The Modern Ops Stack
The world of ecommerce as it stands today is starkly different from the one just three years ago. Online sales are expected to have topped $1 trillion in 2022, as ecommerce continued to ride a long-lasting wave of growth that was accelerated by COVID. Shopify’s role in that growth is undeniable, representing $175.4 billion in sales in just 2021.
Underlying that growth, however, is a group of companies that have helped ecommerce businesses do the dirty work, keeping things running amidst a global pandemic, supply chain crisis, and high inflation. While many sites use Shopify to sell today, they run their business on a different set of tools: the Modern Ops Stack.
The Modern Ops Stack in 2023
The Modern Ops Stack is a collection of companies founded in the past ten years that have revolutionized how companies that manage physical inventory run their operations. They span both software and hardware, combining the two to build complex systems that link buyers and sellers across the world.
The Stack
The stack spans all parts of the supply chain, customer service, and accounting:
Procurement
Inbound Transportation
Warehousing and Fulfillment
Outbound Transportation
Tracking & Reverse Logistics
Customer Experience
Accounting
Procurement
Procurement has always been one of the most difficult parts of running an ecommerce businesses. Companies have to select the right manufacturer, manage production schedules across multiple components and factories, and track shipments just to land a finished product in their warehouse. A web of emails and spreadsheets typically hold all of the information needed to make effective decisions, and real-time visibility simply was not possible.
Enter tools like Anvyl (founded 2017), SourceDay (founded 2013), and project44 (founded 2014), which provide a suite of purchasing intelligence, production management, and supply chain visibility features to help small businesses streamline their procurement processes without adding additional headcount. These products allow companies to manage complex supply chains from a distance, while maintaining close contact with production.
Inbound Transportation
Shipping is the most complex operation on this list - moving goods around the world can involve dozens of touch points across manufacturers, customs agents, dangerous goods specialists, truck carriers, and ocean freight brokers.
Flexport (founded 2013) is the industry leader, combining a robust platform with an army of freight managers who have deep knowledge in everything from the COVID numbers in Ningbo to the latest rail union deal in Chicago. Flexport has also used their position to create a trade finance arm and a venture fund to support both the shippers within their network and the next generation of logistics startups.
In the domestic trucking world, companies like Loadsmart (founded 2014) and Transfix (founded 2013) have connected shippers with networks of carriers to help their customers maximize capacity and ship as efficiently as possible.
Warehousing and Fulfillment
Warehousing and fulfillment is perhaps the hardest place to innovate. The core functions are standardized: you receive, you put away, you pick, you pack. Still, several new companies have found ways to provide additional value and visibility into warehouse operations.
Stord (founded 2015) has built a network that spans everything from drayage to last-mile D2C delivery. ShipHero (founded 2013) has developed their own warehouse management system to support their fulfillment centers, while other 3PLs like ShipMonk and ShipBob (both founded 2014 - also, c’mon folks, let’s get more creative with our names) have developed direct connections to platforms like Shopify to let even the most ops-averse brands run an omnichannel fulfillment operation.
Outbound Transportation
Parcel shipping remains largely dominated by established players like the USPS, UPS, and FedEx. Veho (founded 2016) and Swyft (founded 2020) have developed proprietary software and line-haul networks to help companies compete with the two-day delivery promise that so many customers now demand. “Older” players DoorDash (founded 2013) and Uber (founded 2009) have also launched their own last-mile delivery solutions, opening up same-day delivery to small brands in major metro areas.
Tracking & Reverse Logistics
Tracking tools have helped both ecommerce customers and companies gain visibility into exactly where their order is at any given time. EasyPost (founded 2012), NarVar (founded 2012), and AfterShip (founded 2011) have each developed their own shipment tracking products, with EasyPost and NarVar allowing customers to buy postage via a simple API that integrates with dozens of carriers. These solutions also allow companies to build better reporting on their own networks, helping them identify exactly which carriers or distribution centers are affecting their delivery performance.
NarVar and AfterShip also operate in the reverse logistics space, providing easy return options for customers while helping businesses maintain their bottom line. This space has also seen innovation, with companies like Loop Returns (founded 2016) allowing Shopify stores to plug directly into their platform
Customer Experience
CX platforms have been forced to make a leap forward, as shoppers want to be met where they are (whether that be Instagram, SMS, email, or - heaven forbid - a phone call). Kustomer (founded 2015) has taken a CRM-based approach to customer service, allowing companies to track their shoppers across multiple platforms and purchasing events. Gorgias (founded 2015) is purpose-built for ecommerce, with deep integrations to Shopify and other tools in the ecommerce stack.
