On this episode of Thriving at the Crossroads, we have Fernando Moncayo from Inspectorio. We talk all about how their business helps to make quality inspections more transparent and traceable. He shares how manual the industry is right now and how Inspectorio uses technology to eliminate a lot of problems in the inspections industry.
Listen to the episode here:
TATC Ep 20 – Quality Inspections And Quality Control with Inspectorio
Today we’re recording live in Minneapolis with Fernando Moncayo. He is the co-founder of Inspectorio. Welcome to the show today, Fernando.
Thank you very much. It’s a pleasure for me to be in this special moment.
Fernando, you were part of the Target retail accelerator. Tell us a little bit more about the company.
I believe that Inspectorio is a consequence of fourteen years that we have been doing business with Asia. Mostly, Inspectorio is a quality control and supplier compliance verification platform that gives transparency to a supply chain. Let me explain this. Based on more than a decade that we have been visiting factories in Asia, we have realized that there is a complete lack transparency and traceability especially in the quality of inspections. The whole industry is a multi-million dollar industry. They are not using technology. Most of the processes, not saying all of the process, are just manually based. For example, the inspectors even for multi-national companies are just using digital cameras, pen, paper or even Excel files to do all the numbers. What we decided with Inspectorio is to digitalize the whole inspection process.
Mostly right now what we do is that we develop our own application. It’s an app that is used by our inspectors to gather information and to perform the inspection. Every time that an inspection arrives to the factory, we have the geolocalization. Every single picture, every single measurement, all the data from the inspection process is gathered through the application and then goes to the Cloud. In the Cloud, since now we have all the data, we can translate that to a managerial dashboard where you can see what’s going on with your supply chain. You can also share that in real-time with whoever person who wants to use that information. The good thing here is that in the whole industry, since it’s manual right now, there is a lot of negligence on the part of the effects of the corruption. With the use of Inspectorio, what we are doing is that we are eliminating that.
This is really taking a very manual inspection process today. Like you said, pen and paper, things are written down. Nothing’s really in any systems. It seems like it’s a real problem. What do people do today if there’s a problem in the inspections process? Given it’s in somebody’s notebook or tablet. How are companies dealing with it today, pre-Inspectorio?
Right now, it’s just a matter of trust in the inspector. The inspector is the one who has all the power because he’s the one who arrives to the factory. He’s the one who’s taking the pictures, and actually download the pictures, do the copy-paste in to a report. He’s the one who’s writing down with pen and paper all the information. You just have to trust that whatever the inspector does was real. The bad news is that, that doesn’t happen in most of the cases because I’ve been there at the factories. Sometimes, the inspector could say that he just arrived to the factory and he’s not there. Unfortunately, it’s very sad to tell you, there is a lot of corruption as well. Sometimes the owner of the factory will just approach the inspector asking to change the pictures. There are many bad attitudes and bad things on this process. Not only in China. We’re talking all around the world. If you don’t have traceability and transparency, the space that is there to do bad things is huge.
Right now, we’re in 2017. In the phone that you have right now, the smartphone, you have all the capabilities. You have pictures, you have audio, you have geolocalization, you have memory, you have everything. Why has this whole multi-billion dollar industry of quality inspections and supply compliance not changed? Everybody is using technology to do something like Uber or to do something in our normal life stuff. If we decide to use that for quality inspections, we are doing that. Regarding the Uber, for example. To clarify the inspector approach, is that we don’t send the inspector to the factory, because right now most of the companies they just use bus or taxis or even planes to send the inspector to the factory. What we do is that, since we have geolocalization, all the inspectors are certified by our company. We get the information from the order that we have to inspect. Then we send that data to the inspector that is closer to the factory.
In this case, we don’t move the inspector. We can be faster at the factory location. Actually, the experience that our inspector has is higher. Then when they finished performing the inspection, they just click a button and the whole report is ready. Right now, in the whole industry, it takes 24 hours, even 48 hours to receive the inspection report because everything is manual. This inspector has to come back to the hotel, come back to the office, download the pictures, do the copy-paste, input all the information in the format and then send it to the client.
Imagine how much money you are saving because you can book the inspection faster, other things that you keep all the data. Imagine the value of the geolocalization, imagine the value of the pictures, imagine the value of the measurement, all the data. Right now the data is discernable. The data just stays probably in the computer of the inspector or probably in a PDF file. It’s not dynamic. It’s not liquidated. We keep all that liquid data. We keep all that liquid data. I believe that there’s a real value of Inspectorio if you just see the vision that the company has. We can even create a network where all the clients or the people who are using our application are willing to share the information that they get.
