Maximizing Ecommerce Efficiency: Leveraging the Theory of Constraints
in Online Retail
- with Amitai & David Sasson

GUEST BIO'S

Amitai Sasson

Amitai Sasson is the vice president of marketing and technology of overstockArt.com. In this role, he focuses on all aspects of growing and marketing overstockArt.com to establish its dominance in the online wall décor market. He designed and developed not only the company online store, with annual sales of over $2 million, but also the enterprise resource planning, customer relationship management and supply chain management systems that overstockArt.com employs every day.

Sasson came from modest roots himself; he was born in Kibbutz Ein-Shemer, a small social society close to the center of Israel, and moved to the United States when his family relocated to Newton, Mass. when he was only six years-old. At age 21, after finishing his Israeli Air Force service, Sasson came back to the United Sates to pursue his life-long dream of playing Division 1 Men’s Volleyball. 

He earned an athletic scholarship to Ball State University in Muncie, Ind., and was a four time letter winner who was instrumental in the success of the university’s volleyball program that reached the 2002 NCAA Final-Four and made it to the cover of Volleyball Magazine in May of 2003. Sasson graduated from Ball State in 2005 with a masters in computer science and earned his MBA from Tel-Aviv University in 2009. 

Prior to attending Ball State, Sasson was introduced to hand painted art through a friend and saw the amazing opportunities of this decorative product. He started selling oil paintings door-to-door, and after a month he saved enough money to sustain himself through the first year of college. 

Through Sasson’s experience overstockArt.com was born. He introduced the product to his brother David, an experienced drop-ship vendor for various big-box retailers, and in 2002, they joined forces with Amit Yaari and formed overstockArt.com. The company started from David’s home, and in less than a decade has established itself as the most significant retailer of hand painted oil paintings on the Internet. 

In 2011, Sasson played a leading role in the launch of Artist Become (ArtistBe.com), the new online community for creating, selling and buying artwork online. The site provides a unique means for emerging artists to be discovered, and to assist established professionals in finding new clients without relying on agents. ArtistBe.com is owned and operated by overstockArt.com. 

Sasson also led the efforts to implement a mobile strategy for the online art gallery. He has overseen the release of an iPad app, iPhone app, Android app and the company’s mobile website. 

Sasson lives in Tel Aviv, Israel and manages the overstockArt.com Israel office.

David Sasson

David Sasson is the co-founder and president of overstockArt.com. In this role, he focuses on all aspects of growing overstockArt.com and establishing its dominance in the online wall décor market. Since founding overstockArt.com in 2002, Sasson has grown the company from its modest start to an international organization with offices located in three countries.

Sasson came from modest roots himself; he was born in Kibbutz Ein-Shemer, a small town close to the center of Israel, and moved to the United States when his family relocated to Newton, Mass. when he was 16 years-old. From a young age, Sasson learned how to adapt to a different environment, and how to navigate the uncharted waters of American high school life. 

At age 24, after serving 3 years in the Israeli military, Sasson came back to the United Sates in order to study Business Administration at Wichita State University. In 1997, he graduated Magna Cum Laude with a bachelor degree in Business Administration specializing in Entrepreneurship. 

After graduation, Sasson took a position with Integrated Solutions Group selling technology solutions in the Wichita area. His passion to become an entrepreneur and a business leader led him to next role at Apollon Computers, Inc., where he was a part owner and the vice president of sales. Sasson’ drive and superior selling skills allowed him to grow the company by 30% in his first year.

In 2001, Sasson became the Chief Financial Officer of Apollon Computers, Inc. In 2002, he became the President and Chief Executive Officer of Apollon Computers, Inc. and led the organization to great success for a few years. It was during this time that Sasson had the opportunity to found overstockArt.com. The company started from his home, and his wife Stacy was the only employee in the first year of the business. overstockArt.com quickly began to grow and in less than a decade has established itself as the most significant retailer of hand painted oil paintings on the web.

In 2011, Sasson launched Artist Become (ArtistBe.com), the new online community for creating, selling and buying artwork online. The site provides a unique means for emerging artists to be discovered, and to assist established professionals in finding new clients without relying on agents. ArtistBe.com is owned and operated by overstockArt.com

Sasson lives with his wife Stacy and their two children in Wichita, Kan.

About overstockArt.com & CommunicatorBase

Founded in 2002, overstockArt.com is one of the web’s leading distributors of high-quality wall art. With more than 100,000 wall décor combinations to choose from in stock at all times, the online retailer has one goal: to make it easy and affordable for people to transform their space with hand painted art. Recognized as a premiere shopping destination for hand painted fine art reproductions, overstockArt.com has expanded its offerings to include hand painted and hand carved decorative ceramic tiles and high-quality original canvas art prints. The company also owns and operates Artist Become (ArtistBe.com), the online community for contemporary artists around the world. 

overstockArt.com provides decorating assistance, custom framing, commercial decorating services, augmented reality tools to help people visualize the art in their space, and interactive mobile apps for iPad, iPhone and Android. Headquartered in Wichita, Kan., the retailer was named to Inc. Magazine’s 2010 and 2011 Inc. 5000 lists, Internet Retailer magazine’s 2012 Hot 100 list and 2011 and 2012 Second 500 Guides, and was recognized with the STELLAService Seal for excellent customer service. For more information, visit https://www.overstockart.com/

CommunicatorBase is a Supply Chain management application that combines all your purchasing efforts and vendor communications into one managed location and provides powerful tools so you can deliver heroic results reducing inventory levels and increasing supplier throughput. For more information, visit https://communicatorbase.com/

EPISODE SNAPSHOT

[0:00] – Introduction:
Host Scott Reid opens the episode by welcoming listeners and introduces the guests, David and Amitai Sasson, brothers who co-founded OverstockArt.com and the SaaS platform, Communicator Base. He previews their discussion on the Theory of Constraints and the journey of building their businesses.

