Magazine Article | July 1, 2002

Who's Got Your Back?

Source: Field Technologies Magazine

The supplier-manufacturer-customer supply chain is an environment where few rules exist that don't impact the bottom line.

Integrated Solutions, July 2002
Ed Hess

Children's books and boat supplies. Granted they don't have much in common. It's only by coincidence that both subjects recently crossed paths in my life and serendipitously exposed two models of doing business online.

In the last month, I spent some time traveling to several bookstores in my area in search of that perfect gift. (Having put the purchase off to the last minute, not even could save me.) The bookstores on my list were not supplied by the Yellow Pages but by the publisher of the book itself. After entering the name of the book and my ZIP code on the publisher's site, I was given a list of stores that should carry the item. After a couple of phone calls and a short drive, I bagged my quarry.

Contrast that experience with my friend's recent trip to a local boating supplies store. When he discovered that the product he was looking for was out of stock, he went home and promptly purchased the merchandise online. The transaction was not with another retailer, however, but with the manufacturer of the product.

So, who is to blame - if anyone? Actually, there's no sense trying to divvy it up.

The Bottom Line: Ally And Enemy
At this point, you must understand that loyalty between companies is the exception and not the rule. Unless you're talking about a custom product or service, the ultimate arbiters of success are price and convenience. In this landscape, every business should know by now that the old rules don't apply.

  • As a manufacturer beaten down by reverse auctions and undercutting competition, who can blame you for selling direct to customers through your company's Web site? It's only going to be a fraction of your company's overall sales, and it might offset some of those razor-thin margins you're forced to deal with.
  • A retailer - no matter what size - would be a fool not to have some sort of Web presence. The product I want may be on back order at your store, but customers can get it online from a previously unknown competitor three states away. If you're losing business in this manner, then it's well past time to cobble together a Web site and start taking orders.
  • And here are your customers, be they consumers or businesses. They want the product. They want it at the best possible price. They want a painless transaction. And, who can blame them?

Automation Is Salvation
What you've probably learned the hard way is that the current rules of business are not as tidy as the old ones. Manufacturers are selling direct to customers and stealing business from their traditional outlets. Small suppliers are burdened with carrying additional inventory in order to offer JIT (just-in-time) replenishment to clients who demand it. And, customers want their products cheaper and quicker than ever before.

The only way to compete is with technology. I've talked to manufacturers who have dropped suppliers because they refused to get online. I'm not talking about buying into some Web-based EDI (electronic data interchange) system. I'm talking about being able to send and receive e-mail. For companies like that, there is no hope. They'll wistfully recall big accounts they used to call customers, and their businesses will wane to a halt. Others will embrace the power of technology and the automation and opportunity it offers. For those companies, ROI will not be calculated in some 20-step formula. Their technology investments will be validated by the fact that they're still in the game and - like their partners and customers - playing every conceivable angle.