Imagine the value, the data of the data. We can even know who is who in the supply chain. We can even have a map, which are the bad factories, the good factories. If somebody is placing an order and is using Inspectorio software to perform an inspection, then we realize that it’s bad quality, child labor or some even environmental issues. Next time that somebody is going to that same factory and is using Inspectorio software, and is trying to perform inspection based on the geolocalization, just imagine this, all the information about the factory is going to be recorded. The whole industry is going to know who is who. The good factories are going to have more clients and the bad factories, they’re going to stop having clients. Right now when you go, for example, to an exhibition, let’s talk about the Canton Fair. It’s the most famous fair not only in China but also in the whole Asia if you want to find for new suppliers. When you go to find a new supplier, what you see is just the booth.
It’s just like a regular trade show in IT. It’s the same thing, you see the best face and the booth face.
Then if you go to the webpage, for sure, the webpage is going to be beautiful. It’s another thing when you go to the factory. If you, as a normal person, probably as a small entrepreneur, even a large brand of retailer that you want to report that you didn’t have a good experience in that factory. How can you share that information? How can you take care of the future, not only about those clients that are going to be receiving the products that are going to be produced from that factory, but also for the whole community? I believe that when you talk about transparency and traceability, you talk about being honest. We need to know who is who. Right now, technology allows us to have that chance. That is the final vision of Inspectorio. That’s why we say that we’re bringing transparency and traceability to the supply chain. Right now, we’re focused on apparel and footwear. What happens if we can do other lines? Probably furniture, toys, what about food?
There are a lot of places that can benefit from this. It’s interesting that you bring up about transparency to the supply chain. When I first started doing my research and looking at interviewing you for the podcast, I really thought of it more from the process of, “It’s for me to manage my external third parties.” Like for contract manufacturing or where I want to inspect or look at that. Now, as we’re talking about it and realizing it’s far more than that as a platform. When you talk about transparency in the supply chain, it can be my own internal factories. I can automate and optimize that, as well as external.
Now, you’re also talking about the network effect. I’m seeing more and more companies talking about this. This is where the data is so important. You’re starting to talk about, if we’re going to be really transparent in the supply chain, look at any country and say, “Where is their child labor? Where are these sweat shops?” You can actually leverage the data of other people in your industry. Now, you have a better shot at change because now it’s going to become more transparent. Like you said, one company can say, “I had a bad experience with this firm, or there were problems.” These are things you can trace and track and they’re in the apps. Now, all of a sudden we have a lot more knowledge about what’s going on in our supply chain.
It’s the power of trust. It’s the power of sharing information. It’s something that the community and the whole world is asking for that. Regarding the retail industry, most of the consumers are millennials. The millennials, they don’t care anymore about the brand too much. They care about what is the story behind this product. What are the values that I’m sharing with this specific product that I’m using or buying? Imagine if we can even share that information with them through their label. We got the QR code, we have the RFID technology sensor. Next time that you are going to buy this specific dress, you can just review who produced that dress. Right now, I’m just asking the audience, look into your clothes right now. Who made your clothes? Where were they made? You don’t even know the country, probably not the city, not even the name. We at Inspectorio, we can even know who developed anything in the world.
The other thing, you already talked about the network. That is the real value about collaboration. If you’ve seen Inspectorio right now, we’re in March 2017, probably the people that just go to our webpage, they will say, “This is a nice application.” The application is just the way we gather information. That is just a single piece on our whole strategic planning ambition. When we just talk among the partners and with some specific clients that we have been working right now about the potential that Inspectorio has, it’s when you realize that Inspectorio’s leading the innovation in a whole industry that has not innovated for the last twenty years. I believe that most of those international companies, even new players, they are in the comfort zone. They have very good brand. They can charge $300-$400 per mandate. In some cases even thousands of dollars per mandate. Right now, what is the value that they give you if they don’t share that information? If you don’t even know if that information is real? You just trust them that, “I’ve seen, I’ve been on the field.” What you see in some stands or stores is not the reality of the factories.
There is one documentary that I would like to recommend to people, it’s called The True Cost. It’s in Netflix right now. The True Cost talks about the true cost of who developed the brand. Behind the oil industry, the garment industry is the one that is polluting the most in the whole world. You see in the documentary, what is the reality of some of the factories that are producing and manufacturing our clothes? That is when you realize that something is not right. Right now, the people are asking, especially the fashion industry. They need quality, they need the style, but they need it faster and in a cheaper price. Somebody’s losing with that business model. Somebody’s not winning. In some cases, what happens is that the people who are not winning are the people that are manufacturing the product.
