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Insight: Why I started Mercado

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First Things First

Insight: Why I started Mercado

December 8, 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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I've been at this for a very long time, so I have a lot of experience trying to manage the huge gaps in the import supply chain.
A few years ago, I saw that technology had progressed to the point where I felt we could finally solve them affordably, so I decided to go for it.

One of the biggest gaps in an import supply chain is also one of the most elemental ones, which is the purchase order itself. To state the obvious, an import order is the first step in a very lengthy and complex buying process. It takes 4 months on average from order placed to product received, products are made to order, and there a lot of product, supply chain, and regulatory requirements throughout. On average it takes 6 departments and at least 5 entities to get the products to market.

Importers plan and create orders with a lot of care because sales are in the balance. What products they buy, how they buy, and when they buy ultimately is make or break for sales and the profitability of the business as a whole. At minimum, they review things like historical trends, inventory on hand, expected costs, quantity breaks, expected margins, and customer-by-customer sales forecasts. Typically this is all data available and managed in a company's system of record (ERP).

To give you a sense of the impact of an order, I used some publicly available stats from S&P Global (JOC). I estimate that the 98th importer on their list spent roughly $225,000,000 on products and another $38,000,000 on import logistics. Conservatively this importer is expecting to generate at least $500,000,000 in sales from these orders. A quarter of a billion dollars to get their products here, with a half a billion in sales in the balance. Even a relatively small importer is spending tens of millions, and expecting to 2-3X them in sales.

The Problem

So what is the problem with the order? The entire ordering process is done manually. I know that sounds strange given what I outline above, however it's almost universally the case.

Most commonly, the order which was carefully curated, is exported from the ERP and emailed to suppliers as a PDF.

Managing import orders manually has negative knock on impacts throughout the entire process. Lack of efficiency, the inability to create a connected network, diagnose and resolve product issues before they sail, automate manual steps, and perhaps most importantly the inability to properly forecast sales.

Bottom line is there is a lot of money at stake with a process that makes costly errors and delays inevitable.

Our solution was to build an app which turns the entire ordering and shipping process digital.

The tools we created in the app were purpose built to solve most of the challenges described above. It's been a long journey but it's also been really amazing to have had the opportunity to bring something significant to life, with the incredible support of so many great people.
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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