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Insight: Looking ahead

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First Things First

Insight: Looking ahead

January 17, 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.
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Last week I wrote a post that took a look back on the 10 year anniversary of Flexport.
You can read the full post here if you are interested.

The post was in some parts complementary, and in others critical. I highlighted their progress as a Forwarder but argued that it was tough for me to envision how Flexport is going to 'change the game' without significant changes in strategy. I suggested that they use technology to transition away from competing head-to-head in the brutally competitive forwarding business, and instead become a supply chain company. My second suggestion was to create a supply chain (vs logistics) offering for their customers, to create an Amazon-like-experience whereby purchasing, logistics, and sales were all integrated, and sat under one roof.

The following day, the Wall Street Journal released an article discussing the recent Flexport layoffs, which featured quotes from their new CEO Dave Clark (who just so happened to have joined them from Amazon).

Speaking on the future of Flexport, Clark went on to say that “we’re moving from being a freight forwarder selling a trip for your shipment from point A to point B to offering solutions for your overall supply-chain challenges”. He then stated that Flexport doesn’t plan to build out those operations itself, but instead to enable customers to work with partners through the Flexport platform.

As a platform, Flexport makes all kinds of sense. This allows them to create entirely new services and strategic partnerships without having to build it themselves. Many technology companies operate this way, and Amazon also does it through Amazon marketplace. In many cases Marketplace customers compete with Amazon directly for sales, however Amazon benefits by growing a shared ecosystem that drives down costs and improves customer satisfaction.

It’s unrealistic that in a space this large (15% of the US GDP), one company should try to solve it all themselves. Cheers to the import supply chain industry coming together and realizing it's 'supply chain' potential in 2023.
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.

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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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