Things like this are interesting to me,
CGC began a whole new card grading division including researchers, graders, and encapsulators in a quite short period of time. PSA has been delay prone for two and a half years, Why didn’t PSA put out the same effort CGC did just to catch up on their backlog and handle current demand? Did CGC have a secret that would be unknown to the rest of the world?
Just curious.
I think there are probably multiple reasons one can point to. I’ll offer 2
I’m sure we can dream up 100 more reasons but these are the two that stand out to me.
@garyis2000 , PSA has had a sizeable backlog for quite some time already and they were just starting to meet deadlines on bulk submissions when COVID happened so, personally, I believe they were caught a bit off-guard as this new demand spike happened as they were just being able to contain the previous one.
Evidence of this is the fact that they went ahead with their quarterly specials (which I am sure had been planned months before COVID appeared), despite the increased virus related backlog. They were so confident that things were under control that they didn’t even consider cancelling those specials, causing a flurry of submissions they were ill prepared to deal with.
We know for a fact that PSA’s hiring spree was extremely reactive, and this shows how much they misjudged demand. As PSA’s CEO, if I am looking at 2019’s report and see that we started the year with bulk submissions being completely out of target and finished the year meeting our expected 65 days turnaround, I would not be able to justify a costly hiring spree to the shareholders as, no matter what I do with the data I have in January 2020 I will not be able to extrapolate it into predicting COVID, 2 months of operational inactivity and increased demand.
I mean, if they are still backlogged for 1 million cards, that represents at the very least $9 million in un-realised income for PSA which I am sure no CEO/shareholder will be pleased about at this point.
Now, something I am extremely curious about is where the backlog lies within the departments. The biggest issue from an outside perspective seems to be the logging of orders into the system as that is what PSA transparently admitted they are trying to tackle, but we don’t know how backlogged the grading/research departments are. Based on their current specials I guess it is safe to assume that at least parts of their grading and research departments aren’t that overwhelmed, otherwise they would cut quarterly specials all together in a desperate attempt to reduce submissions.
CGC on the other hand, didn’t have previous figures to look at and feel confident about. No backlog, no outdated systems or procedures, they simply had to enter a market which was desperate for more offerings. As such, there wasn’t much decision making to be done so they were less likely to make mistakes.
Smaller companies usually benefit from better flexibility to market changes and quicker reaction times due to smaller management and operational teams. They are also under less pressure from above as investors/owners aren’t necessarily expecting great returns on a company’s first year.
PSA’s delay is due to the influx of sports & pokemon cards ^. Even though pokemon applies to CGC obviously, it’s probably at a lower rate than what is being sent to PSA.
Also, to me, it’s not just the workflow but the amount of fixed assets they have to encapsulate cards. It’s probably much easier to hire more people to grade, but choosing to invest in more land/space/machines to encapsulate is an entirely different business decision altogether. Even if they had the foresight to expand their production capacity in the US, it would take time to implement, and COVID certainly did not expedite that decision or the process of building up these capacities.
Some people have alluded to this already, but innovation inside of an existing company is extremely hard. I’ve been working for years in this field and have seen it across all industries. It’s a really interesting problem to diagnose with multiple solutions. CGC was able to spin up something new because they didn’t have all of the “weight” of an existing organization. PSA would be better off starting an entirely “new” team outside the existing company than trying to do it inside. I do think this is an interesting challenge to think through.
Why does such a big backlog exist? Let’s assume demand will keep increasing so they need to build flexible ways to scale the org. They need to look at where the bottleneck is in their process. Couple places it likely exists…
You can solve problems with people, process, or technology. Solving with people is faster in the short run, not helpful in the long run (higher costs, errors, time, etc). Building new tech takes time and money. Process creates micro improvements and PSA needs big improvements.
Let’s say the biggest bottleneck is in Grading and they want to solve with people for the sake of short term time. They still have to hire and then train the people so that takes time too. My guess is that they also have a ton of “debt” when it comes to their technology and processes. These types of “debt” (process, tech, culture, brand, etc) tend to be the things that kill existing companies and prevent them from innovating. They try to fix what already exists versus reimagining it from the ground up and then building towards that new future outside the current org.
What would be really interesting for PSA to do is to create an “edge team” that lives outside of the company and has access to company resources to rebuild PSA with new tech and new knowledge. With the right people and resources, I bet they could get back to pre-covid processing times in 6-9 months.
PSA is weird in the time frames, I just got my 184 card order that was received on 6/8/20 before my 25 card order received on 5/20/20 (order is still in the grading process). My 364 card order (received 8/18/20), I don’t expect to get till next year.
Another thought could just be CGC hired PSA staff as a poaching attempt too; higher pay, better benefits. Not uncommon especially in tech etc.
Right it’s sports not Pokémon cards, pretty simple.
