Latest / The Modern Supply Chain / Mastering 3PLs the smart way with Matt Hertz
Transcript
- Matt Hertz (00:00): I encourage brands to think of their 3PLs, like a defacto operational consultant. Think of them as almost like a VP of Ops or a COO. There are so many 3PLs out there and there are so many great ones. Supply chain is such an important part of your e-commerce business and you need to be aligned with folks who are really at the forefront, who are investing to help you stay ahead of the game. Izzy Rosenzweig (00:25): This is the modern supply chain, the show where we break down modern supply chain strategies that help e-commerce brands shift from staying above water to predictably scaling. Today's guest is Matt Hertz, the founder of Third Person, A 3PL matchmaking business that connects brands with logistics providers. With his deep understanding of the 3PL space, Matt has seen the trends and challenges shaping logistics industry from a macro level. In our conversation, we'll discuss the evolving logistics landscape and what brands should look for when finding the right logistics partner. We'll also dive into the smartest brands, what the smartest brands are doing to build efficient and agile supply chains. So let's dive in, Matt, let's start with the high level. Why have brands traditionally needed a logistics partner versus doing themselves because they make that choice very often. Early on you might want to do a garage at some point you go with 3PL, but again, you've been in this space for a very long time. What is the right move? What is the benefits? The pros and cons here? Matt Hertz (01:19): Well, don't age me, it's only been about 17 years or so. But yeah, I guess that's been for most of e-commerce's life, fortunately or unfortunately. But getting said is to answer your question, I think it really comes down to opportunity costs. Every minute a founder or an operator spends time picking something out of a cubby, taping a box or negotiating a UPS contract, it's really a minute that they aren't spending on product development, on customer acquisition. And I feel like logistics is deceptively simple until it breaks. And when you're doing 50 orders a week, few orders a day, it's super easy. But when you hit a spike or if there's a carrier delay, whether it's peak season or any other blip, that seems to happen quite a bit nowadays in logistics and e-commerce, it really becomes that anchor. So partnering with a 3PL, partnering with an outsource fulfillment provider really allows you to turn a fixed cost, a warehouse lease, labor equipment, material handling equipment automation. It really turns that into a variable cost that can scale with your business. Izzy Rosenzweig (02:25): Love that. In general, the thesis of modern supply chain and what we do at Portless, it's really about brands 2.0, DTC 2.0 needs to be profitable. The days are just spending for top line or done. So how do you run a great healthy business? And part of that is opportunity cost. Part of that is simplification, so absolutely love that. So let's just say brands says okay, in the early days, maybe doing the 50 orders, but at some point the graduate to 3PL, how does that evolve? And I know you used to be at Birchbox and you've seen some crazy early days to scale, but how should a brand think about, okay, I'm starting early in my journey. Am I looking for one type of 3PL? Do they graduate? Do you start big? I guess maybe give us a little bit of your Birchbox background and maybe some of the stuff you've seen there and with that answering, how should a brand be looking at growing with 3PLs as they grow? Matt Hertz (03:12): For those who are maybe a little less familiar with, Birchbox was really one of the pioneers in modern subscription commerce. For those who are old enough, we remember Columbia Records when you get your CD in the mail or even Netflix in their original days when it wasn't streamed right, you would get a DVD in the mail, right? I joined in 2009. I was their first full-time employee as well. Their first operator, the first in-house operations hire a month or two into the business. We were doing 500 orders a month. Ultimately when I left four years later, we were doing 1 million orders a month. So I don't have my calculator with me, but you can sort of calculate that month over month compounded growth over the four years, and I dunno what the answer was, but it was a lot. Systems that work at 500 orders a month, they break at 5,000 orders a month and systems that work at 5,000 orders a month, they break again at 50,000 orders a month. (04:07): So scaling isn't just doing more the same, it's fundamentally changing the process. And that is really, really difficult for operators to understand. So at $5 million in sales, you might be with a generalist 3PL, you might be with a starter 3PL who just, they get the orders out the door, you do it, you get it done, it's fine. And not to say that 5 million in sales is a small number, but hopefully for many aspiring entrepreneurs it's a starting point. So when you get to 50 million in sales, you need a partner who offers more like strategic value. So whether that's data integration, custom unboxing or custom packaging inserts, written materials, all that multi-node fulfillment, maybe you've started with a partner in New Jersey or Pennsylvania, now you need someone east coast, west coast or east coast central. Maybe you need someone in Canada or overseas, et cetera, to really cut transit time and to cut costs. So at Birchbox, it took us a while to appreciate this, but we really had to stop treating logistics as a utility and start treating it as a core part of the product experience. Izzy Rosenzweig (05:12): If that's the case, and I fully agree with these breaking points, especially with brands, they're like, okay, we're of a local 3PL to get you started, but then what is the right move? Do you skip and go to some of the largest 3PLs and beg them to take you on early so you can scale with them? Or maybe that's a bad decision, so rigid and they need you to have an engineering team to do a good job. So is the graduation the right move or go for as big as you can as early as you can? Matt Hertz (05:37): It's a fair question, Izzy. I always say that the relationship between a brand and a 3PL is like a marriage, and