Mercado | Article | Bridging the gap: The role of “DNA” in reconnecting a divided import supply chain

Bridging the gap: The role of “DNA” in reconnecting a divided import supply chain

Article

Bridging the gap: The role of “DNA” in reconnecting a divided import supply chain

Published: January 11, 2023
Despite technology having disrupted markets around the world in the past few decades, the global import supply chain we rely on today to manage trillions of dollars of goods, is still operating with outdated and disconnected systems.
Even orders that are created in tools such as ERPs, are often sent and managed using PDFs or emails. Every change, update, and communication about those orders are handled in isolation with no guarantee it's been received or actioned. And it’s this very issue that’s creating errors, delays, penalties, redundant inventory, and understocks, costing importers an average of 10% to 20% per order — adding up to $300 billion in losses annually.

It's time for a change, but to move forward, we first need to understand how we got here in the first place.

The first mile is coming in second

Even though there is no hard and fast rule for pricing, most businesses selling products will mark-up products 2-3X for sale. The math is therefore simple: the cheaper they can source, manufacture, ship, and deliver those products to customers, therefore, the bigger their profit margin will be.

The challenge facing retailers today, however, is that their focus has been on the demand side of the equation; on downstream operations that focus on the ‘final mile’ and getting products from DC to a customer’s doorstep. While this is important and ensures a happy customer, little can be done if the goods are incorrect in the first instance. No amount of ‘next day delivery’ or ‘one-click’ purchasing is going to rectify a faulty product.

To address that, businesses must instead turn their attention much further upstream to the ‘first mile’ — the initial 90 days of an order.

Shifting focus to before the boat

When most people think of importing, an image of a container ship usually comes to mind. However this is arguably the most inflexible part of the supply chain process, as it’s completely guided by physics: once a container is sealed ready to set off to sea, what’s loaded in is what will come out at the other end. It’s a critical function, but relative to the end-to-end import supply chain, it’s a process that reflects only 25% of the time and 15% of the cost of getting goods to market.

The most impactful portion of the importing process by far starts with the supplier who produces the products, as it represents the only opportunity to change, fix, or impact what is made. Connecting to the people who make the products therefore provides the single greatest opportunity for importers to improve margins and sales.

Millions of dollars in profit is at stake

Imported products are typically “made to order” and take on average 90 days to produce. We call this the ‘first mile.’ The process is not only lengthy, but complex too. On average, an order can change up to 5 times, and during production, many issues can arise — from supply-side issues such as raw material shortages, to demand-side fluctuations that means you need to alter quantities to reflect the market — which can require large schedule adjustments to compensate.

To put this into perspective, an importer spends approximately $30M on buying products for every 1,000 containers, and another $5M to transport them to market. Assuming a 2-3X mark-up, that $35M in spend will generate between $70M-$105M in sales.

Today, importers are trusting that sales revenue with PDFs and email — the modern-day equivalent of pen and paper. This needs to fundamentally change if we’re to see any shift in efficiency and cost reduction, and that starts by digitizing the way we manage orders.

It’s starts by building a ‘DNA’ supply chain

“But I already have a digital supply chain!” is the most common response I hear to that statement, and the basis of it is true. The global import supply chain is saturated with tools, systems, and point solutions that provide everything from greater ocean visibility, to improved drayage services.

However, what the market is lacking is a way to digitize, network, and automate upstream processes in order to build a strong, reliable, resilient, and efficient import supply chain.

That’s where we come in. Mercado is the world's first import order management platform that connects importers with their suppliers in a shared environment for executing, managing, and shipping orders. Ensuring you and all parties share a single source of truth for every order.

Mercado is:
  • Digital — this creates a foundation from which to track, measure, and improve the way trillions of dollars' of products are imported every year. Having the right information at the right time is the key to maximizing profits by decreasing costs due to errors and rework — boosting your bottom line by enabling you to sell more.
  • Network — digitizing your up and downstream operations also bridges the divide that exists between supply and demand — creating a connected network across the people, processes, and entities responsible for the buying, manufacturing, and moving of your products, and enabling everyone to work from a single source of truth.
  • Automate — many of today's import processes are handled manually, or with outdated tools. A digital supply network ensures that critical steps can be handled automatically — from production monitoring through built-in milestones, to the creation of e-documents directly from your original order to aid your bookings, finances, and regulatory processes.

Having a modern, efficient, and reliable supply chain is now essential for the success of any importer. Import ‘DNA’ has the power to transform today’s import fragilities from analog, disconnected, manual “supply links” into an agile, adaptable, and aligned supply chain process.

Mercado offers all of these qualities and more, thanks to the simplicity of digital order management that enables businesses to track, manage, and automate production of their products, and spend less time correcting costly errors.

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