They really need to separate sports processing from everything else. If they had two different facilities or teams in charge of processing and grading, everyone else wouldn’t be getting shafted and screwed because modern sports collectors refuse to send in anything less than every card from every pack.
Internal restructuring, hiring, training, etc., especially during COVID, all take time and resources, but the lack of foresight and mismanagement to create a backlog of this magnitude is quite something.
At the beginning of the pandemic, supply chain disruptions were so intense that grocery stores were perpetually out of meat… and these disruptions were mitigated (mostly) in a matter of weeks. We’re talking about massive multinational corporations with thousands of employees and mountains of red tape managing to restructure enough that they could make drastic shifts to meet commodities demands in a matter of weeks.
I do not have an MBA and don’t work on supply chains (as I assume is the case with most of us here), but I don’t buy that some tectonic shift would be required to at least KIND OF keep up with the influx of business at PSA. I just don’t think the profit incentive is there for PSA to get it together, hire some more people, and do some restructuring. Their market share is tremendous as-is, and customers (me included!) are willing to grit their teeth and wait.
There’s most definitely a large enough profit incentive for PSA to get their turnaround times under control. How many more submissions would PSA be getting if their turnaround times were reasonable? Way, way more. I bet if you polled people on their primary reason for submitting cards to CGC, 50%+ of them would cite PSA turnaround times.
I know that, personally, I have thousands of cards (mostly mint WotC/EX Series non-holos) that I would absolutely submit if I knew that I would receive the cards back in 2 months. I would be submitting those cards solely for resale purposes; I have no personal desire to own a bunch of PSA 10 FRLG Bulbasaurs or random 1st Ed. Gym bulk lol. But tying up tens of thousands of dollars for 6-8+ months is not something I want to do. It would involve both a huge opportunity cost and a huge risk. I don’t know what the market for PSA 10 non-holos will be like nearly a year from now. With PSA’s current backlog, by the time I get my cards back the market might be totally saturated. But if I knew I would get them back in two months, the risk would be low enough that I’d go for it. As it currently stands, I’ve only submitted maybe 150 cards out of the thousands I would’ve if the turnaround time had been lower.
@politoed666 , I don’t think that’s an apples to apples comparison. It’s like saying that if an ambulance can arrive at your house within 10 minutes when there’s an emergency, an uber to take you to the movies should be able to do the same.
No reason to overthink it, free market capitalism and filling a long-standing and unimproved void is why CGC is doing what they are doing.
There was/is no secret sauce, people just don’t want to wait 6+ months for graded cards when we have no idea what our country will even look like in 1 month! Legacy collectors can’t really understand this due to their inherent and deep-rooted psychological bias towards PSA.
PSA needs to charge more.
Why are people talking about what they can do to get more volume through? The issue is chasing their high volume low margin business is what got them where they are and it lends itself much worse to if/when this hype/insanity calms down because now they have a bunch more staff, equipment, and space with no work for them. Sounds crazy and even if cards stopped coming in the door tomorrow it’d be a year away, but it’s likely to happen at some point I’d imagine. I don’t think you should be able to grade a card for under $20. They are trying to capture more money with this labor intensive upcharge rule and they should just increase prices across the board more drastically instead. They are charging $1k, $5k etc. on what a few cards a day while tens of thousands continue through for next to nothing. The amount of cards they’ve graded for less than $10 in fees that are worth (and guaranteed for) 5 and 6 or 7 figures today is astounding.
To add to the concerns PSA may have lost part of someone’s submission. Only received 80-90 of 255 cards and now PSA is looking for the rest.
https://instagram.com/p/CGFseouFscP
Let’s see how long it takes CGC to build a sports team and what turnarounds look like since modern sports have crushed PSA this year
Might be an unpopular opinion, but PSA should decline any submissions until they’ve cleared their backlog. Their grading process clearly is a bottleneck, since the overall turnaround times keep increasing. Any manufacturing company would have stepped in at this point, since you normally want to reduce work-in-progress as much as possible. However, since the collectors “pay” for the inventory, I can see why PSA is still accepting submissions. Although PSA is apparently hiring more people, it is only effective if they are able to process more submissions than that they’re receiving each month.
It depends – what exactly is PSA’s profit margin on a $10 submission? If they are only clearing $2 on each submission, then I think that a higher margin, lower volume approach might make sense. But I would assume that they are clearing quite a bit more than that? Because if they are clearing, say, $8 on each $10 submission, then expanding their infrastructure to accommodate a higher volume of submissions would be probably be a better strategy. Putting all that aside, though, I like the idea of a $20 grading fee if PSA is unable to scale with demand. And that’s definitely the case right now.
Their latest report showed about 60% gross margins but just 15% net margins
The relevant fact is that it costs them $4 to grade each card. At $10 a card, that’s a profit margin that should incentivize them to scale (as opposed to going with gottaketchumall’s suggestion of charging $20 a card).