[3:16] – Business Origin:
David Sasson shares the genesis of OverstockArt.com, explaining how he started the company in 2001 with his wife. They saw the potential for combining an “old world product” (hand-painted oil paintings) with a new distribution system (e-commerce), which led to their innovative business model.

[7:13] – Applying the Theory of Constraints:
David explains how the Theory of Constraints helped identify bottlenecks in their production process, allowing them to streamline operations and improve fulfillment efficiency, starting with the framing and packaging steps.

[10:21] – Website Optimization:
Amitai Sasson discusses how they used the Theory of Constraints to identify and fix issues in their website’s user journey. By analyzing the data and understanding user behavior, they made targeted improvements that resulted in a significant increase in conversion rates.

[17:34] – OverstockArt’s Inventory Management:
David provides an overview of their supply chain and inventory management strategy, explaining how they keep their stock levels optimal to ensure swift order fulfillment while reducing excess inventory.

[21:43] – Building Communicator Base:
Amitai describes the process of developing the Communicator Base platform, which uses machine learning to predict inventory needs for each SKU, allowing businesses to reduce inventory levels while increasing profitability. They initially created this solution for their own business and later turned it into a SaaS product.

[34:35] – Efficient Vendor Communication:
Amitai elaborates on how Communicator Base enhances transparency and efficiency in vendor communication. It ensures that all relevant data is centralized at the purchase order or SKU level, providing easy access for both the vendor and the client’s internal teams.

[44:59] – Theory of Constraints as a Decision Filter:
David emphasizes how applying the Theory of Constraints as a decision-making framework helped them solve various business challenges efficiently. He discusses how identifying the core constraints within a system allows for effective problem-solving and resource allocation.

EPISODE DESCRIPTION

In this informative episode of the Ecommerce Optimizer Show, host Scott Reid is joined by brothers David and Amitai Sasson, the brains behind OverstockArt.com and the innovative SaaS product Communicator Base. The discussion delves into their entrepreneurial journey, highlighting how they leveraged the Theory of Constraints to transform their business operations and the development of their SaaS solution. The brothers share insights into the genesis of OverstockArt.com, starting from a home-based operation to becoming a leader in the online art retail space, employing strategic inventory management and optimization techniques to scale effectively.

The episode further explores the creation and impact of their software tool, Communicator Base, designed to streamline inventory management for Ecommerce businesses. The Sasson brothers explain how the Theory of Constraints guided them to develop solutions that address inventory efficiency and enhance vendor communication and overall operational workflows. They detail the functionalities of Communicator Base, explaining its role in helping businesses maintain low inventory levels while boosting profitability and cash flow. Through their story, listeners gain valuable lessons on applying theoretical frameworks to practical Ecommerce challenges, enhancing business processes, and leveraging technology for sustained growth.

MENTIONED DURING THIS EPISODE

Amitai’s LinkedIn profile: https://www.linkedin.com/in/amitai/

David’s LinkedIn profile: https://www.linkedin.com/in/david-sasson-0145284/

Communicator Base: https://communicatorbase.com/

Overstock Art: https://www.overstockart.com/

Theory of Constraints Institute: https://www.tocinstitute.org/

Eliyahu Goldratt Biography: https://www.toc-goldratt.com/en/biography-of-eli-goldratt

SPONSOR

This episode is brought to you by Ecommerce Optimizers

At Ecommerce Optimizers, we specialize in helping Ecommerce brands in one focused area: and that’s making your website easier to use so that more of your visitors buy from you. 

An easy-to-use website delivers a highly intuitive, straightforward, and smooth experience throughout the customer journey – making it much easier and more enjoyable to do business with you. This translates into a wide variety of business-building benefits, including increased revenue, higher profits, and happier, loyal customers who buy from you time and time again. 

If you’d like to learn more about how we make Ecommerce sites easier to use and how our services might benefit your business, head on over to our website at EcommerceOptimizers.com and check out all the details.

EPISODE TRANSCRIPT

Scott Reid  0:00  

Welcome to the Ecommerce Optimizers Show. I’m your host, Scott Reid. This episode is brought to you by Ecommerce Optimizers. We specialize in helping Ecommerce brands in one focused area. And that’s making your website easier to use so that more of your visitors buy from you. And when easy to use website delivers a highly intuitive, straightforward and smooth experience throughout the customer journey, making it much easier and more enjoyable to do business with you. This translates into a wide variety of business building benefits, including increased revenue, higher profits, and happier loyal customers who buy from you time and time again. If you’d like to learn more about how we make ecommerce sites easier to use, and how our services might benefit your business, head on over to our website at Ecommerceoptimizers.com and check out all the details. All right, so on today’s show, we have two guests. Actually, this is the first episode that we have two guests, and they’re actually brothers we have David Sasse on and I’m a tie SAS on and they are with overstock art.com. But they’re also with a SaaS product. That’s called communicator base. And so last week, I’m a tie in and I we had a great conversation, and it really made sense to to invite them on to the podcast, because I figured that Well, I didn’t figure I knew it was going to be a fantastic episode, due to the level of experience that they have, in all things ecommerce, SAS, we’re going to talk about the theory of constraints, which many listeners may not know about, but it was pioneered by a guy by the name of Dr. Ally who Goldratt, who was a professor at the University of Tel Aviv. The book he published was called The Goal back in 1984. So this is a 40 year anniversary of the goal. And I think it’s in my opinion, I read it probably, I don’t know, 25 years ago, and I think it’s one of the best business books ever written. So without any further ado, thank you very much for coming on the show, David, and I’m a tie. I really appreciate it. And why don’t we just start out with some quick introductions? Sure.

