Mercado | Insights | Closing the Gap in Origin Services - What's Next for Flexport and the Industry?

Insight: Closing the Gap in Origin Services – What’s Next for Flexport and the Industry (Part 1)?

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Insight: Closing the Gap in Origin Services – What’s Next for Flexport and the Industry (Part 1)?

May 9, 2023

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Every week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of an on-going series. Each article aims to share a little insight into what's going on that week, and to help foster discussion amongst industry professionals across levels, geographies, and companies.
Last week, Flexport made a significant move to expand its global services into last mile and e-Commerce fulfillment by acquiring Shopify Logistics. The strategic move plays directly to the strengths of their CEO, Dave Clark, who was part of the Amazon ‘S Team’ and led the build-out of their massive eCommerce last mile operations. The acquisition also aligns with Flexport's commitment to further its services and technology at origin and destination.
To understand the factors driving this shift, check out this insightful video from The Wall Street Journal.
There is also a further great opportunity ahead for them to close the gap that exists in origin services: namely that the first mile and eCommerce fulfillment are completely underserved relative to the last mile.

When broken down, the first and last mile are essentially two sides of the same coin:
  • The last mile and eCommerce means fulfilling consumer orders from the warehouse and delivering them to their homes;
  • The first mile and eCommerce means fulfilling orders from a supplier and delivering them to the warehouse.
Currently, origin services (with few exceptions) look roughly the same as they did in the 80s, almost completely bereft of the types of services and technologies common in the last mile. Considering the US purchases $2.8 trillion annually from abroad, it presents a massive opportunity, by reducing costs and improving the ability for importers to forecast sales.
Mercado | Insights | Closing the Gap in Origin Services - What's Next for Flexport and the Industry?
Solving this gap would transform global trade, and give Flexport a significant advantage in the market. However, Flexport isn't alone in this race. Other companies such as the OGs Amazon, FedEx, UPS / Ware2Go, Stord, Roambee, and APL Logistics are also well-positioned to take on this challenge.

It's important to remember that the first and last mile are two sides of the same coin; heads and tails. The same product that is ordered and fulfilled from a warehouse in the last mile, was also ordered and fulfilled from a supplier abroad. Connecting these two ‘miles’ will provide a seamless end-to-end supply chain — a complete digital trip plan for products throughout their complex journey from source to shelf.

As an aside, it wasn’t obvious in the beginning that Amazon would succeed. It seemed insane to bring the entire store to the customer rather than the other way around. However, fast forward to today and it would be unlikely that anyone would willingly do business with a company that doesn't make it as easy as Amazon does to buy their products. It may not seem obvious now that this will happen in the first mile, but in truth it's already started.

In the next post I'll share how....
"In an 'ideal' world, an importer would have at least one backup country, and one back up supplier for every critical product... All of this sounds good on paper, however it's actually incredibly difficult in practice."
One key reason is the dominance of China. Many importers are concerned about China as a sourcing point due to increasing tensions between the countries. However, the reality is that China dominates mfg in Asia, and they are very good at it.

As a result, quitting China is hard, as you will see in the excellent analysis below by Rita Rudnik.

A second reason is much more mundane. Most importers lack a robust database of their suppliers, and their supplier's suppliers. On the surface this sounds ridiculous, however we have gone through decades of 'predictable' supply chains where this wasn't a priority. Using the example above, most of the bike importers I spoke to were simply not aware of how reliant their suppliers were on Shimano.

My guidance to all importers is to address this database issue quickly. Beyond resiliency, knowing a lot about who makes your products, and who makes their parts, is also critical for understanding things like cost, ESG, and sales.

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About the author

Rob Garrison, Mercado CEO

Rob Garrison

A highly accomplished Global Supply Chain executive with 25 years of experience, Rob Garrison has provided strategic vision and leadership to Fortune 500 companies. Rob has an impressive history of building agile, technology-enabled supply chains, and he has an established track record of forging high-growth partnerships, positioning organizations for success and launching innovative technology solutions that significantly improve end-to-end supply chain efficiencies.

Rob is currently CEO and founder of Mercado Labs.
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