Agile Demand-Supply Alignment – Part 3G: Solution Assessments

This article is an excerpt from the report Agile Demand-Supply Alignment — Part Three: ADSA Solution Assessments.
A copy of the full report can be downloaded here.

In Part 3F, we assessed One Network, a multi-enterprise platform with broad supply chain application functionality. Here in the final article in this series, we look at Mercado and Zencargo.

Mercado: Import Management-Focused Supply Chain Application Network

Mercado is a supply chain application network/platform connecting retailers with suppliers, forwarders and brokers, carriers, and other service providers in the order-to-delivery process for imports. Mercado refers to their system as an ‘Import Management System.’ Founded in 2018, Mercado is a young company, building out its platform functionality with the latest UI and technology as a foundation.¹ They provide the functionality to improve the first mile of the supply chain through automation. Their scope includes vetting suppliers, ensuring supplier’s compliance with standards, specifications, and order specifics, monitoring production, and managing shipments from suppliers throughout the end-to-end logistics process.

Mercado, which means ‘marketplace’ in Spanish, is envisioned to include a marketplace of service providers, such as other logistics and supply chain networks (e.g. FourKites, TOPL, OpenTrack), origin services (e.g. packaging, inspections), value-add services (such as labeling, kitting, repack), and logistics services. While they are still a quite young company, with much functionality remaining to be built to achieve a broader footprint, Mercado plans to leverage their partner-centric marketplace model to grow an ‘extended footprint’ relatively quickly on top of the solid core they have already built. Among the many different areas they expect to address in their marketplace, Mercado has expressed a particular passion for supporting socially responsible supply chains and sustainability enablement services.

Target Customer

Characteristics/Factors Driving Adoption

Mercado primarily serves retailers, distributors, and brands who lack automation, workflow, transparency, and visibility during the critical first mile during production — importers who struggle with the complexity, volatility, and difficulty forecasting demand. They are typically mid-sized importers who have long-lead-time international supply chains. Mercado has some substantive early proof points with customers, including a $12B retailer. Over time, executing a larger number of mature implementations will help them refine and prove out their business model and value.

Industry Focus

Mercado focuses on retailers, distributors, and brands selling products that want to eliminate complexity.

User Roles

Mercado serves users on both the buyer and supplier sides.

The users on the buying side of the relationships are those responsible for the inbound supply chain, such as:

• Sourcing and procurement professionals
• Import compliance
• Transportation and logistics managers
• Supply chain professionals
• Finance professionals
• Inventory management professionals

The users in supplier companies are those responsible for production, the outbound supply chain, and customer-facing operations. This includes roles such as:

• Client/customer-service delivery managers
• Outbound operations managers
• Production managers
• Supply chain professionals (customer-facing)

Functionality

Mercado is built on a modern platform with a clean, simple, intuitive UI and UX. They have built solid supplier management and PO management tools and useful logistics tracking functionality.

PO, Supplier Integration

Mercado has prebuilt integrations with SAP, Oracle, NetSuite, QuickBooks, ABS, and RollMaster. These integrations can ingest POs from the buyer’s ERP system. The platform can then provide PO tracking, document generation (based on data from the PO), and tools for collaboration throughout the PO lifecycle. PO change requests can be made within the platform (or ingested from an external PO management system) and the reasons for the request are recorded in the system. The supplier/manufacturer can then agree to the request or suggest an alternative plan. The platform keeps a permanent record of these negotiations and what was finally agreed. Modifications made to POs within the Mercado system can be written back to the ERP PO management system, provided that integration has been implemented.

Mercado’s platform lets suppliers log in via the web and operate with the same feature set as buyers (within the limitations of what each party is authorized to see and do, of course). Mercado creates all documentation from validated orders. All data is kept digital to dramatically reduce mistakes, delays, and expenses. Integration into the customer’s AP system to automatically receive the invoice can be done by request.

Supply Chain Visibility

Mercado provides a standard set of preconfigured dashboards out-of-the-box, including supplier, order, product, and logistics-oriented dashboards and reports. During the onboarding process, Mercado works with clients to understand customer-specific reporting needs. Customer-specific report templates are then configured. Data visibility is managed with Tableau. Mercado has preconfigured reports for orders, shipment booked, departed/in transit, container details, vendor overview, port details, carrier allocation, container type, and utilization. They do not yet ingest vehicle location data directly from vehicles’ GPS/ELD devices or from ships’ AIS data, but they do accept status updates from carriers.

Milestones, Events, Process Compliance Tracking

“‹Mercado provides a set of standard built-in milestones/tracking events such as PO issued, PO received, PO Accept/Reject, Booking Requested, Booking Complete, Shipped, Arrived, Customs Cleared, and so forth. All milestones are configurable. Customers can create their own custom milestones to track progress. Milestone/”‹tracking data can be captured through manual input or via API or file integration with suppliers and third-party service providers (such as 3PLs, carriers, inspectors, etc.).