For example, take a look at what happened in Rana Plaza, three years ago. Rana Plaza was a complex of many factories in Bangladesh. There were a lot of multi-national companies and brands that were placing the orders over there. Then the whole building collapsed and killed more than a thousand people. The thing is that, every single day, many inspectors were going to that place to inspect the quality of the garments.
But not the building, and then the whole building fell down around them.
What we are doing in Inspectorio is that we’re also giving the power to that quality inspector to perform the social and environmental compliance of the place that this person is going. We are using different methodology. The thing is that since you are with your mobile phone, you are using Inspectorio for that software, Inspectorio software is going to ask you to take a picture of the entrance, take a picture of the bathroom. Or just ask these three questions, picking any employee randomly. For sure, I will say that if somebody created Inspectorio four years ago, probably these companies will know what the reality of that specific building. Somebody will raise an alert saying, “There is something wrong with this building.” What happened with Rana Plaza? The whole building collapsed, killed a thousand of people. When some of the brands that were producing over there were interviewed about why they were producing over there, some of them they didn’t know that they were producing there.
Talk about embarrassing. Do you know what’s in your supply chain?
You are buying from a specific trader but you don’t care about who are the real ones producing the clothes. Probably you’re paying and everything is nice when you go to these beautiful buildings or offices to see the quality of the product. Where is the essence? Where is the real root about the clothes? Right now we’re talking about the clothing, the garment industry, but let’s talk about food. It’s not my expertise, but I would like to know where was the source of this specific ham or cheese or rice or whatever that I am eating?
I realized that even now in 2017, many, many companies, retailers and brands, they don’t know that. We need transparency and traceability in your supply chain as well. We have the technology. In Inspectorio we are not creating something that is trying to put again the man in the moon. It’s something that we’re taking advantage of the exponential technologies that are here right now. They’re cheaper, cheaper, cheaper every year. Taking the responsibility to do it, that’s what we’re doing in Inspectorio.
It strikes me that you are not only product inspection but environment inspection, which is new. Your question about take a picture of the entrance and the building and talk to people to find out what’s going on in the production, which that’s a whole new element. I haven’t heard people talk about that a lot, of adding these subjective criteria.
The problem is right now and I can just talk about the retails and brands. What’s happening in the whole world is that you have one department for compliance regarding social and environmental. You have another department for quality inspections or quality of the product line. They don’t even talk. For example, you just send an inspector to look for the quality, but again as I told you in Rana Plaza, they don’t care about the social and environmental compliance. Even very good retailers and brands that are doing the right thing, they are sending inspectors to perform the social and environmental compliance. But the thing is that these audits are very expensive. They just consider that as specs.
The other thing is that it takes time. You don’t have enough inspectors. The average time that it takes is that you will perform these audits every year. In a normal case of scenario, it’s going to be every eighteen months or two years. Imagine what could happen in one year and a half or two years with the factories. The other thing is that sometimes, the owners of the factories, they already know when they’re coming. I’ve been there. I’ve been fourteen years in Asia. We know what happened. We are coming also from Latin America. It’s not a matter of Latin America and China, the whole world. We need transparency. We need traceability. I’ve been there. When everybody knows that the auditors are coming, then everything is perfect that day. Then you pass the test, and then what? See you in two years.
What we’re doing right now with Inspectorio is taking advantage of every single visit from a quality inspector to take at least part of that social environmental compliance auditing. Then you can have data information every day. If, for example, brand A and brand B are using Inspectorio software, every time that an inspector from brand A or brand B arrives to the factory, they can gather information. Brand A and brand B can share that information. It’s the power of the network.
All of a sudden it becomes across how many companies are effectively splitting the bill to do regular compliance. If you have ten companies that are all sending someone every two years, now I’m being audited that much more. They can share their information across the companies as to what is going on.
For that, you need the willingness to open your business to the world, to be sincere with your customer. I believe that is something that, in the United States, we are in a very advanced position compared with all the regions in the world. For example here in the US, there is the Sustainable Apparel Coalition. It is an organization that has more than 150 brands and retailers that have commitment. It is public right now that by 2020 they are going to disclose information about their suppliers. How are they going to do it, or we’re going to do it because we’re part of the Sustainable Apparel Coalition, if they don’t use technology? We need to use technology. Again, we are in 2017. How come we are not using technology to bring transparency and traceability to the supply chain? How come we’re not using technology to perform a quality inspection? How come we still can’t handle that, if I’m the owner of the factory, and the inspector arrives with a digital camera?
