The popular Redwood City autonomous drone company Skydio, launched their first product, the Skydio R1, as a lean startup by manufacturing and fulfilling in-house. This supply chain strategy allowed for a quicker time to market with local product assembly, on-site engineering support, final pack out, and first customer shipments. However, when development started of the recently announced Skydio 2 and the expectation of even higher sales demand, the Operations team knew it was time to outsource a critical part of their supply chain to an expert—they needed a premium fulfillment partner in the Bay Area.
After talking with Skydio’s Head of Operations, Jeff Hoever, it is clear why they made the choice to outsource order fulfillment while still manufacturing in house: immediately upon launch their product is already in hot demand—Skydio 2 has substantially more capabilities and intelligence than R1, at half the price. With an experienced leadership team, they wanted a trusted logistics partner and an expert in the industry to help with kitting, pack out, and order fulfillment—for both forward and reverse logistics—while remaining cost conscious. Ultimately they chose DCL based on its reputation, technology capabilities, and a proven track record of helping startups scale. Jeff explains, “The key decision point for us was being confident that with DCL as our 3PL partner we could scale our business quickly based on their experience, flexibility, solid processes, in-house systems, and great team support.”
The Tipping Point—How to Know it’s Time to Go from In-House Fulfillment to Outsourcing
A question facing many early stage hardware companies is: what factors matter when outsourcing fulfillment? There are a daunting amount of solutions out there: top tier, low tier, costly, cheap, and everything in between, plus already existing options like Amazon fulfillment. A startup may have concerns working with a top tier 3PL like DCL. “I think there are impressions from companies who haven’t outsourced before that managing a 3PL is difficult and that ‘I’m not big enough yet,’” says Jeff. “As a small startup, doing everything in-house for our first product had a lot of advantages; for example, our engineers were right next to the production line, we had the flexibility to make quick updates and were only shipping to North American customers. Even when we started with a few retail partners, the fulfillment efforts were manageable.”
“DCL’s services are a good fit for companies of all sizes.” Jeff says, “DCL’s sweet spot is working with startups and then scaling with them as the business grows. DCL does that with its flexibility, proven on-boarding process, being a true partner, and providing advice. With Skydio engineering and manufacturing resources in Redwood City, it helps to have our 3PL partner close as well. By partnering with DCL, they essentially act as an extension of Skydio. This was a big reason why we chose DCL.” Skydio was particularly excited to have a local logistics partner close to their operations and manufacturing teams, and the ability to be on site with a key component of their supply chain.
Having worked at numerous hardware startups prior to Skydio, Jeff had good advice on finding the tipping point for Skydio’s move from in-house fulfillment to working with a 3PL partner. When his experienced team started planning fulfillment strategy for Skydio 2, they went through all the trade-off scenarios: what would they need in terms of space and storage, resources, freight and shipping costs, systems, hiring a dedicated team to help with returns, and the ability to scale in the future. It became clear that they needed a partner in this—a 3PL whose core competency matched their needs.
“Our first product was successful in getting consumers familiar with Skydio and our cutting edge autonomous technology” Jeff explains. “Our goal with the second product is to scale that demand and interest with an all-around better design, capabilities, price point, and incorporation of feedback from R1. The expectations for consumer and commercial demand drove the need for locally outsourcing pack out and fulfillment operations. Our focus is to build and ship the highest quality products there are—and honestly it would have been somewhat of a distraction to have to do all the pack out and fulfillment in-house, so it made sense to partner with DCL to leverage that core competency.”
How eFactory Fulfills Their Needs
What sets DCL apart is eFactory, a proprietary order fulfillment platform that enables DCL clients total transparency and control.
“When I looked at the anticipated volume of this product, I knew we needed automated and flexible systems—something like DCL’s homegrown eFactory system,” Jeff says. “I’ve worked with 3PLs of all sizes, and have never really been impressed with their order management and inventory systems, which can be very frustrating. The front-end of the ecommerce industry keeps evolving, but these back-end management systems many times don’t. Most of them are antiquated, manual, and prone to errors. A good tool like eFactory is especially helpful for us as a startup. While we have an extremely talented logistics and business systems team, at any startup there aren’t the resources to support all the day-to-day order management needs.”
eFactory helps the Skydio team manage their end-to-end fulfillment. Through eFactory they can watch the flow of their products: from when materials are received by DCL, their storage inventory levels, when orders are placed, and all the way through to where each product gets fulfilled. Jeff says, “It’s a very impressive tool, and very easy to integrate. eFactory provides what we need, it was a big factor in our decision to partner with DCL.”
What the Future Holds—Helping Skydio Scale
Product companies always have their sights set on the next iteration and a more efficient model. And the Skydio team knew that in order to be successful, they would need a 3PL that could offer more than just core fulfillment support.
“With a big 3PL, their business is to pull product off the shelf and ship it—and they do that well,” Jeff remarks. “DCL will manage our drone and accessory postponement along with order fulfillment. As we have iterated our product family and customer base plans DCL has been flexible and very supportive. I’m sure that as we grow there will be more we ask DCL to do as a partner and having that confidence that it will be done well is really important to us.”
“In particular DCL’s onboarding process has laid really solid groundwork for the scalability of our partnership moving forward. There are so many activities in all areas within a startup when ramping up a new product. Having confidence that this very critical component is in the hands of the right partner, a partner that has proven capabilities, is really important. I know that whatever our fulfillment needs are this year and in the future, DCL will have proven that they can support it. That’s a significant comfort level for me. There are plenty of fulfillment partners out there who can do basic fulfillment, but none with the capabilities and support DCL provides, or that I have the confidence that can scale with us.”
A True Partnership Grounded in Quality and Service
Jeff states, “We don’t look at DCL as just a supplier, they are a partner of Skydio’s, our logistics and order fulfillment house. We are fully confident that as we branch out from online consumer orders, to other channels, and beyond, the scaling will take minimal effort.”
DCL was founded on the core values of quality and service. Each client is an extension of our team, and we only succeed if we help our clients succeed. Jeff says, “At the end of the day, its nice working with such a great group of people that you know will support what Skydio needs. We know DCL can help us because they’ve done it before. We can trust the DCL team in its entirety and what is so important to Skydio is the team. DCL is absolutely an extension of Skydio and we are looking at continuing to grow that relationship.”
More About Skydio 2
Skydio 2 has state-of-the-art specs and is smart enough to avoid trees and buildings as it follows you around, doing the incredible things you do.
If you are looking for fulfillment and logistics support, or have questions about how to partner with DCL Logistics please contact us here.