The milestone engine supports date/time offsets before or after an event. For example, a milestone might occur three days after a PO is issued or two days before a shipment is due to arrive. The engine can generate an alert when a milestone is missed, like a vessel did not arrive when expected, production was delayed, or a container was not loaded.

The system can also store specification documents and confirm that the supplier received them and actually looked at them. It can track when samples are sent, confirm that they were received, confirm that feedback on the sample was received, and order is approved. An inspection by a third-party inspector can be requested on the platform, and the inspector can attach a certificate of inspection once completed. In general, the platform can help ensure that descriptions of all relevant procedures were sent, received by the supplier, followed by the supplier, and verify that they were done properly.

Quality Management

Mercado can be configured to track quality and compliance activities at suppliers’ sites using event tracking, milestones, and direct integration from any service providers that may be managing QA and/or regulatory functions. Mercado has a mobile app that allows users at the supplier’s factory or another site to perform functions such as upload files (for example report of problems found or photos showing the problem), manage quality resolution milestones, and send messages to the appropriate multi-enterprise team members to resolve the issues.

Customers can configure their own custom milestones to track the resolution of issues. For example, a customer may track milestones when inventory is quarantined/put on hold, root cause discovered, fix proposed, fix tested and approved, fix implemented, and so forth. Mercado helps customers set up custom milestones during initial implementation.

Collaborative Issue Resolution

A chat session to resolve an issue can begin within the PO or shipment. In that case, all communications in that chat session are directly linked to the order or shipment being discussed. Mercado does not have a separate case management system per se, but users can collaborate on PO changes, missed milestones, quality, and resolving other issues within the context of the PO or shipment.

Pricing, ROI, Time-to-Value, Services

Pricing and ROI

Mercado charges an annual subscription fee, based on the number of POs processed by the system. There is typically a modest upfront implementation fee, usually about 20% of the annual fee. Mercado told us their customers are receiving an ROI of about 3X to 6X per year, with a payback in three to four months.

Mercado tries to minimize the amount of professional services they need to provide. The upfront basic implementation service they provide consists of three integrations: 1) the customer’s ERP/financial system (primarily to get and put purchase order data), 2) forwarders’ systems (usually CargoWise or Descartes AES), and 3) supplier integration which is done via supplier self-service through the supplier portal, with an approximately 30-minute training session over the phone. Services beyond these basic integrations are provided by referral to partners.

Time-to-Value

Mercado follows a structured, prescriptive implementation methodology. Mid-sized firms typically take about six weeks to implement; larger firms up to 12 weeks. Mercado told us they are working to substantially reduce the implementation time. Time-to-value ramps up during a relatively short period where Mercado and the customer are trying and testing out the system in a limited scope — such as for a single country, a subset of suppliers, or a subset of users — making sure that everything is working well. For small to mid-sized firms, this validation period can be as little as a week or two. Larger firms may take up to three months or more for a complete rollout.

Educational Services and Tools

Mercado offers a rich set of self-service educational materials and tools for their customers. They have established the Mercado Institute of International Trade (MIIT), which offers access to experts, online courses, and certification for sourcing, procurement, logistics, and trade compliance.

Who Mercado is a Good Fit For

Mercado should be considered for the shortlist for importers with long-lead-time international supply chains and who want to minimize complexity, volatility, and difficulty to forecast demand. This includes retailers and brands who want to improve their time to market, reduce expenses, and improve sales.

__________________________________________________

Zencargo: Digital Freight Forwarder Providing Control Tower Capabilities

Zencargo is a digital freight forwarder, founded in 2017, predominantly serving the UK and Europe, but also Asia and North America. In addition to offering traditional freight forwarding services, Zencargo also provides control tower software that can be used with their forwarding services or used separately as a standalone platform, independent of Zencargo’s forwarding services. Zencargo gathers SKU-level data from their customer’s ERP systems, augmenting that with data from suppliers, and then compares the current situation on the ground against plans. If the supplier’s factory or already in-transit shipments are going to be late, Zencargo works with the customer collaboratively on how to mitigate the effects. Through various means, they can help in reducing stockouts, better leverage inventory, and optimize container shipments.

This ability to perform the logistics execution differentiates Zencargo from the software-only platforms reviewed in this report. Parts of Zencargo’s control tower leverage human logistics professionals, the same experts that are already providing their freight forwarding service. Thus, Zencargo can augment its customers’ internal logistics and supply chain staff to solve demand-supply imbalances.

Zencargo’s platform-service combination can rapidly respond to changes in commercial requirements by executing the logistics on the platform. They already have logistics experts who are executing, monitoring, and optimizing the international logistics flows for their customers — those same resources can add human intelligence to the machine intelligence of Zencargo’s platform.

