make sure that you talk to probably someone locally in your area if from the states work with a freight provider in the states and you're going to want to get two to three of these people at one given time because then you can compare their rates and bring the efficiency up because they're going to compete for your business once you have the right freake provider and you've compared rate for that month you are then going to get let them know that they've sent this PO you can CC them in the communication or you can just connect them with your supplier and they'll manage a lot of the process but they're going to come back to you with a lot of details about how they is shipping your products that you've paid for to the next Warehouse they're going to give you something like the estimated departure date they're also going to give you the estimated arrival date just right ETA then they're also going to give you uh The Vessel number the bill of lighting and a bunch more details you really want to put a lot of this information within this kind of Master spreadsheet this internal spreadsheet so you can see this departure date this ETA you can communicate easily with the supplier about the when the shipment is leaving and there's just so many important things that will happen here you're also going to want to add the you're constantly going to want to update this estimated uh arrival time if the vessel gets pushed back and you can notify people you might want to put the actual um arrival date and and departure date as well so you can kind of track that over time if you're using air freight this is probably just going to be a tracking number um but you're still going to want the estimated dates as well the main mistake that I see people make here is and and just across this whole video is not being organized if you are not putting a dedicated amount of time to update these sheets you're like oh I'll do it a little bit later it's just not going to work because you're going to forget things people are going to make assumptions based on this sheet that have access to that aren't actually true so this is where a lot more resources comes in handy when you're crossing over the five 10 million Mark but at the same time just make sure that you're religious about updating this based on the information that your supplier is giving you I don't recommend allowing suppliers to update this sheet at all it should be internal use only and if a supplier has changes they should be communicating through to you through that one Communication channel probably Alibaba which your team can have access too and you can make comments and changes on the sheet and notify people in like slack message okay so the product is onest way to now where can we go wrong here let's chat about 3pls I talked about what 3pls are at the start of the video if you're Drop Shipping this isn't going to be too relevant to you because drop shippers they'll ship directly from their Factory uh to the the customer but at the same time you should definitely listen because I highly recommend transitioning away from Drop Shipping providing that uh you're trying to build a brand and have great customer service I've talked about that a lot on the channel when you're looking at looking for a 3pl there's a few main things if you've already got a successful business what you're going to do is you're going to do what's called an RFP which is called request for pricing in that RFP you're going to give people your forecasts all the dimensions of your product your previous results forecast is probably the main one because we are generally a growing business and we're trying to get them really excited about the future we're trying to get them to compete for the business and you'll create this master document with all of these details and you'll go to multiple 3pls again I've got some that I really recommend and I trust that you can uh access an email but you want to go to multiple similar to the freight F they're going to compete for your business you're also going to want to go visit the 3PO as well if you can't actually set foot in there or at least uh see what their facilities look like inside that is a huge huge red flag we've went to one uh that was competing for the udies business and they like yeah the pricing is really good that were stealing wallworth shoer uh ww Worth's shopping trolleys from the wallworth down the street to cut products from one part of the warehouse to the other that's really not what we're looking for although it's pretty pretty uh Nifty and cost-saving so it's similar to going to your suppliers Factory if you can do that you're just going to get a wealth of information you're just basically looking for weal well run organization the information that we're looking to get from our 3pl let me just talk about 3pl management generally first of all I really want them to be wanting using to barcodes because if they're not scanning in bar codes both scanning in and scanning out there's going to be a huge question when it comes to what happened to this product and why am I missing this product at the end of the month or at the after 2 years and it's just suddenly gone people are just going to point fingers so barcodes is an element of accuracy and will generally be correlated with accuracy the other thing that we really want is like an eagerness to work with you I think that it's not great being the smallest brand at these 3p because they're just not going to give you the best servers sometimes it's not being the best being the biggest brand either but at the same time you do want to be a valuable customer to them and generally just how their sales stuff you should be indicative of that the other thing is price this is a big component obviously of 3 and something that you I'm sure you've considered we have three forms of price I guess we have uh ppack which is the cost for someone to grab the product from within their warehouse and then ship it uh we considered that in our unit economic formula before we've got inbounds which is the cost it takes for them to unload the container or the air freight and put it into their warehouse now if you've got a very it depends on the