The technology takeover: what’s next for the supply chain?

The market is facing an unprecedented threat from those in the value chain. Customers and trusted business allies are turning into a manufacturers’ biggest competition.

As a result, manufacturers are implementing new technologies in a bid to keep up with the ever-evolving marketplace. In a major shakeup of the supply chain, manufacturers are taking advantage of the opportunity to open a web store and cut out the middle man to sell directly to the end customer.

In a recent survey we conducted with 559 global B2B organisations, 44% of manufacturers admitted to operating an e-commerce web store to allow them to sell directly to end customers. By being able to handle the complexity of both B2B and B2C buying processes, e-commerce solutions offer manufacturers the opportunity to be seen online by a new customer base. The research also found that 24% intend to implement an e-commerce web store as an additional revenue stream in the future with the intention of moving away from selling across channel. Clearly, how the supply chain operates is facing a number of major changes as manufacturers bypass wholesalers and blur the lines between being a manufacturer and a retailer.

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It’s unsurprising that global organisations are using e-commerce solutions to evolve their current business models, with opportunities to expand their business empires and drive sales strategies. However, as organisations invest in technology to reach new markets it seems as though competition from unlikely sources is on the rise. Our research found that half of the world’s wholesalers feel threatened by manufacturers now selling direct, believing that this is causing the disintermediation of the traditional supply chain and driving the competitiveness between what where once traditional partners.

The outcome of disintermediation of the supply chain is that it will become a more volatile place to operate. Our research highlighted that following the implementation of an e-commerce solution over a quarter of businesses failed to meet key business growth objectives due to increasing competition and aggressive marketplaces. And, it seems as though competition and marketplace unpredictability aren’t the only things businesses are worried about with the changing supply chain.

The research also found that 33% of organisations felt that manufacturers, wholesalers and distributors selling direct to customers was driving down the price of products, threatening business profitability and longevity. Interestingly 63% of distributors saw wholesalers as their biggest threat within the market, highlighting the possibility of the supply chain witnessing large scale consolidation as organisations purchase rivals in a bid to remain competitive.

Increasing pressure isn’t just coming from online competition or as a way to expand customer bases, changing customer demand and a need to deliver an improved buying experience, even in the B2B market, will continue to drive adoption rates of new technologies. While 79% of organisations are planning to upgrade their e-commerce solution in the next two years, other companies are already using more advanced technology within the sales strategy. According to our research 39% of businesses are currently using virtual reality to personalise the buying experience and 39% plan to adopt fully automated ordering using the internet of things. The use of more advanced technology such as VR and order automation means that simple buying processes are able to happen with little human interaction. The introduction of machine to machine technology is seeing equipment self-order parts and potentially shorten the supply chain further as technology allows machines to cut out retailers and wholesalers altogether.

What’s clear from our research is that while manufacturers are principally employing new technologies to meet increasing competition, the impact on the supply chain is much broader. Changes are not only taking place with how businesses are interacting with customers but how manufacturers are doing business with wholesalers and distributers. These changes are causing a major shift in how the supply chain operates and are driving a mass consolidation of business as they fight to stay afloat.

By Michiel Schipperus, CEO of Sana