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Product design lessons every DTC founder should know with Henrik Johansson · The Modern Supply Chain

• Henrik Johansson (00:00): Most factories don't want to touch you. They look for bigger customers that place $100,000 POs, million dollar POs, just finding a factory that's willing to take on relatively small POs but still have a high quality standard that still knows how to develop for the US market and export. That's the hard balance act. Izzy Rosenzweig (00:23): 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 Henrik Johansson, the Co-founder and President of Gembah. Before Gembah, Henrik scaled Boundless to a hundred million plus powerhouse by mastering the art of promotional product. But he realized that for most brands, the bigger risk isn't the marketing, it's the black box of product development. Gembah was born to pull back the curtain, turning the back of the napkin ideas into manufacturing ready tech packs that ensure what you design is actually what shows up at your warehouse. In this episode, we're diving into the DNA of a physical product. We'll discuss why PDF isn't a tech back, how design for manufacturing is the ultimate hidden profit lever and why the future supply chain isn't just about finding a better factory. (01:13): It's about building a better blueprint. Henrik, thank you so much for being on the podcast. We're really excited to have you. Henrik Johansson (01:18): My pleasure. Thanks for having me. Izzy Rosenzweig (01:20): So before Gembah, you spent years in the promotional product space. What was that light bulb moment? Why get into product engineering, sourcing, kind of the upstream stuff? We'd love to hear that background and maybe you could spend one minute or a little bit on what that Boundless was and then the light bulb moment. That'd be super helpful. Henrik Johansson (01:37): So Boundless was really a play in, like you said, promotional products, marketing materials. So we built a marketplace that made it easy for buyers of these products to leverage their collective purchasing power. These kind of spend is often done in every office, every department, and there's no control. Branding is frustrated because they can't control the brand. Procurement is frustrated because they can't manage the spend. So we built the platform and brought it all together. So that's really where it started. And over the years we graduated to larger and larger customers and then finally we got in with some customers that wanted to create their own products, custom products for promotions. And this one was actually for a nonprofit, huge fundraising event. So we had to start going to China and different parts of Asia and finding manufacturers and creating things from scratch. And that was really, I'd say the original light bump moment, not when I invented Gembah, but when I saw, wow, this is a lot more complex than a lot of people realize. (02:41): And also saw failures. We did quite a bit of M&A at Boundless. We bought smaller distributors and one guy's particularly, we acquired him just because a production run failed. He spent $100,000, which was a lot for an SMB and he projected to sell it for $200,000 or something like that. He got the container and the product was useless. Could not use it and he killed his business. He didn't want to sell, but he had to sell because he had to get out of this situation. So that one stuck with me and that's just one out of countless stories. There's so many great ideas, good companies that have failed because something like that. Izzy Rosenzweig (03:19): It's funny. There's almost like two things I heard in that story. One is very often what founders don't realize is it depends on the approach you take. You go to Canton Fair, find a vacuum cleaner, throw a logo on it. Okay, that's kind of easier. But creating a net new idea, which is usually the brands that scale and do really well. You have your version of your sweater, your version of your product, way more complex than going to Canton Fair and picking something off the shelf. Henrik Johansson (03:43): It's a deceptively easy. You can go Alibaba, you can get a sample, you can get a quote for everything. I think it gives sometimes people too much confidence like, "Hey, I can do this. I can create an AI image of a product and I can find someone in Alibaba and they will give me a quote and I'll get a sample." But if you start changing it and you're trying to create something truly unique, then it's a whole different ballgame. Izzy Rosenzweig (04:06): I guess to the story you gave, I almost hear two paths that something could have gone wrong. One was, why didn't they do QC? Maybe all you can show was the problem. Or was it the actual tech pack was never good to begin with and they were winging it back to Napkin. So they produced what he wanted on a easygo PDF, but he didn't describe the specs properly or engineering properly. So what was that example? Was it QC? Was it fundamental? Henrik Johansson (04:33): To be honest, I don't remember exactly what it was that went wrong. I think it was something mechanical that actually didn't work. So I would think probably