reintermediation

What Is Reintermediation? Reintermediation In A Nutshell

Reintermediation consists in the process of introducing again an intermediary that had previously been cut out from the supply chain. Or perhaps by creating a new intermediary that once didn’t exist. Usually, as a market is redefined, old players get cut out, and new players within the supply chain are born as a result.

Case study: Amazon last-mile delivery

last-mile-delivery
Last-mile delivery consists of the set of activities in a supply chain that will bring the service and product to the final customer. The name “last mile” derives from the fact that indeed this usually refers to the final part of the supply chain journey, and yet this is extremely important, as it’s the most exposed, consumer-facing part.

As Amazon tried to figure out last-mile delivery, the company might also over time disintermediate the old delivery industry, which suddenly might be cut out from the supply chain.

disintermediation
Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all can produce products that customers want.

As this process happens, and the new market is defined by Amazon, new intermediaries, that have learned to play according to Amazon rules will form.

Creating a whole new intermediary

For instance, as Amazon has been figuring out the last-mile problem it also approached it with a new program, launched in 2018, called Delivery Service Partner.

Or simply put, a startup that gets helped by Amazon to become an independent contractor (under the rules of Amazon) that delivers packages for the company. Thus, Amazon disintermediates the old carriers, builds up a new system, which is comprised of new intermediaries.

Yet those will follow Amazon‘s rules and policies.

The loop of intermediation and disintermediation

The evolution of the Internet moves from phases of disintermediation, extremely helpful to remove old logic, that does not work anymore in current market conditions, to establish new systems.

As those new systems are established though, reintermediation might take place for several reasons. First, it might be the key player, once disintermediating, now to incentivize reintermediation, to gain more control over the market. Second, as the market adjusts to this new reality new intermediaries learn the logic of this new market and try to capture some value within the supply chain.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"