Mercado | Insights | Who is going to do to the first mile what Amazon did to the final mile? Part 2

Insight: First Things First – Who is going to do to the first mile what Amazon did to the final mile? [Part 2]

First Things First

Who is going to do to the first mile what Amazon did to the final mile?

Part 2

October 26th, 2022   ·   By Rob Garrison

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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.
In July 1994, Jeff Bezos launched a company that would change the face of commerce and supply chains forever. Prior to 1994, most people bought their products in a store or through a catalog via mail order, but Amazon leveraged the Internet to offer an alternative—first with books, and then eventually anything could be purchased online.

By 1998, their business had grown to $680 million dollars. Today they are a juggernaut, generating nearly $500B in sales, and transforming many industries along the way, including Supply Chain, web services, and shared networks.

It all began with the ability for consumers to buy products online. To enable this, they created a simple UI, and digitally connected orders and logistics.

While this was a big benefit for consumers, digitizing the process also created massive advantages for Amazon:
  1. Ability to build rapport with clients through online services
  2. Analytics on customer data to determine what products and services were most wanted
  3. Data leverage to determine where to build connected networks for more efficient delivery
  4. Networks to allow other suppliers to sell product, creating even more synergy and data
  5. Massive process efficiencies due to shared digital tools between Amazon and their customers
Digitization changed the entire landscape of the final mile and how customers sell products both offline (stores) and online.

On the other hand, the first mile (where most of the products they sell originate) is still completely analog. Imports have no DNA.

The suppliers receive their orders offline (largely via PDF) and transact business during fulfillment and shipping (largely via pen and paper), almost identical to the way things were done in 1993 with mail order.

With no DNA in a very lengthy (it takes on average six months to get imported products to market) and complex process there are predictably bad outcomes.
  1. Target wrote down $1 billion in inventory because sales were hot when they placed their orders in September yet not when they received them in March.
  2. 30% of all apparel goes straight to a landfill because it’s nearly impossible to predict demand so far in advance:
  3. Massive inefficiency and waste due to the inability to leverage DNA to make empirical decisions and connect to systems of record.

Is it time for a new approach?
Mercado | Insights - The $2.8T international supply chain visualized
"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.
Missed out on Part 1? Catch up here

About the author

Rob Garrison, Mercado CEO
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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