David Sasson  2:18  

First of all, thank you very much for having us. I’m David Sasson. With overstock.com. And

Amitai Sasson  2:29  

oh, yeah, my name is Amitai. With overstock.com as well. I just wanted to say that, that book, the goal, and we have a gold rush book, I went to school in Tel Aviv University, and it’s a required book to read their professor Goldratt was that his alma mater is Tel Aviv University. And the pleasure to do my MBA there and probably the one the biggest takeaway from that MBA was the course of value creation that was done by a theatrical dress disciples at the time. And just getting to know the theory of constraint was probably the biggest take for me from that period. Yeah.

Scott Reid  3:16  

Excellent. Well, thanks for that. Thanks for that background. Guys. Why don’t we why don’t we start out talking about overstock art? David, you started e overstock.com. Back in 2001, with your wife, Could you could you talk to us about how you started the business? How you came up with the idea and all that just then what are the Genesis come from?

David Sasson  3:35  

What Sure? Sure. Happy to. So interestingly enough, I mean, I was actually involved from the beginning. Even before we started the company. I worked with a lot of companies in the computer industry, we worked with a different dot coms back then. And I mean, I ran into some people that that was a similar product line. And we bought some samples of the of the handpainted oil paintings that that are the bread and butter or the main product line that overstock art carries to this day. And I remember the first kind of group of paintings that we bought, and I was amazed by the product, even though if I looked at it today, I probably wouldn’t have been so impressed. But so we saw product that had a tremendous opportunity. We saw ecommerce as what was back then a new distribution system. And we thought the marriage could be interesting of an old world product with a new distribution system. We can get into the to get started at the low investment. And so that attracted us to in a small risk, big rewards potential and so we went after it. Initially we started at 2001 and we started from home upstairs was the office and downstairs, we had an extra room in our basement. And that was our our warehouse order fulfillment operation. And it was really small. We had our own site. And we worked with the initially you bid.com was an online auction, that was a very strong back then. And we started working with them. And maybe we would put an item starting at, say $50. And it will just go up to $100 150. Like it was it was just like, we would sit there and watch people bidding, he was kind of crazy. And we did not have the ability to frame everything was just shipped rolled. And that’s how we started. And we invested the money in building our own website. And because we wanted to build a brand, we did not want just to be a vendor. Yeah. As you know, as as we started, we saw that this was a really cool product. And I remember given a gift of this product was a painting that we thought was really beautiful to a friend. And a couple of months later, we went and visited her, she lived a few hours away from us. And we asked her so how do you like it? Oh, I love it. It’s a great painting and all that. And I’m like, but it’s not framed? You haven’t framed it. She’s like, Yeah, I haven’t gotten to it yet. And so we talked about, you know, we’re not cheating them, we’re giving them what we said we’re gonna give them maybe even better because of imagery and all that. However, they’re not using it. Many people are probably not framing. If they don’t frame they’re not going to buy come back and buy from us. So we have to introduce frame. And in year two of the business, we introduced frames, and the business increased three times, I think, because all of a sudden people could actually hang it, buy it and hang it. And that was just kind of a great little thing that happened. Almost we didn’t know what’s going to cause this kind of increase. But it

Scott Reid  7:10  

did you kind of remove their bottleneck, I guess, right?

David Sasson  7:13  

Yeah, yeah, that’s right. They’re constrained. That’s right. We didn’t even know about it. But yeah. Interestingly enough, one of the reasons I was so attracted maybe initially to the fear of constraints is I had this idea in my head, ever since I was in college, that a great way of writing a book about business, is to put it inside a story inside a fail. And when first time when I saw the theory of constraint, I’m like, Oh, my God, this is this was my idea. This is Soviet, he did it way before him. So he was smarter than me, but that a lot. But but that impressed me. And that really attracted me. And I just loved the ideas. I think that that theory itself was just right on the notes. It’s just it is really, in fact, every, every part of your life in some ways.

Scott Reid  8:05  

So why don’t we talk about that? What’s your definition of the theory of constraints? And how did you use it? If we talk about overstock art? How did you use that to improve your profitability, the operational efficiencies of the company overall.

David Sasson  8:24  

So I don’t know that he did, I can or should provide a new definition of the theory of constraint. But this is how I look at it. When you look at a process, when you look at or you look at a company or you look at a situation, there is something that’s stopping you from just exploding in many, many cases just growing. And so you identifying this one thing, I usually have a really simple, easy visual explanation that I give for a theory of constraint. And that’s just, if you have a process, that in the first step, you could do 10 units. In the second step, you can do two units. In the third step, you can do 20 units. Improving the 10 or 20 will not impact the end result of how many units you produce per hour, only the two matters. So you focus all your attention on the two. And that’s just a real easy conceptual way of looking at it. For us, when we started implementing the theater of constraint, we looked at our production operation. We had a lot of orders. We didn’t feel like we’re producing them fast enough. We have a relatively simple process. So we started looking, how do we improve what slows us down and at the time, there was a actually taking the painting after it got stretched and it was in the frame. Doing all that process was taking a long time and so we looked at ways to improve for that specific thing, once we figure that out, started producing more, and then we focus somewhere else. And that’s, that was the start of us using it, it’s finding ways to do improvements to what slows us down in the physical process of fulfillment. That was the first.

