Why Proximity Matters

Proximity is a revolutionary metric for fixing the broken supply chain.

Proximity is the use of technology to drive the production and provision of services and products ever closer to the moment of demand. Proximity means that when a need emerges, it is met. When a question arises, it is answered. When frustration happens, a solution is offered. Supply and demand are aligned instantly, most often through the magic of digital technologies.

In the supply chain, context is everything. Business customers buy how they want to buy for the specific need at every purchase, and they feel free to switch their requirements from purchase to purchase without notice. Business buyers do not have a persona; they have a dissociative identity disorder!

This reality has critical implications for B2B innovators, meaning there is no one way to measure proximity. As I first discussed here, proximity is a North Star, to be measured differently across every business customer purchase occasion:

  • Convenience. When buying convenience, business customers buy familiar brands with only a quick check for price, performance, and new features or benefits.
  • Price shopping. The name says it all, and price shopping is about aggressive price checks with decisions judged against price, landed cost, or total cost of ownership.
  • Spot buys. Spot buying is about taking advantage of momentary low prices, often created by market conditions or supply chain fluctuations.
  • Solutions. Solution buying involves solving a problem or executing a project and often involves bundled or coordinated buys of products and services.
  • Customization. Similar to solution buys, custom purchases are made when a business customer requires specific product or service configurations that are not widely available and, in some cases, non-existent or reliant on collaborative product development or service design.
  • Projects. Buyer needs require delivery of products and services over an extended period, delivered by multiple companies in the value chain, to achieve a specific goal or outcome. 
  • Replenishment. Replenishment buys are often predictable or pre-planned purchases against an established operational timeline or sequence of events. They can include products purchased as input for OEM products or items needed for maintenance, repair, and operation of customer plants and facilities.
  • Emergency. Businesses buy products and services in response to (or preparation for) “acts of God” that might include fires, floods, extreme weather, geopolitical conflicts, and more.

The test of the most potent new ideas is that they achieve results outside the normal range of what is achievable by the established system, the way the supply chain works today. Mindsets, practices, and policies are entrenched and will forcefully resist change. Change can come from the middle, driven by reinvented roles for intermediaries, but only if the overall system wakes up to embrace new commerce methods.

As discussed in my first article in the B2Best newsletter, the next wave of B2B disruption is not about displacing incumbent players in the supply chain. Going forward, progress is about collaboration.

Can proximity give direction to collaborations with emerging B2B platforms? I think yes, and have written so:

After Amazon Business, B2B marketplaces seem to have hit a wall. Collaboration-minded digital startups are finding it challenging to build B2B relationships. Distributors balk at putting their products in a buy box with competitors. Manufacturers wonder if they can go it alone and not rely on an upstart marketplace to achieve dreams of differentiation. Neither party wants to give away hard-earned customer loyalty and profit margins without truly new created value

A fresh approach to proximity may be the solution. Marketplaces built around accepting orders in a buy-box environment may fit convenience, price shopping, and spot buys. I suspect that a marketplace (or market network) built for any other buying situations (described above) would offer a very different business customer experience, one with the potential to strengthen collaboration between distributors and manufacturers rather than stoking conflict.

Have you heard of proximity? Do you agree that proximity is a strategic metric for reinventing our broken supply chain? Let us know. Reach out to me at mark.dancer@n4bi.com.