a combination of tech pack, specs, insufficient specifications and then insufficient QC. Izzy Rosenzweig (04:48): UC always needs to live basically. No matter what you do, good tech pack, not good spec, you must do QC. Henrik Johansson (04:53): 100% beat on the street, independent third party going into your factory. Otherwise, you can't allow the factory to do their own QC. So they should do their own QC, but you can't rely on that 100%. So I Izzy Rosenzweig (05:05): Guess let's talk about tech pack for a second because I think many founders that we've spoken to, at least earlier founders, emerging brands are just getting going. They're like, "Hey, I'll take a picture. I'll show you a picture of what I want off the internet. Here are the sizes." Factory says, okay, can get it done, but now there's tons of questions. Is that a classic mistake that people make? And maybe you could explain what is a good tech pack and what does it mean to come ready to go design for manufacturing? Henrik Johansson (05:29): Yeah, I think there's really two broad categories. The devil's in the detail, but you're looking at more soft goods apparel like you mentioned there. The tech pack is pretty standard definition of materials and how you cut and sew the product. I think where it's more complex than ReGembah does most of our work is when there's some level of mechanical or electrical engineering required. So then you often have input from industrial designer for the form and function and then you have an electrical engineerings for electric part, mechanical engineering for that. And then you truly need full bill of materials, you need CAD drawings, you need full specs. So for hard goods and particularly electromechanical type products, what you refer to as a tech pack is pretty dramatically different for soft goods. And I'd say soft goods I'd say is easier. There you can often work directly with a factory and they can guide you through the process because often they're pretty good at knowing what they can and cannot do versus in hard goods, more complex products. (06:28): I would never go to a factory and just hope to kind of figure it out without having exactly defined how this product's going to work. Izzy Rosenzweig (06:35): So maybe let's actually take that into Gembah, which the part where you talked about is like Upwork for designers. And I love the way you described it. So let's imagine a brand that either wants to expand their SKU count or wants to launch this idea that'd been taking up for a long time. They could probably prompt a design or an idea of what it looks like. What does Gembah do? So someone could sign on to Gembah, maybe walk us through how someone knew to want to manufacture something with like a sketch. How do they bring that to life with Gembah? Henrik Johansson (07:05): Yeah. So in case people don't know what Gembah does, we have basically a platform that's a workflow engine, AI-driven engine that can show you. The input is a product. I want to create a insulated drinking cup with a temperature gauge on it. Let's say that. Sounds Izzy Rosenzweig (07:22): Like a great deal, by the way. Henrik Johansson (07:23): Yeah. The engine spits out, okay, these are 140 steps you have to go through, but here's where the upward piece comes in. But for each one of those steps, you identify this is the type of person, this is the type of expert you need for this step. So let's say vacuum cleaner, you'll find someone that worked at Dyson that was part of that's a massive difference in the type of expertise that they bring non-public knowledge. If they worked on projects for decades, most of those projects never saw the light of day, but that expert still went through all that, the trial and tribulation, testing, failing, testing, failing. So they have this immense knowledge that is not available in any database online. So we believe in particular with the emergence of AI and it's getting easier and easier to do the easy work and you can automate it. (08:14): I think that that targeted expertise, finding someone that actually have made products like your product before that can help you is super valuable. We basically act as general contractor, if you will. We bring in all the experts and orchestrate their collaboration through our platform so that almost anyone can go from idea to finished product. Izzy Rosenzweig (08:35): And I think that the power of that is insane because if you think of, let's say even some of the Kickstarter, Kickstarter, you're very often bringing brand new ideas to life and you're trying to see the demand in life. But to do that, if you just put a picture together, you're kind of screwed. But if you get this example, Dyson Engineer that could map the whole thing out, find a factory that's ready to produce it, get a decent understanding of cost, then put beautiful pictures and videos together, you really have a go - to market. So I think the power of that is actually incredible. We speak to customers very often. They'll speak to a factory, they make an order and make a PO and either the factory sends them one good sample or even the sample comes back as garbage or ghost them. Do you find when things go