Amitai Sasson  10:21  

Yeah, on my on my side, as opposed to David’s talking about the, you know, the operations. And when you have a constraint that’s related to production, a production constraint. On my side, I hold the technical hat. And I deal with the customer side, the customer facing side of the site, and also back end operations. For the customer facing side, when I was, you know, looking at the Theory of Constraints, I use that in our CRO processes, we, we initially back in the day, we were started out as a Yahoo store, eventually, we, you know, we grew out of that, and we were tired of the host solution. So we built, basically, custom built a new website, towards 2015. And the new website, you know, websites are written in blood, you know, we, we like to say the thing, the initial, the initial site that you’re on is just not, you know, there’s a lot of things that need to be done to the site in order to improve on it. And we decided to take the theory of constraint and build the CRO methodology around the theory of constraint. And the idea was to do the basically the drummer for wrote kind of iteration on finding the constraint, first of all, so first of all, we looked at what’s the constraint on our website. And we said, Okay, we’re going to use some statistics, that’s hard statistics, and also quantitative information. And we were going to come up with what’s our two straight, you know, looking at, at where people are bouncing, all sorts of drops in the funnel. And at first we did, we saw that constraint is our product pages. And so we we worked on that. And so what we did, again, going with the theory of constraint, we got all the resources of the organization to that constraint, we, we stopped doing other projects, we focus on that product page. And that was the focus of, you know, going from a wireframing, you know, UX, and then the pixel perfect design and then coding it and putting it into place. And then we looked at the numbers, we looked at the numbers, again, we were trying to get to measure throughput, and get more, you know, revenue from that. And we saw what, essentially what we saw that the throughput didn’t go as high as we expected, we did see good improvement in the flow, what happened, the constraint has moved. So we keep moving with the constraint into our focus. So you keep doing that cycle to focus. And we did that in CRM, it was very successful for us, we moved the needle there. For our site, that initial site, and when we were after the CRO process, was a jump about 30%. And in conversion rate, which, yeah, and which is huge. So yeah, so that’s an example where the fear is constrained the focus on finding the constraint, alleviating that constraint and understanding the constraint is moved somewhere else. And just keeping and just focusing your entire energy into that one focus.

Scott Reid  13:39  

So yeah, so And when did you when did you pick that up on the website, or tie?

Amitai Sasson  13:45  

Well, we’ve implemented that back in 2018 2018 18. We did that. That process. We started with the we started with the product page, then we looked at the cart page. Then we saw, then we focused on The Checkout. And then we focused on the homepage. That was just kind of the journey that it took us on. But eventually, we saw just you know, we saw how the funnel reacts to the changes in the drop offs. So yeah, yeah.

Scott Reid  14:20  

And I picked up on a couple things that you just said. Number one, as you’re looking at the data, the quantitative data, we’re using Google Analytics data to identify the opportunities that existed within the site are across Yeah, at

Amitai Sasson  14:34  

the time like looking at you know, bounce rates and things like that and also the funnel funnel, but also quantitative data mean we asked questions, we know we use hot jar for just asking them a simple question. What made you you know, what made you almost not complete your purchase today? That was the questions that we put at the at the end of the of the of the of the chat About or if they’re about to bounce and what’s you know, what’s keeping you from buying today. And just trying to understand getting with that, sometimes the qualitative data is going to be stronger even the quantity, you know, the quantitative one. From what I’ve seen, really, in E commerce, it’s, it’s pretty amazing, you know, if you can listen into your customer service, and really like it, like if there was a better way of flow from customer service to the actual, you know, development and then reality for the customer, that would be amazing.

Scott Reid  15:32  

Did you do any user testing at all?

Amitai Sasson  15:35  

We, we did user tests, we did AV testing at the time of Google Optimize the testing on ghosts. But in reality, to tell you the truth, AB testing has proven to be for us, as has proven to be almost not economical. Until about it, especially I think that even in 2018 2019, especially now, it seems like customers are much more savvy than they used to be, you know, the beginning of the web where you, you know, you change the color of a button, all of a sudden, people are reacting to it. I don’t think that moves the needle that much. And what we’ve seen is that creating these tests a lot of times, you know, takes a lot of energy and a lot of focus, and then you know, limit to infinity, you’re just you know, you’re you’re converting to the mean there, and you’re like, oh my god, I mean, you made all these efforts. So if you’re not like a million dollar a month site, it might not be worth your while to be on.

Scott Reid  16:36  

Yeah, and the thing is, that in order to AB test with confidence, you have to have enough traffic and the numbers have to work. Otherwise, you’re just you’re still just guessing, you know, or somewhere in between

Amitai Sasson  16:48  

Amazon, can you run a test in 30 minutes? Right? No, they can do it. I mean, but you’re you’re gonna run a test for three months. You know, it’s, it’s not gonna, it’s

Scott Reid  16:59  

tough. And so overstock art, it’s, you are, could you just give like a quick overview of, of the product and where you’re sourcing that from? Because you have a lot of skews mean, you have 1000 different skews. So you have a lot of inventory. And that’s one of the things that we’re going to talk about is, is communicated base. So how does overstock work in terms of the supply chain? And you talked about the framing? And could could you give an overview on that, please?

