The practice of disintermediation means removing all intermediaries that are in place within a single supply chain. A common way to talk about this practice would be to “cut out all the middlemen.” When implemented, the supplier interacts directly with the buyer.
Here are the pros and cons of disintermediation to think about and discuss.
List of the Pros of Disintermediation
1. It eliminates your intermediary expenses.
When you’ve eliminated all of the middlemen, then you’ve eliminated the expenses that come with using them. Intermediary partners often require commissions and there are service costs to considered as well, such as shipping and training. These all go away.
2. It increases consumer contact.
Disintermediation puts the supplier in touch with the buyer. In many supply chains, the supplier never gets to meet their buyer, much less form a relationship with them. These relationships that form through disintermediation create more of a vested interest by all parties involved to create something that is mutually beneficial.
3. It provides more control.
Disintermediation allows for suppliers to control how products or services are promoted, displayed, and delivered. Greater control over how items are returned comes into play as well. You’re no longer stuck relying on the promises of the middlemen to make sure what you want happens.
List of the Cons of Disintermediation
1. There is an increase in the internal workload.
Eliminating the middlemen means creating more work for yourself. Disintermediation requires you to take on all the work that intermediaries would normally perform. That means you’re doing everything from taking orders to fulfilling them, managing marketing, and performing all customer service.
2. It can increase costs.
Selling direct might save money, but it can also increase internal costs. You absorb a number of costs and fees with disintermediation, from payment process fees and postage to vehicle maintenance and administrative costs.
3. Your distribution channels are reduced.
Disintermediation almost always causes a reduction in the number of available marketing channels. Intermediaries can be troublesome, but they do provide higher levels of brand exposure. Now all of that becomes the responsibility of the supplier and there is no guarantee that people will buy what you have.
These disintermediation pros and cons show that it can be beneficial to form direct relationships with buyers, but it is also important to have the internal mechanisms in place to take on all the work of intermediaries before starting. That way, the best chance for success can be found.