wrong, is it usually because, oh, this is a bad factory or you're just not giving them the blueprint needed to be successful? Henrik Johansson (09:23): Yeah, I think it's a bit of both. Certainly there are bad factories. I think that most factories are not trying to be bad. They're in business of servicing customers. I'd say that the most common problem I see, particularly in sampling is misalignment and expectation, right? Because let's go back to this drinking cup. I'm expecting this is the vision I have, this is the drawing I created. And the first sample shows up and it looks nothing like that. Well, most, at least first time entrepreneurs, they don't know what to expect. And often the factory doesn't do a good job of explaining what kind of prototype is this. Is it look like? Is it a works-like prototype? What are we trying to prove here? And maybe all they try to prove is that they can make the shape. (10:08): So often you go through multiple sample and each sample has a specific purpose. You're trying to validate something around it, right? Can I create this shape of an insulated drinking cup in this material? That might be the first test. And only after you're deferring that, then you figure out, okay, can we create the coating that we want has this smooth, nice feel? And then the last step is more the lid and all these kind of things. And I think often I see it all the time, people have spent a lot of time, months and tens of thousands of dollars and they get the first sample and they're super disappointed because it doesn't look like what their ultimate vision was. And a lot of projects die there, unfortunately. You can just picture the conversation, the husband, wife, the dinner table, you spend 25 grand on this. (10:54): This looks like crap, but it's supposed to look like crap sometimes. I'm not saying all the time, but I'd say that as the biggest - Izzy Rosenzweig (11:00): It depends on what you align on. Do you want that they could do the design, that movement to engineering, but almost like a misunderstanding of what the intent was. Henrik Johansson (11:08): Yes, exactly. Because if you go through the process for the first time, often you don't realize how that works. The factory is not going to be able to create a full production line, get in exactly the materials, get everything so they can create your quantity of one perfect sample. No, that's why you have to place a larger purchase order because it takes effort and time for the factory and they have to go buy the raw materials. They have to pull this whole thing together for you. So it's never going to be perfect until you're actually in production run. Izzy Rosenzweig (11:37): And I think that the raw materials, what you just mentioned is sometimes very not considered. And why? I've heard brands that would speak to factory found in Alibaba and it's like, "Oh, great. The factory can make me a tech pack or a factory can make me a design." I'm like, "Hey, they're making that design based on their expertise of raw materials." You don't start from the factory, you got to start from the expert and then match the factory. Do you see that mistake? Does that come up often where you start with design, bottoms up or top down? Henrik Johansson (12:07): We strongly believe in DFM, we have a version of it called D2M. Basically start conversation with factories early. I think that's the right intuition. As soon as you have a clear picture of what you're trying to create, it's great to get feedback from the factories to determine, is this actually feasible? Can this be done? Is there smart of a way this can be done? And that's something that really can help you reduce the cost and the time and the risk of bringing new product to market. We see a lot of people making the mistake. They finish the design completely in the US without talking to factories at all and then there's this big disconnect. They bring that design to the factory and they're like, "Well, we can't make this or we can't make this, but the unit costs going to be twice what you expected it to be. (12:49): " So it's really dangerous and a very common mistake that you finish design without talking to factories. The other mistake on the other side is that you go straight to the factory, to your point, that could work out, but are you sure you're talking to the right factor? Is this the best factory to do this for you? And then while it's sort of deceptively inexpensive maybe for them to do the tech pack and work on that, well, now who owns the tech pack? Do you own the Izzy Rosenzweig (13:13): Tech Henrik Johansson (13:13): Pack tech pack? And now you're completely in their hands, right? Price increases, have you locked that in from get - go or otherwise they basically own the design, they own the tooling maybe and next year they double the price and there's nothing you can do. Izzy Rosenzweig (13:28): That's super. I didn't think of that. There's this term, at least in our business at Portless where we ship goods from China all over the world. In our model, there's great things called tax deferment. You don't need to pay taxes upon because you're storing and then you ship only after you sell. But