David Sasson  17:34  

Yeah, certainly, we have a variety of products, all our products, our decor related or art related, mostly handcrafted or handmade, our main product line, our handpan oil paintings, they are created in studios overseas, we work directly with the studios, the supply time of a painting from an order to actual supply is usually between 60 and 90 days. So because we have such a large variety, we can’t order a lot of depth. And so that’s, that’s a functional issue for the business, we do all of our own framings. So we order all the frames, some depending on how we order, some take a really long time, some are two weeks away, so that that’s kind of the variety, we hold everything in stock. So when when a customer orders, we are able to ship in one or two days, so they get the product very quickly. That’s very important. And that is something that’s tough for our competition to replicate. So we want to make sure we keep track of that. We sell directly through our website, and we sell through other retailers and marketplaces. But everything is online. And all orders are fulfilled from our facility in Wichita, Kansas, where we do not just pick and pack obviously, we take that the art and then we we build the frames, and we stretch and package the product and ship it. So that’s kind of the operation in a nutshell, everything. Chips and customer service are@overstock.com in which that kid is us. And they think I’m covering everything, but maybe I’m missing something. I mean, I

Amitai Sasson  19:25  

know Yeah, we the big thing is that we hold stock, everything what you see is what you get, we have so you have the ability to custom frame and that hold so we hold saws and Underpinner and we chop and join frames all day. We have Channel Zero, which is our website, and then we have shares, we partner retailers that we work with. And we also have a b2b arm as well, where we do hotels and things like that. Interesting

Scott Reid  19:52  

and so are you shipping internationally, or you’ve just in North North America? Where does Where’s What’s your client base,

David Sasson  20:00  

we do sell internationally, but the vast majority is staying in the United States. That’s because shipping costs going to Europe or anywhere outside of North America is very high. Canada is reasonable, but it’s also not inexpensive. What happens with the carriers is they measure weight and volume or actual weight and art is, is light, but it’s very big. And so that becomes very heavy. And, yeah,

Scott Reid  20:36  

I’m gonna tell you, when we spoke earlier, you had a quote that really jumped out at me, which was, it’s all about value creation, when we were talking about the theory of constraints. And that you wanted to work in small batches, you wanted the ability to be able to work in small batches, without killing yourself. And so you developed this system, where you’re continually building models for each SKU, like demand bottles, and then you’re automating the process of supply the the result of that kind of methodology, or that strategy that you have has been reduced inventory levels while remaining profitable. And that’s a key thing that the cash that’s tied up in inventory for any e commerce brand is significant. It unless you’re doing drop shipping or something like that. But for your model, the ability to reduce your inventory, my understanding was it really increased your profitability and allowed you to be a lot more nimble. Could you talk about that whole kind of transition from maintaining high inventory levels to managing it much more efficiently?

Amitai Sasson  21:43  

Yeah, so basically, because we hold stock, and if you’re a retailer that hold stock, you know that it’s a nightmare. I mean, just managing that if you have a ton of skews, just working as far as you know, the buying process, at this making decisions and things like that, we were at that point, back in the day that we had a bunch of suppliers that we need to add, we need to hold stock for our products. So your painting will arrive in three days. So we’ll make the holidays and things like that, which are our biggest days, we have to hold stock in these situations, many retailers do. So in our case, where big issue was actually communications, like communicating with the vendor in a way that’s going to be outside of the realm of emails and excel sheets, because you’d be surprised how many big retailers, even $100 million retailers are still doing buying in a seasonal manner. And just holding a ton of stock throughout the season and hoping that levels, you know, and working based on levels. For us, we couldn’t have that luxury, we had a ton of dollars sitting in inventory. And we wanted to release those dollars. So what we started doing is we started looking at the data flowing from our billing, essentially. So we looked at daily sales of each and every SKU, and we put that daily into a database. And so daily and slowly what happens, you start getting a model of sales per SKU, for each day, you take another file, and the other file shows me quantity of each SKU. So if let’s say a SKU is selling, then there’s the quantity tickers gonna go down. If something goes back, it’s coming into the warehouse. So the numbers they’re keeping. So we started building models of quantity on hand, and sales per day. And then we were able to basically using a little bit of phase law, as well using basically not a lot of information, it allowed us to kind of build a model of with a certain degree of confidence and taking into account production time and seasonality and all sorts of things like that, we were able to build a model to predict how many we actually need. And when we run these things now today, we’re able to the click of a button, know what we need to order from each and every supplier in a certain degree of confidence. And that’s color coded. So we can in 10 minutes go through each supplier that we can order in smartest small batches. And why is that important? Because when we do air shipments, and everything comes in fast, but it but we do these shipments every week or so. And we keep these shipments low. And what happens if you’re for instance, if you’re a retailer, if you’re buying quantity, 15 and $15,000 quantity every three weeks or $5,000 quantity every week, you’re essentially spending the same money but your inventory levels are staying very very low. Although spread Those dollars, and you can spread that dollar. And those again, come back to the Theory of Constraints meant of methodologies of reducing inventory in keeping availability high and keeping throughput high. So that’s where the Theory of Constraints kind of comes into the communicator base. That’s how we call this, this tool that we’ve built. And, David, if you want to talk about that a little bit more.

