Whose customers are they?

Abstract

PurposeMany product organizations recognize the benefits of outsourcing manufacturing of key components or even entire product lines to China and other low labor cost countries. But while the cost savings are obvious, many product companies fail to grasp the parallel risk of their own distributors or retailers by‐passing them to source products directly from offshore suppliers. The author discusses case examples of companies that do a good job of anticipating and addressing this threat through a range of approaches to building strong connections to end customers. The author proposes six key strategies for companies in this situation.Design/methodology/approachIn this article, Jackson cites a number of case examples of businesses that have built strong connections to end customers even though they typically reach these through distributors or retailers. Examples industries included in the article are durable consumer goods and medical products. The author then draws lessons that can be applied broadly by any company concerned about the risks of distributors or retailers sourcing private label product directly from off‐shore suppliers.FindingsThe author proposes six priorities for defending against disintermediation by distributors and offshore suppliers: acknowledge the urgency of the threat; reinforce brands; find new ways to link to customers; look for mass‐customization opportunities; enter into creative partnerships; be serious about services.Originality/valueThis article sheds light on the risk of disintermediation for product companies using offshore suppliers, and strategies that can be used to mitigate this.