there's this term called tariff engineering, which is 100% legal, what does it mean? You're creating a sweatshirt. Well, if there's X amount of polyester, your HS code is Y and therefore your tax is X, but there's something called design for manufacturing. I think I've heard you've referenced that. I know tariff engineering, like brands smart but raw materials from a tax perspective. What is this idea of design for manufacturing? Henrik Johansson (14:05): Yeah, it's a similar concept, but it's like what I referred to before is that the opposite of design and isolation and then go to the factory. But rather, let's go back to this drinking cup example that you say you have this idea, I want to make this shape, but the factories can't do that, that maybe they have existing tools and molds and ways to create a certain set of shapes. And if you insist on that specific shape, may double the cost of going through it. Or you insist on some specific material that maybe they can't use in their existing machinery. So that there's all these things that if you finish the design before you get factory feedback, you can make some very costly mistakes that could render the product unaffordable or not manufacturable and also it's going to slow you down significantly. So there's often shortcuts or ways that you can leverage their knowledge, their expertise to design it in a better way, designing for manufacturability. (15:02): You may have certain things that you defined that you thought looked cool, but maybe they're not essential. Maybe it's not the core value of the product so you can be flexible on things. That's what we do. And we see a lot of smaller entrepreneurs that don't have huge budgets where what we call D2M, it's sort of taking DFM to the next level where we almost immediately go to the factory. As soon as they have a concept, we have a knowledge which factories can make that. We reach out to the factories and ask, give us feedback. If you were to create this drinking cup with a temperature gauge, how would you go about it? Does it matter where the gauge sit, what type of gauge it is? Can we make it transparent so you can see the fluid? All those things. Anyone could be a total game stopper or a game changer, but if you don't get that factory feedback upfront and finished then lock into the design, you could be in for the world of hurt when you start talking to factories. Izzy Rosenzweig (15:56): Super interesting. And I would guess for design for manufacturing, the factory give you great feedback of like, "Hey, I know you like this idea, but it's almost impossible to manufacture it that way, the molds or whatever." But how about when it comes to let's say cost efficiency? So let's say a brand's been running and they've been selling this certain electronic for a long time or a certain mold, plastic mold, and they're like, "Hey, I got to decrease my cost by 5%, by 7%." Will people come to Gembah like, "Hey, here's my current product, help me save money, help me reduce cost, make it simpler to produce." Does that happen? Does that come up? Henrik Johansson (16:28): Yeah, for sure. And the factories are usually amicable to that and open to that. Of course, they want to try to maximize their profits, but for them, the best customer is a customer that keeps on coming back and keeps on placing orders. The worst is someone that comes in does a minimum order quantity in MOQ and then never shows up again. That's why they have MOQs because it does take effort and cost to set up a new production line for any product really. A lot of people just treat factories as vendor and I think if you treat them as partners, you have a much better chance of achieving what you're talking about. I encourage all our customers to go travel, see the factory, let us be the field in the street and do every production run, QC, all that stuff, but you really should go meet the factory owner, shake his hand or her hand and build a relationship and go into the factory and look at the production process and usually you can work with them and find a better way to reduce cost of time. Izzy Rosenzweig (17:21): What is your perspective on how to pick a great factory? Because again, back to the early emerging brands, they might start in Alibaba and maybe there's four factories and you walk the floor. So how do you say is like, "Hey, to your point, this shouldn't be a transaction, should be a partnership and every partnership is like a marriage and the classic equals." So what do you tell a brand to look for? All about price or no, don't care about price, care about reliability, care about capacity, or does it matter what stage the brand is at? So how do you advise brands when they think about factory partnerships? Henrik Johansson (17:52): Yeah, I think all of that, it's kind of a complex matrix, but we have to look at all those factors. And particularly what a lot of folks don't quite appreciate is that if you're a small brand and you want to place the minimum order quantity, let's say it's a $10,000 PO, most factories don't want to touch you. They look for bigger customers that place $100,000 POs, million dollar POs, just finding a factory that's willing to take