David Sasson  25:27  

Certainly, I’ll give an example. When the split a few years ago, we had a person that was doing some of our purchasing and she was buying frames. And she was ordering in an undisciplined manner, like every once in a while. And every order was huge, because her goal was to never run out. And I remember looking at that, and thinking that’s not right. And so I thought I’ll take over. First thing I did is in this case, because of shipping costs, it made sense to do it every two weeks, I communicated with the vendor, and the vendor had minimums. And he said, but you got to hit this minimum, and I told us that I’m gonna hit the minimum overtime. If you’re unhappy with our purchases over time, we can we can discuss, but it will give me the same price. And we’re just going to order every two weeks. So you know, everything is so predictable, so easy for you. It’s not one huge order and request a while it is every two weeks, you get an order from me. He’s like, You know what, Okay, sounds good. I’ll give you the same price. And if we are not hitting the minimum, then we’ll figure it out. Okay. And that reduced our inventory. And significantly, it’s probably what we dropped by about 60% increase our availability, it increased by somewhere around 60%. Because she was constantly running out stuff. And just streamline our operation and his operation. We weren’t, we would talk about it every couple of weeks, because, you know, you work with companies and you become friends. And it’s like, it’s a beautiful thing we love, we know exactly when we gotta get paid, we know exactly, and everything just works. And so just taking this idea of how do I optimize? How do I optimize my situation while taking care of my vendor. So they’re optimized to is really what this allows you to do. When we look at our situation, when it comes to art, art, a lot of our art sells only few units in here. But we have to have it in stock, in order to be able to fulfill. And we want to fulfill fast because our competitors can’t fulfill fast because they don’t know what will sell. And we don’t know what will sell either because we don’t have a crystal ball. So we built this system demand planning, which Amit I built. I helped him with the logic. And it is based on Bayes theorem, and it is is based on theory of constraints of being able to refill this. And we don’t know what we’re going to sell, but we know what size or what dynamic size bin we need to have. And that’s how we fill it. And it it works fast. So we are able to order once a week if we need to. And it also keeps us at minimum needed inventory. But not below that. And so then we are able to fulfill regularly, we run out of stock on special slow movers from time to time just like anybody else would. However, we are able to keep core products in stock as needed and fulfill fast. While our inventory dropped by a lot. I don’t want to say a percent, but I don’t remember, but we’re significant drops. And when you drop your inventory significant and increase your availability, you’re increasing profitability and increasing cash which allows you to invest in other things which will increase your sales by more. That’s why it’s so important. It’s

Scott Reid  29:13  

great from a customer service standpoint as well, because you’re able to fulfill and you do that with confidence. In terms of inventory level management, two words, come to mind that you’re able to manage those inventory levels faster and better. And without thinking about it necessarily because your system is doing it for you intuitively, does it not reduce the need to have a buyer as well to that’s making these decisions? Is that just then automated? Essentially, maybe there’s some human oversight, but it’s not nearly at the level that that it perhaps used to be is that a correct assumption? So

David Sasson  29:50  

I would say like this when we started, it was so hard to order that we would only order or when we had, because we have such huge variety. And because it’s slow, a lot of slow moving, you build his models in Excel, and he tried to guess and you, and you would sit for such a long time until you’re like, Okay, I’m just gonna send it out. And so now it’s thought through, it’s fast, it’s easy. And yes, you’re right, it reduces the need to have a true buy, you still have to negotiate prices, especially the beginning, you have to oversee the things are going correctly. So you still need to have people involved. However, yes, a lot of the we streamline the process, which made it a lot easier. Absolutely.

Scott Reid  30:42  

And in terms of training that model, how long did that take with your business to get it to a point where as you’re feeding that data in on a daily basis for you to achieve that level of confidence that you felt comfortable with,

Amitai Sasson  30:57  

in general, we were able to see, because we started this off, we were able to see after a year, we’re able to see a model a complete model, that’s taken into account, the different data that were there, because we’re because we’re feeding in 365 Rolling data. So we’re feeding that. So approximately after a year, you should have a model that’s going to be with a certain degree of confidence will be good. When we running it now with the new retailer that we’re feeding it old orders. So we’re starting, we can start the process much earlier that we can start, you know, feeding into data creating the products on the system. And and in some cases, we’re able to feed historical data. So we can kind of, you know, fill in kind of given a benchmark of that beginning tendency.

David Sasson  31:48  

Because that’s the thing is, what happens is with the sort of the supply time of an item the fluctuation in that, because we start out with an average number. And then then we have to calculate it. And then you calculate averages. And so the more you do it, the more accurate it become. Buddy works from the beginning in fairly accurate ways. It is it was solid pretty quick.

Scott Reid  32:16  

And you you develop this for your own business. And then my understanding is he said, Hey, this is working so great for us. Why don’t we Why don’t we create a product and roll it out? Via SAS model? When did that? When did and that’s that’s known as communicator base. Yeah,

Amitai Sasson  32:36  

that’s those the communicator base. We started that right, as the pandemic hit. So we started doing that we started with an apparel brand at first. And yeah, so we, we’ve been building this now for about three years. The system itself has been built for 10 years now. So I mean, it’s been kind of the blueprint has been has been going on for 10 years. But communicator base of what we rolled out. It’s been around for about three years. We’re completely bootstrapped, we’re still, you know, doing everything ourselves. But But yeah, it’s been a really great kind of, you know, pitch that we were able to find a really nice solution for. And just using the that business, the business data that we’ve been able to, to, to acquire throughout the years, to really create a product for cut for retailers and hold a lot of skews to be able to just hook it up to their billing made it be QuickBooks or another, and then start seeing data on there and looking up their vendors. And then we’re starting to see orders flow back and forth. And then you know, you’re kind of hooked. It’s very, very sticky, because you start working with these orders and you get used to it. And then it just yeah, it just works. That’s what’s nice about

Scott Reid  34:15  

and and is there is there a if you were to look at a certain number of skews where it makes sense for a given client of yours to adopt. Communicator base is is there a kind of a benchmark that you look at where there’s a tipping point in one way that says, hey, it really makes sense?

