Mercado | Insights | It's called a "supply" chain for a reason

Insight: It’s called a “supply” chain for a reason

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First Things First

Insight: It’s called a “supply” chain for a reason

December 1, 2022

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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.
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Have you ever wondered why the 'supply' side of the supply chain is so under developed relative to the 'demand' side?

I have spent the majority of my career focused on the supply side. Since launching Mercado I have been thinking a lot about this question and how we can 'level up' supply with demand.

In the last 20 years, the demand side has seen significant investments. You can easily buy a soccer ball online and have it in your hands the next (if not the same) day with shipping included (congrats to team USA!). If you are a business you can buy a truckload of soccer balls online and have them to your DC in a week. And yet on the supply side, those exact same soccer balls are purchased and shipped offline, almost exactly the same as they were 20 years ago.

While the disconnect isn't new, it really boiled over during the pandemic. Investments in the demand side (also known as the “final mile”) made it digital, networked, and automated. As a result, it was able to scale up quickly to meet the massive spike in demand that occurred during the pandemic. Meanwhile, the supply side (aka the “first mile”) has remained disconnected, offline, and analog. As a result, product availability struggled to keep up with the surge in demand.

This imbalance has completely thrown off the equilibrium of the supply chain. For example, there was no automated way to either react to, let alone predict, the wild swings in demand and the subsequent implications on supply. Orders placed in October of 2021 while the market was hot didn't arrive until March of ‘22 by which time the market had significantly cooled. This created large inventory miss-matches with many retailers still sitting on overstocked warehouses and offering significant discounts in a bid to simply shift products and make space for future inventory already on its way. Billions of dollars were lost.

It goes without saying that 4 to 6 months is an eternity for demand to be disconnected from supply — especially in a hyper competitive world. Creating parity in the buy and sell sides of the import supply chain ecosystem would significantly improve this dynamic, and create strategic advantages in efficiency for procurement, the overall network, and most importantly for sales. On the strategic side a digital supply network is also needed to address issues like resiliency and brand transparency.

The bottom line is this: While importers sell products in a digital, networked, and automated fashion, they have to buy the same products offline. Some simple changes can help companies buy products the same way they sell them. This will create significant improvements throughout the entire supply chain. In my next post I'll cover a few of those opportunities.
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.

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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