business this can be material or not you might want to consider this in your unit economic formula but sometimes it is such a small amount that it's probably not necessary and then we've got outbound costs this is something you really need to understand because outbound is going to be a a huge cost for your business if you're using something like Australia Post or UPS if you're in the states Royal Mail and if you're in the UK the outbound rates are going to vary hugely and each 3pl will generally have their own account with these cers this is why you can get huge variance between one 3pl versus the other because if they've got gym Shar shipping out their product they might have incredible rates that you can then piggyback on whereas if they're a brand new 3pl you honestly might be able to get even better rates than them this is where the Shady practice around 3pls can sometimes come in they will blend these costs across the board and really create like a fugazi around what they're actually charging and where but the main thing that you need to remember is just if you got all of these variable costs for your business you can understand and compare each 3pl in that category and more importantly you can actually order the 3pls at the end of each month so this this isn't just like I'll sign the contract and I'll forget about these costs and I'll just see it in my uh profit and loss at the end of each month this is you need to create an Excel spreadsheet that estimate how much of each of these costs are based on the sales that your Shopify store has done for that period so that you are not getting overcharged on a monthly basis it's absolutely shocking to me of all of the daily Mentor clients I would say probably 30 to 40% of them are getting overcharged in C areas simply because they're taking the word for it of either the couriers or the 3pl themselves the other cost here we'd have is storage as well but I think that that can be quite a minuscule cost for you as well unless your product is is quite large like the Udi storage probably isn't going to be a hugely material cost but I definitely would still check it and I would still be auditing it one thing to not about the management of 3pls remember when I was talking about the purchase order just being integral to this entire process you are going to receive that purchase order uh at the 3o level which will then update your shop ofite inventory so you want to make sure that everything is accurate along that process as well because the three b's are going to want what's called an ASN an ADV V shipping notice I think that's what it's called so you want to send the uh that that internal spreadsheet you can either create a summary of that or the purchase order providing those enough details and say hey guys this is coming uh because otherwise they just is going to get blindsided by the stock and it might take ages to unload and you can get a bunch of extra costs for like storing the container or not unloading it in time while we're still setting up this 3pl it's really important that we get an SLA a service level agreement this is a contract that states all of these things that we're talking about obviously not uh Egon but it's saying this is the level of service that we'll provide and within that SLA there's going to be certain things like picked on time so the 3pl itself will guarantee that the products will be picked at a certain time and shipped at a certain time this can be huge hugely problematic especially in promotional periods because if you if if they're saying that they're going to pick it within 24 48 hours and then it during Black Friday they have an amazingly important client and they failed to forecast their own staff members and then suddenly your Pi your pick time blows out to 7 days it takes them seven days start picking products you can guarantee that your actually outbound uh process your outbound times are going to take ages as well because all of the couriers are backed up Suddenly this is the main issue and it's why e-commerce Brands can just get so many negative reviews uh around the Christmas period because the time to pick and the time to actually ship just really blows out and this is why our service level agreement for when they will pick on time needs to be explicit and I believe that they all need some level of negative consequences if they fail to achieve on this pick maybe it's a discount on that or maybe it's completely free for that actual pick the other thing that we can track when we do this manually at the moment is delivered on time we track this from a customer service metric as well if we can see that there's you know under 95 uh under 95% of products being deliv it on time we can then go and investigate is it because they're taking too long to pick is it because the cour is taking long and we can actually talk to them about discounts and refunds and we can dissect the problem as well the truth is you're not going to get this in the service level agreement though it's just a really good internal metric for you to track the other question you can ask your 3pl is how often do they do inventory counts because especially when you get a little bit larger you want them to be doing fast selling uh skews counted fairly regularly through a cycle count I would highly recommend that no matter what business you are at least getting a cycle count two times a year and having that in your service level agreement as well the final thing I'll say about 3pl management is the cheapest option is not always the best option because these other business owners too there some of them are very very good at what they do and running warehouses and this isn't a you know Zero Sum game it's not a zero sum relationship you don't want to take them the cleaners them to lose money on every single order them to have kind of no flexibility whatsoever you want to build a relationship with these people and try to give them the benefit of Doubt and this is where clear communication clear expectations are are actually in place so if you're giving them forecasts making sure you're trying to hit those forecasts don't give them some wild forecast that they staff up for and then you