I believe that in the next five or ten years, all the inspections all around the world are going to be done in the same way that Inspectorio is just performing the inspections right now. We’re going to listen to this recording and we’re going to be laughing.
Hopefully we laugh about the Dark Ages of the inspection process back in 2017.
For us, it’s a huge responsibility to be the first one or one of the first ones. I believe that the whole world is going to do that in the future. For us, it’s not only the responsibility to be the first ones, but right now we want to be the best. We want to become the standard of the market. Right now we are working as a third party inspection company. That means other companies can just hire our service and then we send our inspectors to the factory. But we are also launching in the following weeks the software as a service for inspectors. We’re going to be the first software as a service for inspector company. That means that if the brand or retailer has inspectors in Asia, Mexico, Egypt, Peru or wherever they are producing their products, these inspectors can use Inspectorio software. I believe that the value is in the execution. The third stage is going to the factory self-inspection software.
I was going to ask you if we were going to get to the point. I was listening to you talk about the geolocation. We know where the pictures were taken and we know what was taken. You could get to the point with someone in the factory, because you know based on where those phones and those technologies are, you take the pictures, you prove it.
What’s happening right now is that the whole industry is broken. The thing is that they don’t trust. Why? Because everything is manual. Imagine if we can just validate the location of the factory through a sensor or a beacon of the factory, then the QC team from the factory can have the Inspectorio software. Any time, the brand can just click a button and ask for a random inspection in that specific moment. Then the QC person at the factory just opens the phone, performs an inspection. Whatever happens on the phone on the Inspectorio application, we can measure it. We can see. We can validate that that information is real. If I am the owner of the brand or the retailer and I asked for an inspection and they don’t perform an inspection or probably they can’t validate the location of where the inspection has been performed, you know that there’s something wrong.
There’s a lot of outsourcing, especially in the fast fashion business. You pay one factory. The one that produces your shirt is some sweat shop in some dark place in whatever part in the world. We need to validate the location. We need to be sure that every single picture or measurement of data that we input into the system was taken from a qualified inspector in a very safe place. The final goal of Inspectorio in this process is to reduce negligence, reduce unreported defects and even eliminate corruption. We even have a button in the application that if somebody approach us or some inspector, we can click a button in the application and we can start recording whatever is happening in that moment.
If someone tries to bribe you?
Yes. They can even take pictures with your conversation.
That’s a whole new level.
We can strip that information and then we can send it to you, the owner of that brand or the general manager of that retailer to say, “Your supplier is doing this with my inspector.” Why are we doing that? We have been there for fourteen years. We have been inspectors. We were hiring inspectors. We were hiring all the inspection companies, so we know what the weaknesses are. Right now, we have decided to lead this transformation of the whole inspection process and bring transparency and traceability to supply chain. That is what is Inspectorio is about.
Leading it for apparel and footwear, that’s been the focus for you as you’ve been getting up and running with the company. How are you doing from a costumer adoption? I know you’ve gone through some of the accelerators and you’re building out your platforms. Is it live and available for customers yet? Is it still coming? Where are you at in the process with the product?
Right now, it’s March 2017. We are 100% ready as a third party inspection company. Even though we have more than a decade of experiencing quality inspections and doing business with Asia, especially in international commerce, especially in garments and footwear and all the other products. We started Inspectorio a year and a half ago. We created a minimum viable product in Latin America. We started working with some clients in Latin America. Right now we have more than 40 clients in Latin America. We just landed in the US through this Techstars retail program in partnership with Target.
When we came here, we came with the vision to be a third party inspection company. But then here, through the mentorship of Techstars and even people from Target, we realized that the real potential of Inspectorio is not to be a third party inspection company. It’s to become a software company. In this case, Inspectorio, the company is going to use Inspectorio software. It’s a matter to learn from the market. How we see it is that any other inspection company can use Inspectorio software. Answering your question, based on the mentorship that we’ve got, we realized that we need to get into this software as a service for inspectors. We also realized that we have to jump into the software as a service for the factory self-inspection.