it's really important to find someone who's a good fit for who you are at that moment in time and it's very natural to graduate. I mean, just thinking back to my Birchbox experience during that time, we worked with three different 3PLs during the four year period and it's not because we made mistakes, it was just that we grew so much that your business evolves and the different things you need with it and account management and scalability, you just scale so quickly. So of course if I knew that as a business we were absolutely going to scale from 500 orders a month to a million in three or four years, I probably would have picked a more scalable option initially. But you don't know. I meet with founders all the time with business owners. Oh yeah, we're going to grow 20% month over month or we're doing 5,000 orders a month in January and by December we're going to be doing $50,000 a month. I hope and pray you're going to do that, right? I'm rooting for the success of e-commerce, but it's not a shoo-in. Izzy Rosenzweig (06:41): It's something we've seen as well. You try to go too big, it sounds good, but now you're the lowest priority of that business because you went to the largest repl and you're doing, I know, $10,000 a month, but there are other customers are doing $50,000 a month or a hundred thousand a month, should you rather be small fish in a big pond or a big fish in a small pond. There's that right balance, but totally agree. Kind of marry who you are today, don't pretend you're going to be someone else tomorrow. Ideally you have a dating period so you understand what you're getting into. Now, you mentioned something really interesting, which was adding value. Your three pillars can't just be a logistics provider, they're your partner. Hopefully they're more than just shipping your goods. And I actually tie this to DTC 1.0 versus DTC 2.0, 1.0 wild west of ads and Facebook ads free money from COVID. Those days are done. You‘ve got to run a smart, efficiently-run business, a healthy business, every part of your model. So the days of Amazon where you're putting your goods to 50 locations, you have same day delivery. I really think those days are done and deliver may have shown that. And really where it is is adding value as a brand, you're telling a story, you're a brand, you're all about storytelling, you're something unique. What are some stuff from a 3PL perspective that you've seen that added value to these brands as they grow? Matt Hertz (07:59): I think it really boils down is E two partnership. Anyone could use Amazon for most if not all of their distribution needs, right? Amazon's got their fulfillment by Amazon business. They've got their multi-channel fulfillment business which supports merchants with non-Amazon sales channels. In other words, you can use Amazon to fulfill your Shopify orders, and that works for a segment of merchants. But I encourage brands to think of their 3PL as like a defacto operational consultant. I think of them as almost like a VP of ops or A COO we're like, Hey, 3PL, hey MR 3PL or Hey, Portless, tell me that I'm shipping and packaging. That's not right size for my order. I don't know, I don't see my inventory. If I had a nickel for every time I heard from an operator to say I've never been to my warehouse, I mean I'd probably be retired, I'd at least have a few sacks of nickels, right? (08:55): And I certainly do not encourage that. I absolutely encourage operators to visit their warehouse. Absolutely. It's like marrying someone before you go on dates and meet the person, right? I do not encourage that by any means, but the point is is that there are so many 3PLs out there and there's so many great ones, and those who I think are picking up market share and are really building traction in the market or those who are innovative, who are at the forefront of technology, whether it's physical technology, automation, robotics, or if it's integrated with different partners that can support with custom inserts or post-purchase experience, you really need this part. Supply chain is such an important part of your e-commerce business and you need to be aligned with folks who are really at the forefront who are investing to help you stay ahead of the game. Izzy Rosenzweig (09:45): A thousand percent. Logistics at this point is a commodity. Now not everyone does a good job. You got to make sure you get a great logistics partner, but assuming that's checked, what value you bringing to the table? And I know at Portless it's all about look us as consultants, everything from we do custom packaging to packaging consulting. Do you have a thick enough box for the products that's in? What's the volumetric weight you reduce the volumetric weight? How you doing VAT collection in Europe? How are you doing everything from lines of credit? And I fully agree with that. And this is part of DTC 2.0 and really 3PL 2.0. It is not enough to just be logistics provider. What are you doing to partner for their success, logistics success? Is it 3PL success, our success? Have any of the traditional 3PL strategies or processes changed since the trade war? Since all the tariff chaos? Matt Hertz (10:33): I always tell brands, hooking up with partners who are at the forefront, who are aware of what's going on, who have the scalability and the ability to change is really important. When the trade war started in 2025, there were a number of 3PLs who supported brands who were fulfilling, for example, out of Mexico, taking advantage of de minimis. And for those brands fulfilling out of Canada or Mexico and frankly out of China, out of the markets was highly lucrative. And there were some 3PLs that literally went out of business overnight and who left those brands high and dry. There were other 3PLs that said, this is a problem, this is unfortunate, but we have options, right? We can move you to facilities in the United States or elsewhere and you really won't skip a beat. So this sort of goes back to that point of thinking of your 3PL as a partner, and far too often brands are thinking of their 3PL as a transactional decision. It's commoditized, and that hurts me so much when I see brands reaching out to 20 or 30 different 3PLs asking the same questions, and ultimately they're going to pick the partner that's 3 cents less than