Amitai Sasson  34:35  

Yeah. So I mean, because even if you have a low amount of skews, you still have variety, that’s the sizes and colors and things like that, but taking into account all of those kinds of if you’re over 600 skews, even with colors and sizes and things like that, then definitely you need some sort of tool to this sort of tool will help you manage your buying woes and and be able to We’ll start working in a way that that’s much more advanced than than the regular tools that gives you certain points that you’re that you’re going to buy from. So I’d say about 600 500 600. Shoes over, then you should probably look for a solution.

Scott Reid  35:18  

And my, my understanding of this, as well as that it also it’s embedded in the name, communicator base, it also enables communication between a company and its vendors, which creates efficiencies, and is that correct as well, because that’s the way it started was it was a communication platform. Exactly.

Amitai Sasson  35:36  

That’s what it is. It’s just that communication, taking things away that everything is very transparent between you and the vendor. That’s so helpful. And it also makes you work. Work right, you know, you need your billing to be up to date, you need to put in those gels, you know, in your, in your accounting. And, and that goes to book managing by the numbers. If you’re David knows that book as well. I mean, what is your KPIs? What are the things that you’re tracking? And, you know, it all comes down today to profitability, and you want to make sure that you’re making money, and, and cash and your cash position? So keeping things like that it makes you really work transparently, all across the organization?

Scott Reid  36:21  

Yeah, cuz there’s other more valuable things to do in your business than just manage inventory, I guess would be a fair statement. Yeah. And what would you say? Like kind of like an average in terms of retailers? How much of their of their cash is just sitting there in inventory? Like, is there a percentage? From,

Amitai Sasson  36:40  

from what I’ve heard over 60% of cash sits in inventory for retail? On average? I mean, it’s, that’s massive. Yeah. Yeah. It’s it’s insane amount of cash sitting there, instead of it working for you in other areas. Yeah.

Scott Reid  36:56  

And that would be if we’re thinking if we’re talking about the theory of constraints, we’re talking about inventory. And that’s money that’s currently inside the system. Let me know if you can repurpose that that money so that it’s being directed towards something else that’s that’s building the business is that the correct logic on the on leveraging the theory of constraints as as it relates to your inventory, and the inventory management? So

David Sasson  37:23  

money that sits in inventory? I’ll give you an example. We had, I had a lady that used to do our buying of art for us. And she started taking over the role. And we gave her a communicator based system, and I see that inventory has grown. So I came to her like, what are you doing? She’s like, Well, I’m just buying based on what the system tells me like, Okay, can we look together? Sure. And so she’s telling me here, it tells me to buy two, but I’m buying five, like, Okay, why? And she says, Well, this product is right now at an event with a retailer. And I know we’re going to sell it. So I’m going to bring a little extra thing. Okay. So you’re not using the system, right? Well, not in this case. Okay. So I told her, but now we’re going to have too much inventory, because only about 20% of items on event actually ended up selling. And she said, Well, if we have a letter, that’s okay, these don’t go bad. I’m like, well, but if I don’t have cash to pay your salaries, and okay, if they’ll give you those three extra paintings, it’s not really. Okay, so it’s not okay for business either. So we need to order what the system tells us and then inventory will grow. And we’ll adjust the system if we start seeing shortages. And because a lot of times, people think, well, it’s sitting there, it will be converted to cash that is true, but when it’s really important, but some items will not convert fast enough. And so if you have that extra cash, it could be invested in marketing, it could be invested in people, it’s put invested in solutions. And that’s what you want to accomplish. And the communicator base, used correctly will generate the cash that is cost to implement it pretty easily. And that’s the whole idea is that we’re helping them actually generate cash with them. And the communication piece there depends on the business you’re in. But in our world where things do take a long time, it’s important that we have all of our communications sitting at the PIO level or the SKU level where we can see this is when you got it. This is when we met had this no this is when we had this known or just known or that No. And everybody could see it you the vendor and every employee, even a customer service person if they need to see who the vendor was that created this or they could see it. It’s all there for everybody in your organization. And that’s really helpful compared to something hiding in an handwritten note on somebody’s desk. Oh, or even in just their email. And they’re not trying to hide it. It’s just being hidden because nobody else has access to it. Those are sound the strength of the system.

Scott Reid  40:10  

Yeah, it’s interesting. What I’m thinking is that is so dialed into what Dr. Gould Goldratt was all about was taking that theory and implementing it into a business. And I think about how many people must have read the goal. But don’t well, first of all, somebody so few people actually really know about it. We were talking about that on a tie. But how many people actually take that, that, that truth and do something with it? I think you guys are really unique in that, that you’ve taken it to heart and you’ve just embedded that into the fabric of your company. You’ve created another company as a result of that. It’s really quite impressive. How does somebody get engaged with you with communicator base? How does that relationship start? I think that would be helpful for the listeners to understand. I know that you have the website, which is communicator based.com. And how does that initial kind of onboarding? What does that look like? If you could describe that? That would be great.

