September 21, 2017 - Article

Supplier Provided Technology Risk: What You Need to Know

You don’t have to look far to find headlines showing the impact of consolidation in the print, marketing communications, and branded merchandise supplier landscape. Within these industries – the headlines are rife with consolidations, separations, bankruptcies, and third-party buyouts.

Among the major players, R.R. Donnelley and Quad Graphics both bought competitors. WorkflowOne and then Standard Register filed Chapter 11. Three of the largest label makers merged: RAKO, X-Label and Baumgarten. Venture capitalists, such as Advent International and CVC Capital Partners were active in their take-overs. Gallus was acquired by Heidelberg. Flint Group bought Xeikon. And R.R. Donnelley & Sons split into three separate entities.

The list goes on and on, and industry churn is not going away. For enterprise sourcing leaders who manage significant spend in these categories, it is increasingly difficult to manage the risk associated with supplier consolidation. Ultimately, every merger, acquisition, buy-out, sell-out and management change increases risk within your supplier pool. Navigating the acquisition of a current supplier by one of their competitors can be tricky. Even more disruption occurs when suppliers simply close their doors – an occurrence that happens much more frequently than you might think!

Proprietary Supplier Technology – the Business Reality

Chances are, one or more of your print, communications or branded merchandise suppliers is providing an e-commerce experience for your users. These platforms are often positioned as “industry-leading technologies” with enough bells and whistles to create a better buying experience for your internal customers (and perhaps your external channel partners). However, a careful evaluation of these platforms can uncover the inherent risks associated with deploying the technology of a single printing firm to hundreds or even thousands of your internal customers.

From the perspective of a printer, the primary purpose of deploying order entry and e-commerce tools is to funnel orders to their production facilities, and create “barriers to exit.” i.e. they want to lock you in and make it difficult for you to exit the relationship. These organizations are experts at positioning their platforms as a software solution – but their approach can create significant risk for the enterprise.

This doesn’t mean that proprietary solutions can’t deliver value to your organization – they certainly can. But leading organizations evaluate utility against risk to ensure that the value equation is balanced.

Taking on More Risk: The Pressures of a Contracting Industry

Consider again what’s happening in the print and branded merchandise segments. As suppliers across the industry are increasingly pressured to deliver lower prices to customers, increasing competition forces them to make capital investments so they can deliver innovation from a user experience perspective.

For printers, upgrading the software that enables your end users to buy from them can quickly become less important when financial decisions are made. Software development, updates, and support improvements often take a back seat to investing in new production technology or improving profits. For a printing company facing takeover or bankruptcy, software upgrades are pushed even lower on the investment totem pole – competing with every other function within their struggling company.

In the end, printers often underinvest in their technologies because software isn’t a primary revenue source – it’s simply an enabler of printing revenue.

Alternative Technology Options

The most important step to reducing the risks associated with proprietary software is to assess your supplier panel. Asking questions such as: What happens if we need to change suppliers? Are we getting features and functions that are best in class? What investment are suppliers making in their customer facing technology? And, what is the supplier’s financial condition? When evaluating your print and marketing communications supply chain, careful evaluation of these aspects will help you diminish any business disruption caused by supplier instability.

At SupplyLogic, we believe that the use of open technology platforms reduces risk at the enterprise level – and often creates a more robust user experience. Customers that rely on proprietary technology solutions from printers are creating their own barriers to exit and often struggle to continually improve the experience of users throughout the organization.

SupplyLogic is a third party management company providing specialized services within the print, marketing communications and branded merchandise categories for many of the largest U.S. consumer oriented enterprises. We continuously examine and leverage the best technology in the industry, while monitoring the financial status and capabilities of top suppliers. Enterprises that deploy open platforms in a supplier agnostic environment inherently reduce risk and often find significant savings along the way.

To learn more about how to reduce the risk of supplier technologies, visit www.supplylogic.com, or contact us at 1-877-767-5644

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