Business as Usual Challenged
One thing is for sure about the uncertain future. It won?t be business as usual.
For a glimpse at what is coming, consider the unfamiliar, multi-syllabic word disintermediation, which is defined as the elimination of the middle parties between seller and buyer.
In his landmark book The Singularity is Near renowned scientist and engineer Ray Kurzweil states:
?New models based on direct personalized communication with the customer will transform every industry, resulting in massive disintermediation of the middle layers that have traditionally separated the customer from the ultimate source of products and services.?
This should give pause to any business executive or owner in the wholesale, distribution and transportation fields, the so-called middle layers.
Imagine a time when manufacturers can accept orders and robotically create the ordered product the same day, and ship directly from factory to customer.
Opportunities to reduce prices through disintermediation will have a profound effect as companies strive for price advantage in world markets.
A procedure such as this would eliminate inventory cost at the factory, shipping cost to a wholesale distributor, commission to the distributor, warehousing at the distribution level, sales expense at all levels, and shipping and handling expense wholesaler to customer.
Consider what this would do to price competition between old business as usual companies and the new model.
Recently there may have been a canary in the mine in the form of Wal-Mart pressuring vendors to take the costs out of the supply chain.
Wherever possible Wal-Mart buys its food products locally to reduce the number of miles its supplier?s trucks travel. No small item at today?s gasoline prices.
Instead of buying coffee from suppliers with as the company described it ?a bunch of people muddled in the middle? it now buys from a cooperative of Brazilian coffee farmers, cutting three or four steps out of the supply chain.
In its familiar role as the price enforcer Wal-Mart has been able to roll back prices on hundreds of food items by as much as 30% this year, according to an article in Fortune Magazine.
Fortune quotes Pamela Kohn, Wal-Mart?s general merchandise manager for perishables as saying ?when our grocery suppliers bring price increases, we don?t just accept them.?
Opportunities to reduce prices through disintermediation will have a profound effect as companies strive for price advantage in world markets.
It is obvious that sophisticated manufacturing at the local level, made possible by the accelerating advances in science and technology, will reshape world markets as part of the Rethink Revolution? presently underway.
Referring to ?direct personalized communication with the customer? mentioned by Kurzweil, elimination or reduction of expense involved in today?s multi-level distribution systems will free up resources for more effective customer relationships.”
The human element in the equation will be enhanced, boosting woefully lagging customer satisfaction.