Mercado brings supply chain smarts to the importer masses

Much of the global supply chain runs on technology approaching midlife, a crisis that Robert Garrison and his latest venture hope to fix.

Garrison, who himself worked 25 years on both sides of the business at major shippers and carriers, said email and digital spreadsheets are still the main tools used in many global supply chains. But email and digital spreadsheets, invented in 1972 and 1985, respectively, cannot keep up with the new era of on-demand freight visibility, SKU proliferation and global product sourcing, Garrison said.

To that end, he founded Mercado Labs to develop software for managing supply chains. The 2-year-old startup received $3.2 million in a June funding round including LiveOak Venture Partners, Story Ventures, Schematic Ventures, and Berlin’s Amplifier. The funding will go toward expanding Mercado’s market reach this year, as well as software engineering.

Garrison said the idea for Mercado goes back to 2001 during his time at Kmart. But “the market just wasn’t ready for it for a whole bunch of reasons.”

“It was not only knowing this problem existed and understanding the problem very deeply, but now finally having the technology to solve it,” he said. “This is the time for this product.” 

Along with Kmart, Garrison also worked in logistics at J.C. Penney and Michaels Stores. Major beneficial cargo owners (BCOs) like those already have sophisticated supply chain systems.

As such, Mercado is initially targeting the mid-market of importer BCOs, those shipping 300-12,000 containers annually, with revenue of $100 million-$10 billion. That can include both retailers, along with the wholesalers that supply them.  

Excluding food, beverage and auto-related goods, close to 1,950 companies shipped a minimum of 100 containers in consumer durable, non-durable and retail goods last year, according to U.S. customs manifest data compiled by FreightWaves. 

Those goods accounted for 1.4 million containers in 2019. About 85% of those shippers, though, brought in less than 1,000 containers. 

About 85% of U.S. retail goods shippers bring in 1,000 or fewer containers. Source: SONAR

But Garrison said the process by which many of those BCOs source their products is a long and lagging chain of communications.

A BCO’s enterprise resource planning system may generate an initial purchase order, say for red yarn in time for Valentine’s Day. But the Asian manufacturers don’t have a similar system with which to receive a purchase order.

That can kick off a back and forth via email as the supplier sends back information on what can actually be delivered, and whether there are price increases or other changed terms in the purchase order.

On their end, the logistics department then needs to go back to their marketing and finance departments to have the new terms approved. Already delayed due to the changing terms, the BCO then has to inform their carrier or forwarder about new delivery dates or get expedited service.

In his experience, Garrison said, up to eight different companies may be involved in getting a product from overseas. Within the BCO itself, up to 30 people in various departments may touch a purchase order.

Mercado Labs CEO Rob Garrison

“All this was email and Excel back and forth for two weeks,” Garrison said. “That’s one product. Imagine if you have 7,000 purchase orders and tens of thousands of products.”

Mercado’s cloud-based, software-as-a-service links to the buyer’s ERP system, where it can take the purchase order and deliver it through a web browser, rather than having to develop a custom software integration between a BCO and their supplier.

“All the communications, collaboration and changes are done online,” Garrison said. They “can tie in finance, merchandising, the freight forwarder and the broker into one system to make everything transparent.”

The biggest of the big BCOs, of course, already use cloud-based supply chain management, the incumbent being GT Nexus, which privately held Infor bought for $675 million in 2015.

At the time of its acquisition, GT Nexus had approximately $120 million, Garrison said.  

Mercado’s monthly subscription is based on expected container volume, with true-ups the following year based on the actual number of containers shipped.

“We have a price point and an implementation point that any importer could afford,” Garrison said. “Where GT Nexus would take nine to 12 months to implement, we take weeks; where they are millions of dollars, we are tens of thousands of dollars.” 

Mercado’s collaboration platform

Even so, a major U.S. retailer is using Mercado’s software for its Canada and Mexico operations. Mercado has a total of 15 customers.

Nor is Mercado Labs skinny on features. Garrison points to things like native language translation for suppliers and subcontractors overseas, tags to organize and search, video conferencing, and a mobile app.

“That doesn’t mean we couldn’t handle someone that has 20,000 containers per year,” Garrison said. “But there’s a huge market in that [mid-market] range so we’re going to focus on that first.”

This article has been amended to reflect that Schematic Ventures is also an investor in Mercado Labs.