Target Customer Characteristics/Factors Driving Adoption

Zencargo’s target customers are primarily mid-sized retailers and consumer goods brands, in a particular fashion and luxury apparel, footwear, cosmetics, health & nutrition, furniture, homeware, sporting goods, building supply and home improvement, and home and garden. Zencargo’s customers often have complex and volatile supply chains and are typically fast-growing businesses with a big e-commerce presence or a desire to move rapidly to e-commerce. Companies that are vertically integrated and do their own manufacturing in-house, rather than outsourced, would not be as good a fit for Zencargo.

User Roles

Zencargo users are typically in one of four roles:

• Supply chain
• Logistics
• Merchandiser or commercial buyer
• Finance

Functionality

Zencargo offers control tower functionality, integrated with their freight forwarding services as described below.

Good Upstream Logistic Visibility, Basic Milestones

Zencargo’s control tower provides some basic production status visibility, and more advanced upstream logistics and inventory visibility. They do not yet have inventory or logistics visibility for further downstream, from the warehouse to the consumer. They gain visibility into milestones at ports via integrations with 3rd parties. They have support for direct use of onboard GPS/ELD data from vehicles for tracking purposes, but no integration yet with third-party tracking networks (e.g., MacroPoint, Project 44, etc.). The platform comes with PO- and shipment-level milestones out-of-the-box. There are no customizable milestones yet, but that capability is coming soon. More detailed, industry-specific milestones are also in the works.

Exception handling and corrective actions

Zencargo’s intelligent rules engine raises issues, notifying customers of exceptions, and providing a collaborative environment to resolve them. They provide some root cause analytics to understand what is driving the issues and allow for business process improvements where relevant. The platform provides information and tools to help manage production, logistics, and inventory. The logistics dashboard is a central part of Zencargo’s offering. There is a comprehensive exceptions section for logistics colleagues to view specific disruptions.

Supplier portal and booking

Zencargo provides a supplier portal where suppliers and manufacturers can respond to requests, update the manufacturing and fulfillment status of each PO, upload relevant docs and information, and collaborate with the customer. Suppliers can raise a booking request relating to a specific PO. The application can support freight paid at the destination or origin. There are workflow tools for approval to ship (PO level & Shipment level), allowing the buyer-importer to approve shipment plans/requests from the supplier before they are executed. The platform can provide instant quotes for Ocean FCL, although it is rarely used, as most of their larger customers have fixed rates. They have online quoting functionality, but it is not instant.

Document Management

The platform can store all types of documents and automatically generate documents including shipping labels, invoices, and packing lists. They can show landed cost that includes duties, taxes, and transport.

Pricing, ROI, Time-to-Value

Pricing

Zencargo’s visibility and order management software is packaged into the price of its freight forwarding services. An alternative pricing structure is available for instances in which the freight service is bought directly from the carrier.

ROI Metrics

Zencargo tells us that by using their platform, their customers typically increase revenue by about 1%, reduce their freight costs by about 5%-10%, and reduce working capital by over 1%. The main metrics Zencargo measures and targets to improve include:

• Container utilization — how full the containers are vs. maximum for a given SKU, thereby reducing the number of containers shipped for the same volume of product
• LCL used — ship more FCL, less LCL
• Lead time — average node-to-node lead times
• OTIF — improve supplier ship timeliness and logistics performance
• Supplier performance — OTIF shipments, as well as data accuracy and timeliness
• Data accuracy — from all sources
• Inventory turns — reduce the amount of inventory while maintaining or improving service levels
• CO2 emissions — via higher container utilization and other means
• Landed cost reduction — today primarily by reducing logistics costs; in the future by reducing tariffs and duties as well

Implementation, Time-to-Value

Implementations, without any API integrations, typically take a matter of weeks depending on the complexity of the supply chain in question, during which Zencargo makes sure the data flows are correct, onboards suppliers’ factories, provides training, and maps exceptions. During this period, Zencargo and the customer together build an SOP² and SLA³ to define how they will operate together and what the service level expectations are. Zencargo also offers implementations with API integration.

Regarding time-to-value, small to mid-sized companies will usually have many functions being used broadly across the organization within a few months, with adoption expanding in a phased approach. For larger customers, it depends on the speed and scope of the rollout. Within a single business unit, they may see time-to-value in a similar timeframe as a mid-sized company. It typically takes longer to roll out across an entire large enterprise.

Who Zencargo Is a Good Fit For

For mid-sized retailers who do significant importing, Zencargo provides an interesting option that combines control tower capabilities with freight forwarding services. This might be the right combination for those looking to simplify their solution provider relationships and have a single point of responsibility. The savings and revenue impacts that Zencargo touts are compelling.

_____________________________________________________________________________________

¹ Their leadership team comprises industry veterans and practitioners with a combined 65 years of experience managing import supply chains in companies such as Michaels, Lilly Pulitzer, Lumber Liquidators, Footlocker, Target, and Five Below, to name a few. — Return to article text above
² Standard Operating Procedure — Return to article text above
³ Service Level Agreement — Return to article text above

To view other articles from this issue of the brief, click here.