Digital Solutions for Disintermediation

June 1, 2022
Olivia Hann

What is Disintermediation?

Disintermediation is best described as “cutting out the middleman.” Tech in disintermediation serves to streamline the supply chain starting at manufacturing and ending with the product’s delivery to the consumer. By disintermediating, your business can earn more profits while saving your customers money, among other things.

How is that Possible?

Let’s look at the example of a window manufacturer. After finishing the product, the manufacturer sends the windows to a distributor who marks up the price. This distributor then ships the product to a wholesaler where the windows are then bought for retail, where they are finally purchased by customers. In the three stops between manufacturer and customer, the windows’ prices have been marked up three times. The manufacturer receives none of these profits from the markups. Customers end up paying a higher price than they would pay if buying directly from the manufacturer.

With this in mind, the window manufacturer implements its own online marketplace. Now, since customers can buy the windows straight from the manufacturer without having to go through the distributor, wholesaler, and retailer, the price of the windows won’t be marked up multiple times. The manufacturer can mark up the windows a single time, allowing them to turn a profit while keeping the prices low enough to appeal to customers. This is one example of software promoting disintermediation.

Disintermediation and the Internet of Things

The Internet of Things (IoT) is a tool to boost your disintermediation process. IoT refers to every device that is connected to the internet and therefore to each other. If a manufacturer decides to sell directly to their customers, they need to make changes to how they run their business. One example of this is shipping to customers and the fleet associated with it. With the IoT, a business can record data like mileage, how many stops and starts are made, and what routes are taken by drivers. Doing this stops the business from estimating the data about their fleet. Instead, they now have accurate information that can drive their decisions, all thanks to the IoT.

An online marketplace can start an IoT. Say the online marketplace for windows in the last example made waves in the industry. Soon, the marketplace starts expanding their platform, eventually leading to the manufacturer launching their own devices for the home. Sound familiar? Products like Amazon’s Echo are part of Amazon’s IoT. If a customer needs a new lamp, they can simply ask their Echo to order one, rather than going online to search for one themselves. This certifies a purchase from Amazon while making it convenient for the customer.

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