on relatively small POs but still have a high quality standard that still knows how to develop for the US market and export, that's the hard balance act. The further you go from the coast to inland, you can always find cheaper factories, but then it's usually more manual labor. So still a pretty big spectrum if you go from Shanghai to inland China or to other countries for that matter. (18:40): So I think it's not a simple answer. It's a matchmaking process. Is it like a dating app you have to figure out and particularly if you want to make changes to the product because that disqualifies well over half of the factories because most factories are assembly factories. They can pull together things from different folks, but they're not actually doing tooling or molding and things like that. So you got to know what you're looking for in a factory partner. So I think that's key. What capabilities try to find some of those really expertise in the type of product you're creating. Izzy Rosenzweig (19:11): We talk to our customers about, as they move into the factory side, very similar feedback with one thing we're seeing slightly different. So the feedback we would also give very much, don't oversell yourself. You go to a massive factory, you oversell yourself, we're going to do a million units, and very quickly they realize that you're not going to do it. Then all of a sudden you're the lowest priority, you're last on the production line if they even respond to you. So totally agree on that side. But there's an evolving thing that we're seeing specific out of China, different in other countries. And I would say more towards soft goods like apparel and other soft goods, that even big factories are getting open to small batch manufacturing. And I would say we're seeing that again, I think because Shane helped show factories like if you're willing to go low MOQ, yes, you're not going to make so much money, but if they trust you as a good partner, they could produce faster, smaller quantities so you could test it really quickly and then get the feedback and scale, which actually will lead me to my next question, which is how do you see AI playing in the world of tech packs? (20:09): How much could you trust it? How much can you not trust it? Maybe it's AI enablement, specific in a world where at least the Portless customers, they move fast. Their goods were right next to their factory. They could produce, get it done in seven days, test it within 24 hours, deliver it to the customer five days later. We're seeing, at least in our space, very fast moving businesses. How does that work from an engineering perspective? Maybe there's a different soft grid, hard goods. I'd love to hear your perspective. Henrik Johansson (20:34): Yeah. I mean, first on the MOQs, 100% right. In soft goods, you can get much lower. You can get MOQs for 500 bucks or a thousand bucks in India. And to your point too, it's much easier for them typically to make samples because they have fabrics typically. You may not be able to get exactly the color that you're looking for, but often they have fabrics and it's very easy for them to just spin up a line of sewing machines and making a few samples. Versus on the hard good side, they don't have unlimited aluminum sitting in their warehouse. They only go buy it for specific purchase order. So it's a lot harder for the factory to spin up and do small quantities. And often there's toolings required. To your point, it's moving so fast and with the lower complexity on soft goods, I do think that we're almost there or there already with the ability to create tech packs using AI. (21:25): I can't vouch for how good they are, but - Izzy Rosenzweig (21:28): AI slops still exists. Henrik Johansson (21:30): Yeah. Slop still exists. And I think your output depends a lot on your input. You can come up with a tech pack. Is it the right tech pack? Does it have the right design sensibilities? I think that's where us human are going to continue to be valuable in taste and judgment. What kind of sizing do you need for the European market versus the US market? And I mean, sure AI can figure out a lot of that too, but I think there's a lot of sensibilities that humans are going to continue to be really good at. I do think that the simplistic software tech packs or CAD for construction materials and stuff like that that doesn't require a lot of sophistication or design sensibilities. So I think that the interesting part is where designers, real humans can bring additional expertise. Like we talked about the Dyson engineer or the person that worked at Aura, people that have worked with specific cutting edge technologies that is not in the public domain yet. (22:24): And I think that that's where human beings are still better. Izzy Rosenzweig (22:29): It kind of reminds me a little bit from how lawyers are going through AI revolution right now. No one should do their own contracts, but you could get an idea, send it to a lawyer. The lawyer could take that, use their own AI, and hopefully it's a deflationary move. I do think the cost per hour might go lower because law firms could stop hiring so much. They could do so much work with