Amitai Sasson  41:06  

Yeah, great, great question. Initial onboarding with us is we would take your order files, usually companies have a standard order file they use with their vendors, we would take that order file, and we would start loading orders into the system building products and building past orders into the system immediately, then we would invite the vendors. So vendors would have their own access to a portal where they see orders and shipments of their own orders. And shipments, of course, there’s certain information that they don’t see. And then the collaboration can start. And then you start building the orders on the communicator base, based on the products that you ordered in the past, of course. And the last step is the demand planning, we hook your billing and your inventory, basically two data streams, the sales data, and the quantity data. And the model starts building. And then you start getting recommendations. And you start getting demand planning data. And you can start using the AI here and a machine learning that’s learning data, not AI, but machine learning. That’s learning the data and it starts taking into account. How long did it take until it arrived in your warehouse? Everything like that. So if we start compounding the days and giving an accurate assumption is how many exactly do you need at any given time for every SKU?

Scott Reid  42:35  

Interesting. And how long is that onboarding process?

Amitai Sasson  42:39  

Well, it really depends on the client, sometimes it can be pretty rough, it’s always hard to, because you really kind of need to it’s something in the heart of the business, but we’ve had situations where and we’re getting better at it, right now we can see a process of that can can be probably between three months to a month that you can get completely on boarded.

Scott Reid  43:03  

Now, that’s great, that’s quite for something that’s going to transform your business for the better. You have different pricing plans that people can look at on the website, is there anything that you wanted to talk about on that or just direct people to that website, all

Amitai Sasson  43:15  

of our clients right now are all in a custom model, essentially, where we build it with them cater to their needs. So we would love to if you have a need if you’re a retailer that needs help with their buying process, and we can definitely have a meeting and and see if it’s something that can be a good fit. We haven’t really been able to go after the small businesses that don’t have a lot to spend. But we are conscious that they also have the same edge. We’ve haven’t been able to solve this. And this is something that we hope to solve this year to create a true fast option for smaller retailers under 20 million or so.

Scott Reid  43:55  

And people can go onto the site and schedule a demo. And then you’ll walk them through the whole process. Yeah,

Amitai Sasson  44:01  

yeah, we can schedule a demo or they can contact me directly. I always on LinkedIn or via email at Tommy Thai at communicator. base.com.

Scott Reid  44:14  

Excellent. Repeat before we move on. Is there anything else that you wanted to say about communicator bass that I didn’t ask you that I shut up? No.

Amitai Sasson  44:20  

No, let’s David that somebody wants

David Sasson  44:23  

to say, No, I think you’re covered well.

Scott Reid  44:26  

And if we go back over to the theory of constraints, we’ve spoken about leveraging the theory implementing the theory across across your website for optimization using inventory management. Clearly your your production facilities, other other areas that have your business that you’ve successfully embedded that that that practice. I mean, it’s I’m guessing it’s throughout your entire business, but if there are other areas that that you think would or that you’d like to talk about, I’d love to hear about them.

David Sasson  44:59  

I think when we look at the theory of strength for me, it’s the thinking processes that you would use. If you use the exact thinking processes that were discussed. And the goal, they don’t exactly get into it. There’s other books that get into the more details. They’re a little bit taxing that they’re hard to do, they’re mentally difficult. But you can come up with some amazing solutions when you do that. But even even outside of that is just the way we look at situations that even small things, and I can’t think of a specific example right off the bat. But even small things, if you just look at the situation and say, what is the constraint in this flow? What is the constraint in this situation? And how can we concentrate our efforts towards that in many cases, you’d find interesting ways of coming up with solutions. That has been just an area that has worked for us while solving it even sometimes you look at a situation you’re like, Oh, this is simply a problem between two people. And you find that because you look at that the situation was, what’s my constraint here is they just are just not they’re not talking? Yeah, that’s the constraint. If they just get off the chair and go, they just say, hey, this, is solve that. And so sometimes, just by looking at the situation, and just trying to break it down, what is medical is trying to solve the problem without even having to draw anything or really, and that’s really has been a huge thing for us. Just being able to solve problems relatively easily. That

Scott Reid  46:43  

way. It’s kind of like a filter that you’re applying to different. Yes, yeah. Yeah. Something comes along, apply the theory, where’s the constraint? I mean, it’s kind of a simple question to ask, and we spoke about, and you just touched on it as well, about with people. I mean, with people that could it doesn’t have to be a mechanical process. It can be communication between two humans or lack thereof, like, where’s that constraint? Is it the personality where that’s bringing the whole team down? Or sometimes less is more or addition by subtraction? That’s the constraint, right? I mean, that’s ultimately that’s what it’s all about is, I can think of a lot of constraints in my life that I wish I had applied that filter to. I don’t know about you guys, but it’s a great life lesson. Thank you very much, guys. I really appreciate you being guests participating on the podcast. I think it was just a wonderful episode, we learned all about overstock art, how that was started, we learned about communicator, bass, we talked about the theory of constraints. I trust, if any, anybody’s listening to this episode, that they’ve got a ton of value out of it. I certainly did. I really appreciate your time and look forward to speaking with you further as we move forward.

Amitai Sasson  47:57  

Thank you so much, Scott. It’s been a pleasure. Honored to be on your podcast and yeah, we love geeking out on TLC. So anytime, anytime, we’d be happy to talk with you about anything.

Scott Reid  48:14  

Thanks very much.

David Sasson  48:15  

Thank you, Scott. Appreciate it. Thank you.