Accounting
Bookkeeping has seen less change than other parts of the stack, with QuickBooks and Xero dominating most of the market. While Bench (founded 2012) and others have focused on SMBs, most of the advancements in accounting have come from integrations developed by the other companies we’ve mentioned, allowing businesses to directly plug in their procurement, transportation, or fulfillment partners into their bookkeeping software.
Easier Ops, Fuzzier Economics
All of these tools have made running an ecommerce business significantly easier. By shifting the bulk of operations to the companies in this list, it’s possible for a small team to run a successful Shopify store without having to learn the nitty-gritty of operations or even step foot in a warehouse. These tools have opened ecommerce to thousands of product creators who would not have had the tools to operate the full business ten years ago.
However, these tools have also obscured how the business actually runs for many ecommerce companies. By outsourcing both the expertise and the work to experts, many companies no longer have direct visibility into things like material costs, warehouse processes, or fuel surcharges. Instead, they rely on their partners to manage those services entirely - often at a markup to the actual cost.
Tying all these systems should be easy - most have excellent integration layers and real time APIs - but most companies struggle to centralize the data. At the end of the day, the health of a business is determined by its financials, and integrating with financial systems is incredibly difficult.
Where do we go from here?
To truly utilize the Modern Ops Stack, we need to leverage these tools to their full potential in three ways:
Real-time visibility
Intelligence
Unified business modeling
Real-time visibility
Real-time visibility is already a standard feature across the Modern Ops Stack - click through to any of the companies mentioned here and you’ll be sure to find it mentioned on their site. But the reality of working with these tools is that the information an operator needs is spread across too many tools.
Take a simple question like “How many blue sneakers do we have?” The answer to that question likely involves checking how many you have on order in one system, how many are currently in transit to your warehouse in a second, how many are on hand at your warehouse in a third, and maybe even how many are in your retail partner’s warehouse in a fourth (or depending on how many partners you have… nth). Real-time visibility in silo’d systems isn’t very real-time at all.
Intelligence
Intelligence is another term that many of these tools offer out of the box, but they are again limited by how disparate these tools are.
Take another simple question like: “When should we re-order the blue sneakers?” First you need to identify your current inventory position (see above). Then you need to understand how sales are trending - your ecommerce platform is a good place to start, but it likely doesn’t take into account other data points that you know about.
Maybe the blue sneakers were out of stock for a month, which led to no sales during that period; maybe marketing spend has been entirely focused on red sneakers, but you’re planning to rebalance across the full catalog this year; maybe customers have been exchanging the blue sneakers for bigger sizes because your manufacturer mislabeled everything a half-size down. All of this information is at your fingertips, but none of it talks to each other today.
Unified business modeling
This is both the problem and solution to these questions. To fully leverage these tools, companies must understand how they are interacting with each of the tools in their stack. Let’s ask one more “simple” question: “How much did the blue sneakers cost?”
You paid your manufacturer some amount for the finished goods (or maybe you paid a few manufacturers for individual components, and then a separate assembler to create the finished good); you paid customs charges to bring them into the country; shipping costs to get the goods to your warehouse; storage costs to keep them on the shelf; transaction fees when the customer placed an order; fulfillment costs to pack them for customers; more shipping costs to ship them to the customer.
All of these costs are spread out across multiple systems, often on invoices that aren’t clearly marked for an individual item (e.g., you likely pay storage by the pallet space - how many sneakers fit on a pallet?). To truly understand how each of these tools fit together, you need to centralize them in one place that holds both your inventory and cost data.
Turbine: The heart of the Modern Ops Stack
At Turbine, we’re building financial technologies for companies that manage physical inventory. We think of ourselves as sitting at the heart of the Modern Ops Stack - one place to coordinate all of your processes.
We’re structuring the product on the principles of intersystem real-time visibility, native feedback, and unified operational and accounting processes, allowing companies to ask and answer all the questions in one view. We help companies automate their three-way-match and order-to-cash reconciliation today, and forecast their cost needs.
Our goal is to make Turbine serve as a single pane of glass across all your platforms, reducing your need for additional tools/integrators and providing you with the visibility that the Modern Ops Stack promises. Sound interesting? Reach out at the link below, or shoot us an email at hello@helloturbine.com.