AI and you need a smart person to overlook and give you the thumbs up. I feel like specifically hard goods and vacuum electronics, you don't want to do that yourself. Let them do it, give the thumbs up and hopefully your cost maybe goes down a little bit. Maybe it's a lower cost per hour. Maybe your turnaround is faster, but it still feels like, to your point, you need that stamp from an expert. Henrik Johansson (23:11): I mean, if I was going to put 100,000 of my dollars into purchase order, would I trust an AI generated tech back without human... Izzy Rosenzweig (23:20): Maybe a little longer for that. Henrik Johansson (23:22): Not yet. Give it a few years and we'll probably be there, but today I would not. That said, like you said, it's incredibly powerful for a lot of things. Idea generation, you have this idea of this cup we talk about. I mean, it'd be super easy for me in two minutes creating a beautiful rendering for it, start testing it, do some Facebook ads, see if there's actually demand before I spend a dollar on design. That stuff is so powerful and everybody should do it. Izzy Rosenzweig (23:48): Love it. I love this conversation. I think everything upstream from sourcing, design pack and CAD files, this is like for emerging brands new and getting it right is so essential. I guess last question for a brand that's starting out, you've been in sourcing and DesignPac for a long time, do you recommend like, "Hey, this category's super interesting over the next five years or the one thing you should be doing or double checking as you launch your new idea and bring it to life. Any advice you'd give to emerging brands? Henrik Johansson (24:16): Yeah. If I knew what's going to be popular in five years, that'd Izzy Rosenzweig (24:19): Be Henrik Johansson (24:20): A very rich man. I'd say what's interesting though, if you go back five years, everybody was using tools like Helium 10 10 or Jungle Scout and seeing what's trending on Amazon and all that stuff. And those are still valuable to some extent, but it's really backward looking. You're looking at what have people searched for in the past, which is helpful to assess if there's a market for your new product. When I see good brands now, it's more trend scouting, trying to figure out what's trending, looking at TikTok, looking at Google trends, looking in the real world, it's what's happening, what's changing and try to move into that. Pets, baby are great categories. They start to feel saturated to me. I think there's still a huge market. I mean, particularly in the US, people spend stupid amounts of money on their pets and that's great. And I think that's going to continue as a trend in the rest of the world. (25:07): But I think health aging are interesting areas. We've got a lot of people that are going to grow older here and have a lot of disposable income. So you can figure out a way to create products for those folks. That's probably a good field to look at. And then anything AI enabled, right? Vision, what does any device in your home look like? If it's AI enabled, can your microwave decide how long you got to defrost that frozen meat? That'd be nice. Izzy Rosenzweig (25:31): Such an interesting point you made. And if you're looking at historical data, you're looking at the past. And I know Sheen, I follow them pretty closely. They are some of the best at understanding what will come, understanding colors that are coming, understanding where TikTok creators are starting to dress and then put out stuff and obviously all the big fashion ones. So that's a fascinating concept of look into the future, don't look into the past. I don't know if there's tools. Are you seeing people use tool? Is it just being on TikTok and being aware? Or is there the Helium 10 of the trends versus Helium 10 of historical data? Have you seen any tools around that? Henrik Johansson (26:06): Yeah, we started to do more of that at Gembah too, helping folks, folks that come with just a concept or maybe they have a brand and a collection, but they don't know what product should develop next. So I think it's still a relatively new area. We have some frameworks, we have some tools, data sources that we use for that. But I think in general, I mean, you can hire Gembah, but if you don't hire Gembah, I think the sources of TikTok seems to be on the forefront of Izzy Rosenzweig (26:31): Everything. Yeah, the forefront of trends. Yeah, for sure. This has been awesome, Henrik. If someone's learning more about Gembah and more about yourself, where could they find you or could they find more about Gembah? Henrik Johansson (26:40): Yeah, go to gembah.com. That's G-E-M-B-A-H, G-E-M-B-A-H.com. You can learn everything about what we do. You can look me up on LinkedIn that's probably best, Henrik Johansson, Co-founder and President of Gembah. Izzy Rosenzweig (26:54): Amazing. Henrik, thank you so much for joining the podcast today. Henrik Johansson (26:57): Thanks, Izzy. It's been a pleasure. Izzy Rosenzweig (27:03): 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 Portless, check out our website, Portless.com. As always, hit that follow button so you don't miss an episode. See you next time.