Editor’s Note: Startup Spotlight is a regular feature at WRAL TechWire, brining attention to emerging entrepreneurial venutres in North Carolina’s innovation economy.
Rachael Classi is the founder and CEO of Tiny Earth Toys. The company raised a $1.5 million seed round led by Bull City Venture Partners last year. Classi was one of many presenters at the recent Raleigh-Durham Startup Week. This column, written by Classi, was adapted from the presentation she delivered.
DURHAM – As a startup founder, I am frequently asked “what keeps you up at night?”
How do I answer? Well, besides one of my young daughters quite literally waking me many nights, I find that lately, I am kept awake with concerns about our company’s supply chain challenges.
When I founded Tiny Earth Toys in 2020 to redefine the paradigm of ownership and consumption with a rental toy subscription, I made a conscious decision to not manufacture our own toys.
While North Carolina is known for its wood-working expertise in the furniture industry, setting up manufacturing can be a capital intensive and slow process. And I knew to test the market response to an innovative solution for plastic toy waste and clutter, we needed to run lean and be adaptable.
Saying no, saying yes
By saying no to manufacturing, I said yes to building a complex supply chain of toy manufacturers and suppliers.
It was fairly straight forward to identify and secure the materials needed when we were serving our first 100 customers. But we’ve grown significantly since launching a year ago and we, like all consumer goods companies, are facing increases in price, lead times and complexity due to the global supply chain crisis.
It has forced us to build resilience in our supply chain to serve the growing demand from millennial parents looking for educational toys without the clutter and waste.
As we expect supply chain complexity to increase as we scale, we believe our success will hinge on staying focused on supply chain resilience.
I was asked to speak about our challenges, in the context of what other entrepreneurs could do, during Raleigh-Durham Startup Week.
These are my top three tips for entrepreneurs about building a resilient supply chain.
How to build a resilient supply chain
First, build meaningful relationships.
In a world where commerce can be conducted 100% virtual, it takes diligence to build relationships throughout the supply chain. We’ve focused on getting to know all of our suppliers and vendors with empathy for their goals and operations. We’ve implemented quarterly review meetings with our key suppliers and keep an internal scorecard on key metrics of value to our business so we can track the success of our business relationship over time.
Then, plan for redundancy.
We’ve had to become very comfortable with facing the unexpected. And we’ve learned the hard way to build a database of potential replacements for all of our products in case of shortages, outages or major operational disruptions. We believe that our supply chain resilience is dependent on knowing the substitutes and operating with supplier redundancy.
Importantly, negotiate for what matters.
Negotiation is an art and I do not claim to be an expert. I have, however, learned to first prioritize negotiating for the terms that are most critical to your business success and that sometimes that isn’t price. During the holiday season for example, the most important factor for our growth and success is secured lead times, ensuring we have products in stock when families are shopping. Knowing what matters most to your business can help provide clarity on tradeoffs you are willing to make. And negotiation is a daily activity that does not need to wait until the next annual contract. It is generally more fluid and flexible than founders may think.