Explaining the intricacies of supply chain management to a marketing department that exists on a different functional planet can be tough. Rather than trying to teach marketers the language of operations, maybe a better approach is to talk about the supply chain that they should actually own.
In an ideal world, supply chain and marketing work in synch to make sure that their respective goals are aligned. But in reality a lack of communication between the two disciplines often causes operational glitches.
Take, for example, the shipments that have to be expedited at considerable cost because the transportation department was unaware of a new promotional campaign or not briefed properly on its scope.
How about the gaps in sales information flows that make it near impossible to forecast demand accurately? For many years, marketers in the retailing business have been using information based on point-of-sale data to analyze demand. Yet, many still find it difficult to break out of their silos to share these valuable insights with operational folks.
Then there is the issue of SKU creep. Marketing likes to create multiple variations of a product to appeal to as many customer groups as possible. The problem is that SKU proliferation adds complexity and cost to the supply chain, penalties that are not always given enough consideration when the decision is taken to extend product lines.
Of course the language barrier is not one-way; supply chain has its own agenda that can be counter-productive from a marketing/corporate standpoint. A case in point is the inward-looking operations departments that aggressively pursues its own performance targets, and in doing so undermines broader initiatives such as customer segmentation strategies.
Encouraging cross-functional cooperation is one way to avoid such misunderstandings. Another possibility is to establish a common platform for communication such as the performance of the marketing supply chain.
If you are unfamiliar with this particular animal don’t be concerned: apparently many marketing folks are largely in the dark as well. The Chief Marketing Office (CMO) Council, an industry organization with 6,000 members, describes this supply chain as the efficient and timely delivery of marketing and merchandising materials to dealer, agent, franchise, retail and brand office locations. It also covers the processing of customer requests for sales literature and samples through Web, call center, and email channels.
A recent report published by the CMO Council entitled “Competitive Gain in the Demand Chain” reveals that many marketing executives have never assessed demand chain performance nor given it a high priority within the marketing operational mix. The report is based on the results of an online survey of 260 marketers carried out by the council during the third quarter of 2010.
Some 80% of respondents acknowledged that their organization is not efficient or effective enough in provisioning the demand chain. Thirty-eight percent agreed that this activity is critical to business competitiveness and performance. Yet only 25% said they ensure that sales support materials and resources are delivered on-demand, which would improve sell-through and customer conversion. The study indicates that there is little or no visibility to the demand provisioning process.
One area that could offer a relatively quick pay back is vendor selection or management, suggests the council. Nearly half of respondents regarded demand chain procurement and fulfillment as a compilation of individual vendors. But only seven percent viewed the demand chain as an area for consolidation and rationalization.
In a nutshell, marketers tend to outsource the management of this supply chain to vendors without the kind of due diligence that is routine in the wider operational world. As a result, they are probably leaving substantial cost savings on the table. On the plus side, nearly 60% of the respondents planned to introduce a more disciplined approach to marketing execution systems.
While this represents a business opportunity for logistics services providers, the more pertinent point here is that these issues bring supply chain concepts into marketing conversations. “What we’ve asked marketers to do is to really start to look at the marketing supply chain as a new area of marketing optimization,” says Liz Miller of the CMO Council. The idea becomes an easy sell when it is framed in terms of the cost savings that can be achieved, she adds.
So the next time you are trying to illuminate supply chain challenges for the marketing department, it might be worth mentioning this area of opportunity. Marketers may not know it, but apparently they need to be good supply chain managers too.