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Quick Take: When customers lead the way
Are digital technologies empowering customers to take control of the supply chain?
Welcome to my second Quick Take edition
My first Quick Take was a rant. I’m worried that manufacturers and distributors are driving forward into the digital age, acting in their own interest, and not talking with each other. Without communication and collaboration, the long-standing partnership will wither and die. My rant got a lot of attention and created several conversations, and I hope it’s making a difference.
Customers lead the way
This Quick Take is about customers taking charge, enabled by state-of-the-art technology, and creating a supply chain to meet their specifications. It’s a bit like manufacturers, emboldened by new digital capabilities, disintermediating distributors by diminishing their role or cutting them out completely.
In an earlier Deep Dive edition, I explored several radical themes for the future of distribution, including customers taking control of the value chain, writing:
In the current supply chain crisis, large companies are taking control of their supply by sourcing direct and cutting out distributors. Their goal is to ensure operational continuity by building in buffer stock. In several conversations across multiple industries, I have learned that a primary motivation for taking control is that distributors do not have direct knowledge of customer strategies, risk tolerance, or emotions. Distributors may add just-in-case inventory by asking customers for guidance, or for making their own assumptions about resiliency, but these adjustments are secondhand. Moreover, adding inventory is a cost that must be passed on to the customer. If large customers are going to pay for a more resilient supply chain, they want to be in control. [Emphasis added.]
Scott Cuthbert, co-founder and CEO of Safeopedia, shared a real-life example. It turns out, the U.S. Navy is building a blockchain-enabled logistics tool to manage medical inventory at home and abroad. Supply chain breakdowns during COVID-19 constitute a significant motivator. The Navy’s goal is to achieve “true just-in-time delivery of essential products such as blood and plasma.”
Key features include:
Real-time inventory tracking
Expiration and consumable monitoring
Modular API integrations
Cold-chain/product quality verification
Real-time demand prediction and supply planning
Cross-hospital load balancing of supplies
From my point of view, this is a consequential development because by taking control of its supply chain, a huge customer is seizing the initiative from distributors and manufacturers, who may have provided the same features and benefits. To be sure, B2B companies may take notice and model innovations on the Navy’s, but so may customers and platforms.
If large customers take control of their value chains, they may relegate suppliers to commodity players. Platform players may also notice and build customer-driven marketplaces, allowing customers to develop and manage a supply chain to their specifications. Today’s marketplaces are seller-driven. Sometimes, the marketplace competes with its third-party players, but the goal is to sell to customers. A marketplace designed to enable customizable supply chains might also serve small and midmarket customers.
By controlling the supply chain, customers set firm specifications, reducing investment risks for suppliers. Proactive distributors or manufacturers might reach out to their largest customers or partner with startup platform businesses to initiate similar supply chain capabilities. By doing so, they might flank the competition and lock up business.
Will customers in your markets take control of the supply chain? Do today’s digital technologies (blockchain, artificial intelligence, automation, and so on) make this possible? Inevitable? What will you do? What will your competitors do? Are there any other topics you would like me to explore? Please share your comments below or reach me at email@example.com.
The helicopter, flight deck officer, and ship in the image are of the Thai Navy. If you noticed, let me know. I have a reward from my days as a U.S. Navy officer.