Mercado | Insights | The history of 'modern' global trade (Part 1)

Insight: The history of ‘modern’ global trade (Part 1)

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First Things First

Insight: The history of ‘modern’ global trade (Part 1)

June 2, 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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When Ocean containers were introduced to the Pacific Trade in the late 1960s it revolutionized trade.
To understand the factors driving this shift, check out this insightful video from The Wall Street Journal.
Before the introduction of containers, importers would send their products directly to the pier, where they were loaded onto the vessel by longshoremen. With containers they could be loaded off-port, sealed for protection, and then transported efficiently anywhere in the world over sea and land.

One of the largest US importers at that time was Sears Roebuck. In those days, Sears dominated retail in much the same way Amazon does today. Sears immediately saw the benefits of containers; however, they needed services to support this new method. Sealand, a major ocean carrier at that time, agreed to perform the necessary services: collecting the documents, loading the containers, and transporting them to the port. Sealand created a separate division for this called Buyers and Shippers, named after the Sears buyers and their shippers. To this day, some importers still refer to this service as buyer’s consolidation.

Over time, Sears requested additional services, such as document inspection, data transmission, and supplier follow-ups. Other major carriers entered the picture. Maersk created a division called Mercantile, and APL formed American Consolidation Services. By the early 1980s, forwarders started to enter the game. Expeditors bought a company in Taiwan called Cargo Management Services, to form ECMS. By the mid-1980s, there were roughly 15 companies in the 'consolidation' business. It was also around this time that Purchase Order Management entered the picture. Customers wanted to know the status of their products, in addition to their shipments and for that they needed their PO data tied to their shipments.

At the end of the 1980s, the first pure-play order management technology company, Lognet entered the picture and a decade later, another ex-APL employee, John Urban, founded GT Nexus.

Over time, data became as important as the services. Purchase order management involves receiving the PO from the importer and matching the order to the shipment at the time of booking. Back then this required two EDI transmissions: an 850-purchase order transaction and an 856-advanced ship notice. The service was primarily for logistics professionals, who used the order to perform three functions:

  • Communication of product status (how many Christmas trees versus how many containers).
  • Forecasting (how many containers were needed, utilization, how much warehouse space, etc.) for greater efficiency.
  • Quality control for tasks like documentation management, consolidation, and carrier scheduling.
Despite its many benefits, Order Management remains a very strategic, high value 'niche' service due to its complexity and implementation. That's about to change...
"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

Rob Garrison

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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