That is the path that we have right now. We have our partnership with Target. They made it public that they made an investment in the seed round that we just closed in January. Based on that, we are learning a lot from them. It’s amazing, all things that we have learned. We are sharing strengths and capabilities because Target has a real, real commitment in order to bring transparency and traceability to the supply chain, to lead this journey in the whole world. They are also willing to lead and invite all the retailers and brands that are trying to get into the network. If the network grows, we are getting stronger, not only as Inspectorio but as a retailer, as a brand, and at the end, as the world. If we measure the impact that all these manufacturers abroad are getting into the world, there is a lot of responsibility on this Inspectorio mission. There’s the path. We want to end this year with these three different business models: Third party inspection company, software as a service for inspectors and software as a service for factory self-inspection.
We are, in some conversations in the year-end closing that we have closed with all our clients as well here, in order to jump in April into the SaaS for inspectors. We see a wonderful future because we truly believe that there’s a need and we are leading in that. Right now for me, it’s a matter of execution. Because everybody can have the idea. I have shared all the ideas right now in this conversation. As I told you, what really, really matters right now is execution. That is what entrepreneurship is about. It’s making things happen. You can have the idea, but if you don’t have the capabilities to do it, it’s nothing. Even for multi-national companies or very big companies, I believe that the smarter thing is to hopefully work together with Inspectorio because we have the speed, we have the knowledge, we have the innovation capabilities. Regarding innovation, for example, what happened with the large corporations is that you can’t innovate in a radical or even in a disruptive way. Because the whole culture, the whole process, the whole system of these large corporations, they don’t allow them to innovate. They can innovate in a marginal way.
An incremental way. You’re right, disruptive innovation is extremely difficult for most companies because they’re very stuck in their own processes.
I would say not only most, but all of them. You name the most innovative company in the world, they just have some things. They are outside of the normal corporation, because it’s crazy but the way that we have been taught to create a company is to follow a process and procedures and whatever. This kind of structure doesn’t help for this mother company to innovate. If you want to innovate, you have to create separate things, even separate companies in order to innovate because innovation is also a lot of things. Not all the inventions that you are going to get are going to be successful.
You have to tolerate failure. You have to realize people will fail and a certain amount of things are going to fail, that has to be accepted and allowed.
You’re talking about a different culture. You’re talking about a different process. You’re talking about different management, also different capabilities and talent that you have to raise. It’s very difficult for the large corporations and the well-structured corporations to innovate. Again, they can innovate in some incremental way, in some marginal way, but if you really want to innovate in a radical and disruptive way, you need to do it outside. That’s why the large corporations, instead of trying to develop something internally, they are partnering with somebody else in order to bring that equation. It’s what Target did with Techstars. Techstars knows how to deal with startups, and Target just says, “Let’s do a partnership with Techstars. Let’s just open this opportunity to the whole world.” We were in South America and then we saw this in Twitter and then we said, “We have something that we believe can change the whole industry, so let’s apply.”
Is that how you found the retail accelerator for Techstars? On Twitter?
Yes. Now look, nine months after that, here we are. We have the US Head Office here in Minneapolis.
Thank you so much for joining us today. I have one final question for you. This is one I like to ask everybody. Can you tell me your favorite travel destination you’ve ever been to in the world and why?
Somebody that is really, really wise, he told me that, “Happiness is achieved best from the moment and the circumstances that you are in.” I have enjoyed every single place, every single city. I was doing something in Facebook I believe and I realized that I’ve been in more than 40 countries and almost 200 cities in my life. I am 42 years old right now. I can tell you that in 99% of those countries and cities, I’ve been really, really, really happy.
To answer directly the question, I really enjoyed the food in Peru. I enjoy the food, the people and the beaches in Mexico. In the United States, I love to take a drink in New York. I love to eat seafood in San Francisco. I love the good food in Madrid. Asia’s amazing. Singapore is a place that I really, really had fun because you can get all of what I’ve said in one place. I can’t leave this interview without mentioning my beautiful country, that is Ecuador. I love Ecuador because I’ve been living there my whole life. The good thing about Ecuador is that we are a small country, and in less than four hours’ drive, you can be at the coast, you can be on the beautiful beaches. You can go to the highlands with the most active volcano in the world. You can even go to the jungle. If you just take a flight of one hour and a half, you can be in the Galapagos Island. I believe that not too many countries have these possibilities that Ecuador will give you. Finally, the people in Ecuador are wonderful. Hopefully the audience will go to Ecuador because it’s the most beautiful country in the world.
Thank you so much for joining us today, Fernando.
Thank you very much for the invitation. It’s our pleasure to share this with you.
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