don't actually hit as well so build a really good relationship with them treat them with respect make sure they're making money as well and it should work out well so then this brings us to probably the last side of what we're going to talk about today which is customer service now I highly recommend implementing a customer service tool that cont track emails if you're not already there's a bunch out there I've tested zendesk it was too clunky slow so we moved to gorgees I'll leave a link in the description as per usual uh I don't think that you 100% need to use gorgeous there's other options out there you just need to compare compare pricing for your size of business we found it was most efficient and cost effective the truth is there's about to be a huge disruption in that space and whoever uses an adapts adopts sorry AI in the the fastest rate is going to be the winner in this space so I really do recommend setting up your customer service uh one thing that I often get asked is international verse local so which customer service to use international has the benefit of them not having similar public holidays sometimes they do have public holidays which is great but it's not on your actual time zone probably where you're selling and sometimes local if everyone is having those kind of days off can be extremely problematic I don't believe in the premise that International using people in the Philippines or we use some people in the FG as well is extremely cheaper because the efficiency of those customer service agents can sometimes be like double as double as good locally versus internationally and this is all based on your training programs and how you're actually training these people up as well as how you're sorting out complex tickets versus non-complex tickets if you can create a system I believe the best system is a blender both at for larger businesses the smaller businesses it can be either but for larger businesses you going to want to filter out the the easier tickets that they go to the the international side of things and then the local more Nuance things you want people closer to the sources of Truth closer to the internal team uh locally so I think that that's one of the best ways to do it but this kind of brings us to how are we measuring the effectiveness of your customer service teams from an operational point of view you got a few metrics first you've got the resolution time if it's taking a long time to resolve the problem for people one it might be indicative of there not being enough visible information for people two it might be because of slow customer servers or improper systems three it might just be because you haven't set up your Macros well enough so that you can answer customer service tickets very very quickly that's very similar to the other thing which is touch points which is indicates how much how many times actually someone needs to touch that ticket to get the resolution for people this can be resolved by people just getting more detailed replies or again accessibility to the the information then the next thing that we have which will probably be correlated with resolution time is reviews now a great measurement of success everything that we're talking about today is remember these are the this is measurement of the output of our operations what I mean by that is this is what the customer is experiencing they're experiencing certain uh resolution times around the issues how happy they are with the product if all of your operations what we talked about before you don't have a tech pack so you're getting faulty products it's taking too long with the the freight side of things uh it's too expensive because you haven't negoti Cates down all of this stuff is going to affect the customer and affect your review so these are great measurements of how good are your operations so reviews are a great uh customer service metric to track over time the one that I wish I knew about earlier is as a business operator again we go back to our unit economic formula for our business managing on a daily basis we can break that down even a more granular level for customer service is cost per service which is a formula of every single expense that you have customer service including the software that you're using the amount of agents that you're using that maybe you have one agent maybe have five agents maybe have 60 like us you're basically dividing every sing single every single ticket that you're getting and dividing it by the cost because what you'll see what you want people to do similar to uh similar to the 3o management we need to be forecasting our customer service as well remember the diagram of the sales coming up and down like that this sales forecast that we have we're going to want to be onboarding more customer service agents and training them during this period so that we have them during Peak and this is another reason why International customer service is so good you can obviously need to be very transparent this is like hey we need you guys during these periods and you can train them up and the local it gets very very difficult to do that at scale there are some agencies that will handle it for you locally but I think internationally is a little bit better set up for for multiple reasons so realistically we want to be keeping our cost per service relatively consistent across the year despite our sales coming up and down like this because your ticket volumes are going to increase really quickly here but at the same time you can increase the amount of uh customer service agents that you have to kind of match that metric so I think that'll do it for today it was a very very big video I know this stuff can be very dry join the free shop fight e-commerce course join the Discord if you want to chat about any of these these questions if you're doing over a million dollars in Revenue make sure that you and any of this was kind of new to you you need to be joining daily Mentor I promise I'll help we'll give you a refund if you're not happy within the first 30 days um no questions asked so yeah I'm Keen to help I hope uh I hope you learn a lot but yeah don't forget to like And subscribe as well peace