Founder and CEO of Mercado Labswith a 25-year history of building engineering solutions that improve end-to-end efficiency in the supply chain.
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I’ve often talked about the manual state of the global supply chain, but many in the industry are still unaware of the magnitude of this problem. Simply put, the most influential tool used by most importers today to track their orders was released in 1985: Microsoft Excel. So implicitly, this spreadsheet software currently determines the success of more than $340 billion of products arriving in the US each year.
Since 1985, it’s fair to say that the industry has grown much larger and more complex than we could ever have imagined, surpassing the role that spreadsheets should play. In my time working on bringing new solutions through a digital supply chain platform, I’ve noticed that compared to 40 years ago, the number of importers has also grown exponentially to handle the scale at which consumers have been driving the retail landscape.
But alongside this booming growth, a darker, more chaotic side of the international supply chain has emerged. Unforeseen shocks and events have exposed the vulnerabilities and vulnerabilities of an industry that has shifted from a linear “chain” to a complex array of networks and nodes. The “ripple” (more akin to a tidal wave) caused by the Covid-19 pandemic highlighted weaknesses caused by opaque supplier relationships, low inventory levels, and single-supplier sourcing, such as:
• Regional plant closures have devastated production as importers struggled to understand production capacity.
• Raw material shortages revealed too much reliance on a select few suppliers to meet a high production quota.
• A lack of investment in aligning e-commerce with physical sales has resulted in lost sales opportunities as consumers move almost exclusively to online shopping.
In short, large segments of importers were ill-prepared, under-educated and lacked mitigation strategies to solve the shortcomings in their supply-side networks.
Data is good; insights are better.
If the pandemic was a signal to grab the attention of importers, its aftermath will lead to action. The lack of foresight and foresight that almost overnight collapsed the western world is not something that executives, investors or consumers want to experience again. But essentially, the past two years have revealed as much about companies’ deep knowledge of their operations as their lack of preparedness.
Over the past decade, we’ve seen a clear push to harness the power of data (both ‘big’ and ‘small’). This has led to greater visibility and improvement in overall global supply chain transparency to better understand and manage the way imports go from source to store. But the unpredictability and fragility of the market that has emerged hasn’t changed this desire — I think it’s made data all the more necessary.
Markets are known for rewarding companies that invest heavily in the data side of their operations. I’ve seen investments soar in companies offering middle and final mile visibility platforms, alongside companies leveraging the power of state-of-the-art technologies, such as blockchain, to create a more robust supply chain tech stack. However, data is only one hurdle to overcome; the next thing to follow soon is how to use it.
Let me give you an example: if we take the fundamental relationship between supplier and importer, the first thing we need to understand is: Who who are suppliers Where they are based and the outer layers of their supplier networks they rely on for the supply of raw materials and goods. If a factory shuts down and cannot produce goods, what are the options for moving to another factory? Or to find alternative labor sources? Or is a completely new supplier needed? And how quickly can this shift happen?
Real-time data feeds fuel such choices, with insight-based analytics engines helping to make the next-best decision. Such technology is already driving the success of many large retailers who have faced challenging market conditions with fluctuating consumer demand. (Disclosure: My company offers one of these solutions.) However, for the majority of the market, I’ve found that there has been little to no investment in such tools.
What does this mean?
At first glance, it may seem like the proverbial links in the supply chain are held together with manual methods and printed documents draped over the cracks. But in reality, those connections aren’t even interconnected, because each business unit operates independently of the next. I think our common goal as an industry should therefore be to reconnect and automate the chain so that it can work efficiently. Steps leaders can take include:
• Veterinarians before they begin manufacturing products, centralizing and managing verification, education, and information.
• Create and share digital purchase orders (POs) between suppliers, importers, and internal teams to ensure a single source of truth.
• Automatically generate shipping documents directly from the PO to minimize and ultimately eliminate human errors.
• Layer analytics on top to provide real-time insight into a product’s disposition.
However, it seems clear that these basic principles are missing from many importers’ supply chains. By taking these vital actions, we can bring the global supply chain into the modern era, connecting all links. The good news is that there are very few existing systems that would require rip-and-replace.
I think the main problem facing the industry today is a wealth of point solutions that address individual supply chain challenges, but do not provide cumulative benefits. Importers are already dealing with a multi-tool tech stack, so make sure you find the right solutions that work with, rather than against, existing business processes.
When moving to a more modern approach, it may seem easier to stick with the status quo than to make change. But I’ve found that leading the way when digitizing and connecting your supply chain can ultimately lead to any company’s north star: more revenue – which is ultimately the most important thing when it comes to boardroom meetings and annual reviews. So the only question left is: are you ready?
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