Professional Sports Authenticator, also known as PSA, is a California-based company specializing in the authentication and grading of collectibles. The range of collectibles that PSA accepts is vast. They service everything from sports memorabilia to trading cards. For those who may not be inundated into the rich history of the collectible hobby, authentication and grading serves as a way to dramatically increase the market value of any given collectible. Customers simply ship their memorabilia to PSA and wait for it to go through the long and arduous process of research, authentication, and grading. Once this is complete, the memorabilia will be assembled into custom-made, tamper proof cases, furthering the added value to the memorabilia. PSA was one of the first companies to offer this service back in the 90’s and has remained well above its competitors in the industry since.
From 2000-2015, PSA has stayed relatively stagnant in the amount of orders they service and fulfill yearly. However, in the past few years, the demand for their service has skyrocketed, specifically among trading cards. Although the demand was still manageable, PSA’s lead times continued to steadily increase while they kept up with the boom in new customers. During the pandemic, PSA received an even further increase in demand that they had never seen before. Joe Orlando, President and CEO of PSA, described this increase as a “tsunami.” In March of 2021, according to Orlando, “PSA was receiving more cards every five days (over 500,000 per business week) than what [they] used to receive every three months.” This meant that PSA experienced an unexpected %1100 increase in demand. From a logistics perspective, how do you manage to keep up with this ridiculously under-forecasted demand all while utilizing processes heavily reliant on human labor?
It goes without saying that it’s incredibly difficult to keep up with demand that has been as inaccurately forecasted as PSA’s 2020-202l demand. Thus, I think it’s important to mention some of the reasons demand has increased so dramatically. In previous years, the increase in demand could usually be attributed to a spike in the internet presence of the hobby. Social media influencers have played a significant role in the growth of PSA long before the pandemic started. As mentioned earlier, PSA’s competitive advantage lies within their ability to add more market value to their customer’s collectibles than any of their competitors. When influencers share their experiences with PSA, viewers can easily turn into customers when they see how much money can be made through using PSA’s service. When the pandemic hit, the collectible hobby started to see a huge surge across the board. With the whole world quarantined at home, people began uncovering their old and forgotten collections as well as starting new ones. The surge in the hobby’s participation, coupled with the massive increase in media coverage and collectible influencers, dramatically increased the overall market of collectibles. This market increase only served to entice even more people to join in on the fun, money-making hobby.
Despite not having the logistical capability of immediately meeting this new demand, PSA has begun making really interesting steps in improving their processes and hopefully, in turn, their lead times. One of the first steps PSA made was hiring and training 350 new employees, effectively doubling their human capital. Additionally, in October of 2020, PSA doubled the size of their headquarters to 125,000 square feet and later acquired an additional 58,000 square feet in March of the following year. Instead of building new facilities, PSA instead expanded on their existing facilities, which was a cheaper alternative. In order to keep up with the onslaught of orders, it was necessary for PSA to drastically expand their company. Additional employees will greatly aid in speeding up the research, authentication, and grading process, which currently is absent of any helpful technology. The increased physical space will allow for more inventory and overall process expansion.
Perhaps the most exciting step PSA is taking can be seen with their recent acquisition of Genamint, Inc. According to PSA, this software company “will help improve and scale the process by which PSA handles trading card submissions.” Specifically, this software should drastically improve the time it takes for ultra-modern trading cards to get graded. To elaborate, ultra-modern refers to a specific service level responsible for all trading cards made from 2017 to present. Due to the recency of production and large set sizes, these types of cards are much more difficult to authenticate and grade. In fact, ultra-modern trading cards are among PSA’s highest demanded service level, currently making up 70% of their backlog. Right now, all of the grading process is entirely done by human workers. With the addition of Genamint’s software, PSA should be able to speed through the many processes that used to consume an exuberant amount of time. This includes processes like order entry, authentication, identification, as well as the introduction of a “card fingerprint,” which will be able to accurately track the card’s change in condition over time.
Ever since PSA could accept online order submissions, their business model was set up in a way that could support unlimited capacity. In other words, there were no limits to how often or how much a person could submit. As shown with the unprecedented demand increase, it’s this system that contributed to the massive bottleneck that still exists today. Fortunately, PSA realized that they couldn’t keep up with these orders until they made significant changes. As a result, PSA has prohibited customers from most types of submissions since March of 2021. They don’t plan to reopen those submissions until they get through their massive backlog and implement Genamint’s technology into their processes.
Nat Turner, executive chairman of PSA’s parent company, said, “acquiring and integrating Genamint will allow us to grade more trading cards faster while improving accuracy,” Personally, it’s a little shocking that it has taken PSA this long to realize technology could solve many of their logistics problems. Although many have expressed their concern with removing humans from the process, this is truly the step in the right direction. If PSA is to effectively address their consistent unpredictable demand, they have to lean into the ways other massive companies have managed their inventories and processes through the use of innovative technology. The implementation of Genamint’s software into PSA’s logistics strategy should drastically improve lead times and reduce inventory on hand. I look forward to seeing how PSA will continue to use technology to strengthen the efficiency of their supply chain and grow their business.
References: Chris Larson