the other one. This is not finding a hotel on the strip in Las Vegas for the night where it's like, yeah, I'm going to pick the cheapest one. This is such an important relationship, and I always tell brands, the shipping box is the only marketing channel with a hundred percent open rate. (12:06): Every box that's delivered to a customer's door will be open, maybe not a hundred percent, but pretty darn close to that versus email marketing. So if you're competing with Amazon and speed alone, you lose because Amazon is the best at that and they will continue to be the best at that, but you can win on experience. So smart brands are using kidding and personalization to build retention. So if I open a package and it feels like a gift, I'm coming back to that brand. If it feels like a commodity brand box, then I'm shopping on price next time. And Amazon is really, really good at that. And I've supported many, many brands who sell direct to consumer via Shopify as well as Amazon and Amazon's their channel to get product to customers really quickly. And Shopify is that channel to get product in a really beautiful and personalized way to the consumer. Izzy Rosenzweig (12:59): Absolutely agree. Love that. Any new trends you're seeing evolving in the logistics space? Matt Hertz (13:04): Agentic AI is something that's also really interesting. It's not just robots moving boxes around a warehouse anymore. It's AI agents handling customer service tickets and routing inventory proactively. The tech stack is really becoming as important as the pallet jack or a forklift inside a warehouse. Izzy Rosenzweig (13:22): And I think on our end, what we've seen a lot is from agentic AI. It's not all about pretty pictures, but from a logistics perspective, it's looking at data. There's tons of noise, it's the right signals. How do you know when to reach out, how to be proactive to the right shipment that maybe is being delayed. There's a weather forecast problem, there's a storm East coast, we're seeing a lot of that as well. From a data side, again, who knows what will happen with Tesla and robots and Optimus, but that's probably another one or two years away. What advice would you have for brands looking to scale to find the best partners in 2026? Matt Hertz (13:56): I think we mentioned this earlier, Izzy, but date before you marry. Izzy Rosenzweig (14:00): Yeah. Matt Hertz (14:01): And I might be a little bit biased given the business I run today, which is effectively a dating app for prs and 3PLs, but I think it's so important, right? Date before you marry, get to know your partner. Don't sign a three-year contract based on a PowerPoint deck. Look for partners who are transparent about their failures, not just their successes. I encourage brands to really get to know, I mean, ask for their financials and expect the 3PL not to shell over all their financials, but they should be able to send something, right? So this is such an important piece of the diligence process. And even in the last few weeks, as you know, there have been a handful of 3PLs who have failed or who have shuttered fairly quickly and well-capitalized partners. And this will continue to happen, right? In a market that's as bifurcated or as fragmented as the 3PL market, it will continue to happen. So it's really important to get to know this partner before you sign the dotted line. Izzy Rosenzweig (14:59): Anything specific? I know financials is one. You talk to people, you have a great salesperson, they're super nice. You ask 'em about SLAs, they tell you one day inbounding or two day inbounding. How do you go a layer deeper? What do you advise there? Matt Hertz (15:12): I think it's important to define where your non-negotiables are. Know exactly what you need before you start looking. Is it that fast shipping? Is it that two day shipping nationwide? Is it that custom tissue paper in every order? Is it returns processing? If you don't know your requirements, there's no way you can find the right match. I have brands all the time that are like, I want a 3PL that extends us long payment terms. I'm like, really? I realize that's important, right? Cashflow is important. Cash is king as they say, but that's solvable. Finding the best partner as defined by operational performance, price technology, account management, scalability. I can name a few other variables that is not really easy to solve. So that's exactly why we built third person to help brands articulate those needs to find the right perfect fit for them. Predictions, Izzy Rosenzweig (16:02): Fast forward five years, what is the big thing in logistics and 3PLs that change? Matt Hertz (16:06): I think the end of one size fits all. I predict the concept of a generalist warehouse will die out, and most of the 10,000 plus warehouses or 3PLs in the United States alone, not in the world, but just in here in the US are generalist warehouses. So I think they will continue to die out. We will see highly specialized micro fulfillment networks. These are warehouses that only do cold chain or only do heavy and bulky, or only do high velocity apparel or only do wine shipping. I believe that specialization will win over scale. We see this in other industries that are really fragmented, whether that's hotels, you have your boutique hotels, you have your sort of big box hotels, there's specialists, right? And the bar industry. You have your Irish pubs, you have your speakeasies. I think people want specialization, and I envision that happening in the 3PL space. Izzy Rosenzweig (17:07): Love it. Where can people find you? Matt Hertz (17:08): I'm on LinkedIn. Look at my name, Matt, or I guess Matthew Hertz. Reach out to me, Matt, M-A-T-T @thirdperson.co. not.com. We were too cheap to buy the.com, but third person.co. I know Izzy's got my information, so I'm fairly accessible. So yeah, we'd love to connect with any 3PL or brand who's got any questions related to supply chain. Izzy Rosenzweig (17:30): Awesome. We'll add those links to the podcast. Thank you for listening to the modern supply chain. If you have questions about anything we talked about, you can find me on LinkedIn. And if you're interested in learning more about Portlesss, check out our website portless.com. As always, hit that follow button so you don't miss an episode. See you next time.