Escaping the Supply Chain Paradox

September 12 2025

By John Mannes

Supply chain is one of the biggest markets in the world. It touches everything we buy and consume. It’s riddled with automatable manual work, legacy incumbents and inefficiencies that scream out for technology. Small improvements can have multi-billion dollar impacts. So why is it that despite all this surface-level opportunity, most supply chain startups don’t break out?

That’s the paradox: the most logical supply chain ideas rarely work — and the companies that succeed often don’t look like supply chain companies at all.

The Cost-Center Trap

The fact that so many traditional supply chain segments are so logical is exactly what makes them so dangerous — that’s the trap. If you think about it logically, you're going to struggle to find the problem with the framework.

Many founders in supply chain start by building some version of a TMS, WMS, visibility platform, fleet management tool, load board or back-office automation system. But unfortunately they’re all largely built on the same structural incentives flaw: supply chain is itself fundamentally a cost center.

Cost centers don’t drive growth. Their owners aren’t responsible for revenue. They rarely have the organizational power to effect company-wide transformation and they're typically limited to realizing your value in their discrete functional area. That means your upside is capped, your ROI depends on other functions and your fate is always in someone else’s hands.

Good luck selling wholesale change to an organization where the supply chain teams don't themselves have enough power to shift the entire organization. If you're trying to help someone eek out another 2% margin, but they're selling sprockets and they should be selling widgets, that’s a great supply chain problem to be solving, but it's not the supply chain problem that most supply chain teams are incentivized to solve.

And because you can't control what your users and other departments do, you're only as strong as the weakest organizational link. If you had your tool, you could of course make it yield value to justify ROI, but can your customer independent of an organization-wide digital transformation? The organizational dynamics of many traditional enterprises raises the bar on the value needed to justfiy ROI as my partner Seb elaborated on in his recent piece on pricing in traditional industries.

Customer Health Makes All the Difference

Contrary to dogma, cost centers aren’t universally bad targets. But coupled with the macro dynamics of legacy industries, they do often limit the upside of many well-intentioned supply chain startups.

Customer health is the critical variable. Healthier customer segments are more likely to be able to support more cost-focused solutions, while unhealthy segments will struggle. Growing customers with momentum give you growth and momentum by extension. Unless you can save legacy businesses, you probably should think twice before selling into them. The trajectory of many legacy spaces is dire — look no further than shopping malls. Even the long tail or rural users benefit from the advantages of ecommerce. If you can't save your dying customer, they're going to drag you down with them and eventually kill you too. If you're selling to people stronger than you, you can ride coat tails, if you're selling to people weaker than you, you better have brought the life raft.

It's easier to build something like Ramp and succeed in a cost center because your early momentum is coming from more nimble tech-forward companies and startups and customers setting up their first expense solution. There aren't many companies with those attributes that are buying supply chain tools. Selling into traditional industries and larger enterprises means a lot more organizational burden, specialization and politics that exacerbates the negative attributes of selling into a cost center.

Why Pain ≠ Opportunity

One of the biggest mistakes founders make is assuming that if something is painful enough, it must be a good business. In supply chain, pain and opportunity are not the same thing.

Pain points are priorities of the Chief Supply Chain Officer. Opportunities are things that your customers CEO can show up to their next earnings call and brag about. At any time, the CEO of an enterprise has a few things on the top of their mind that they're thinking about daily. If you can be an easy solution to one of those problems, you'll get credit and adoption way before your peers solving lower priorities with lower level stakeholders in the organization.

If you can double a customer's revenue over night, I can guarantee you won't be stuck in procurement purgatory, if you are then your customer is a bad customer and they're going to die.

What Unconventional Looks Like

The most compelling opportunities often don’t look like supply chain companies at all.

Across our portfolio we've had the delight to work with founders building supply chains from the ground up, founders reconceptualizing what inventory and fulfillment are at a fundamental level and founders structurally reimagining the unit economics and constraints of entire industries.

Quince built its supply chain from the ground up, enabling the best factories in the world to sell direct to consumer. AI and automation were part of the plan from day one in a deliberately cross-functional way. There were never dependencies on other people’s data or other people’s decisions in the way there would be if you were only selling say a demand planning solution to a legacy retailer.

In a similar way, VIAVIA is reshaping commerce by creating a shared inventory pool across new, used, and rental clothing. Each item is continuously evaluated and valued as it comes in and out of inventory. Fulfillment can be prioritized across channels based on whichever path yields the highest ROI.

Both are full-stack. Both treat supply chain as the core engine, not a side function. That doesn’t mean every winner has to be full-stack. But it’s often easier to create and capture value that way.

In textile manufacturing, another of our companies (stealth for now) is creating a way to produce quality garments with a level of automation and impact that rivals the invention of the sewing machine itself. With its technology, factories will have the flexibility to produce clothing much closer to the consumer, without the traditional constraints that come with mass manufacturing -- upending the operating assumptions and unit economics of the entire clothing industry.

None of these companies fit in a traditional supply chain box, and yet all are dramatically reimagining what supply chains are. In this way, many of the most interesting supply chain startups don’t look like supply chain companies — they show up as brands, retailers, fintechs, marketplaces, robotics companies and even Infrastructure-First Consumer Companies with supply chain cores.

Resetting the Supply Chain Mindset

So how do you avoid the paradox? A few mindset shifts stand out:

1. Hard-to-map is good: If your company is difficult to categorize, that’s often a feature. The best supply chain companies are counterintuitive.
2. Stakeholder test: Impressing a Chief Supply Chain Officer is useful but can be insufficient. A higher signal evaluation of value is whether your product can make a CEO look good. The bar for value is very high.
3. Customer health helps: Selling to healthier, growing customers gives you tailwinds. Selling to dying incumbents ties your fate to theirs unless your value prop is strong enough to save them.
4. Experience matters: The sharpest teams often have the experience and empathy that comes from running an inventory business end-to-end, or from rigorous financial backgrounds where they think in terms of models, cashflows and efficiency. And they commit years to building really consequential technology.

The best supply chain companies are built on a different mindset, one that empowers them to dream bigger and capture greater value from their creations. The category is full of opportunity but it’s also full of landmines and traps, exacerbated by the traditional and legacy nature of the customer segments. But those who are actually able to meld supply chains to their vision, will wind up building some of the largest businesses in the world.