The founders of 6-month-old RetailReady, recent grads of the YC winter 2024 cohort, have found an overlooked area of the warehouse/shipping industry that costs retail brands some $40 billion a year, they say.

They are building a tablet app that replaces paper warehouse manuals that document packing instructions. Co-founders Elle Smyth and Sarah Hamer came up with the idea while working together at supply chain unicorn startup, Stord. 

“We met each other and bonded over our love for the supply chain industry,” Smyth told TechCrunch. “We call it an engineer’s playground. There is no lack of problems to be solved there.”

Smyth and Hamer left Stord, and began to work on their startup idea in earnest, after getting accepted into Y Combinator. “One thing that Sarah and I really are confident enough in having is extreme founder market fit.”

RetailReady targets the $40 billion compliance market to help reduce the number of retail compliance losses that shippers incur annually due to incorrectly shipped packages, Smyth said. The company uses a double batch of AI technology to help reduce improperly shipped items: large language models to ingest the shipping requirements manuals and computer vision to validate compliance.

The supply chain and logistics industry is a huge market, and there’s no shortage of legacy and startup companies going after a piece of it, particularly as the number of shipments has increased due to online shopping. Much of this is third-party logistics, for example, Hopstack, Techtaka, Ranpack and ShipBob, to name a few.

Smyth said RetailReady is more niche. Warehouse workers have to reference “phone book-sized” manuals of how to ship items to retailers, like Target and Walmart. The manuals include information like how to compliantly pack orders, for example, folding apparel in a certain way, where to place a RFID tag and where to place the label depending on product category. 

If shipping/warehouse workers don’t pack these items correctly, retailers will charge the brands fees, known as a chargeback. “Brands will end up getting 3% off their invoice, on average, taken off just because these requirements are not met,” she said.

RetailReady replaces those manuals with a digital version that gives workers a directed workflow on how to pack an order correctly. In a feature currently in development, the app will then use computer vision to look at the orders as they are being packed to verify compliance. 

“We’re really excited about continuing from the product side, including our computer vision module where we will begin photo capturing the workers’ process so we can actually validate whether or not they did it correctly,” Smyth said. 

Though Smyth was mum on discussing growth figures, she said that six months after launching the company, Smyth and Hamer are currently onboarding six customers. The company works with brands, warehouses and retailers.

The founders raised $3.3 million in seed funding that they will use to hire additional employees and focus on product and technology development. 

Wischoff Ventures was the lead investor in the round and was joined by Y Combinator, 640 Oxford, Lombardstreet Ventures, Duke Capital Partners and a group of angel investors, including Cargado co-founder and CEO Matt Silver, Stord co-founder and CTO Jacob Boudreau and Scale Angels Fund.