Supply Chain Management Review

Robert A. Rudzki

Supplier Chain Disintermediation
March 25, 2008

One SCMR reader asked that we comment on the notion that supply-chain disintermediation has become a non-issue.

First, a definition. Wikipedia defines “disintermediation” as “the removal of intermediaries in a supply chain: i.e. cutting out the middleman. Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet.”

Certainly, with greater transparency brought on by the Internet, there are more opportunities for disintermediation. Notes Wikipedia, “Buyers [can] bypass the middlemen (wholesalers and retailers) in order to buy directly from the manufacturer and thereby pay less.”

During the height of the dot.com frenzy, I attended a high-level seminar in New York City on the subject of “e-Business” and the internet. Most of the speakers, who were introduced as experts or thought leaders in this new, red-hot field, strongly believed that the Internet would displace traditional brick-and-mortar businesses.

One speaker, the chairman of one of the major office supply houses, took the opposite view. In a very calm, logical manner, he explained why his firm (and perhaps others) would not be displaced by the Internet, but would in fact lead the adoption of the Internet’s capabilities to strengthen relationships with their customers. His view – that a traditional player could effectively adopt this new technology – was clearly in the minority at the time of the conference, but his view has since been confirmed by reality.

Thinking about it strictly from a supply management perspective, the question becomes: does the intermediary offer something of value? Value, keep in mind, is defined by the customer. Some customers may view value as just price. Many others consider value to include service, convenience, technical assistance, delivery, etc. Customers who see value from an intermediary will gravitate toward that source.

If you have a favorite example of an intermediary offering compelling value, share it through posting a comment below.

Posted by Robert A. Rudzki on March 25, 2008 | Comments (2)