January 29, 2007
Supply Chain Digest: Supply Chain Integration – Crossing the Marketing and Logistics Divide
By SCDigest Editorial Staff
In the fall 2006 issue of the Journal of Business Logistics, Alexander Ellinger and John Hansen of The University of Alabama, and Scott Keller, from The University of West Florida, published research based on a number of in-depth interviews they did with both logistics and marketing professionals in business-to-business oriented corporations.
To the surprise of no one with experience in either area, to a large extent logisticians and marketers think the other side is less than cooperative and focused correctly.
It will not come as a surprise that the authors found that, “Logistics managers in our sample were frustrated by the relative indifference towards the logistics function and lack of attention to detail of their marketing colleagues. Logistician respondents stated that they frequently find themselves having to react to fulfill marketers’ promises to customers that have been made without input from logistics.”
They quote one respondent as saying, “Marketing people, in my opinion, will not come to logistics people. As a logistics person, the burden of proof is on me to go to them.”
On the other hand, as the authors write, “A common perception among the marketing manager respondents was that logistics is often willing to forsake the customer to save on costs.”
One interviewee on the marketing side commented, “You always get the feeling when you talk to [logistics] people that they’re too busy.” Does that ring home at all?
The authors identified a number of barriers to improved collaboration between sales and marketing. These included insufficient knowledge of their functional counterparts’ constraints and limitations, a lack of communication, poor working relationships, conflicting goals and a lack of direction from senior management.
The approaches to overcoming these barriers should be fairly obvious. In the end, it’s all about leadership, communication, and listening first, talking second.
Certainly, many consumer goods companies, such as Campbell’s Soup and a number of others, that have very successfully implemented customer logistics teams that integrate sales, marketing and logistics, understand these opportunities very well.
Discussion Questions: What’s your take on the integration of marketing and logistics? Is it better than in the past? Why or why not? How do you think the collaboration can best be improved?
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Whoever is at fault, it is becoming essential in the multi-channel, cross-channel environment that marketing and logistics get it together.
It is becoming essential for reasons of efficiency, productivity, inventory control, and of course, customer service.
In a cross-channel world, where customers expect to be able to shop, buy, pick up and return in any channel, a unified view of inventory and logistics–getting the product where it needs to be when it needs to be–will spell the difference between profit and loss, between success and failure.
Marketing and logistics still inhabit two separate universes. What’s changed is that we are know more aware that these universes intersect at a point. Think of the classic Venn diagram from your high school algebra textbook. Imagine marketing as Circle A and logistics as Circle B. There is an area C which marks the intersection of A and B. We call that area the store and Area C has grown to include basic warehouse functions like keeping the store in-stock.
The problem is that not enough marketers or logisticians understand the growth of Circle C. Too many marketers are only concerned with what happens at the points of shopper interface–the shelf, the display, the ad, in-store media, etc. At the same time too many logisticians measure success with essentially industrial tools–orders shipped, perfect orders, accuracy of delivery windows, warehouse put-aways, etc.
What has to happen is that both camps need to learn how to shrink their own circles and grow Circle C. Only when marketing grows to include supply chain considerations and when logistics understands that the real critical “put away” occurs when a shopper loads a good into their pantry or refrigerator are we going to be able to break down the useless walls that separate both camps from increased success.
All too often logistics’ compensation is heavily weighted towards expense reduction. Marketing compensation is is heavily weighted towards sales. When compensation plans clash, so do the people. If logistics and marketing people are put into teams, it helps to align their compensation.
The tradition has been for logistics and marketing to be in separate silos. Breaking down the barriers, beginning the interaction and developing trust are huge hurdles to overcome. Not many organizations have committed themselves to overcoming the hurdles. Until they do, the adversarial relationships will continue, their consumers will not be served well and those consumers are fair game for other companies.
I almost had to laugh and most certainly smiled big. In my almost twenty years of working with retail logisticians this has been an underlying theme. The companies that have integrated the marketing ideas/suggestions into the mix have certainly reduced their cost of distribution and execute more efficiently. A perfect example: marketing comes up with an idea to perfect an existing product; they will add ten new flavors; now you have a strawberry, cherry, orange, kiwi, etc. All are different skus requiring special handling, storage, truck capacity and store shelf frontage. Wow, the cost of that product just skyrocketed…does that mean the margins are better? Usually not. The 80/20 rule usually exists. Another example: DVD and video distribution. The company designs the warehouse to automate the distribution process. Perfect! Until marketing decides to add stuffed animals, etc., to the package…making the multi-million dollar automation equipment a dinosaur! Definitely marketing should be integrated to all areas of the company and I see few companies taking advantage of this. An Opportunity? Yes!
Build me a team in Ryan’s larger Circle C
Where the focus is to achieve what can be.
Then charge everyone to use their brawn and brain
To meet all the needs of the Total Value Chain.
Give no preference to whom should get top tissue
Let everyone get paid the same on this key issue
And when all paychecks are opened for reward goals
Let everyone equally hear “For Whom The Bell Tolls.”
As a part-time college instructor in both marketing and logistics, I find it rather surprising that most companies have not figured out that these two areas are key to business success. One focuses on increasing sales while the other focuses on reducing costs. The combination of the two would be ideal. The inventory cost savings associated with a lower acquisition or operating cost can be highly leveraged–as Wal-Mart has done so successfully.
Logistics is supposed to get the right product at the right place at the right time…at the right price. Marketing is supposed to get the right product at the right place at the right time at the right price TO THE RIGHT CUSTOMER. What better way to do this than to work closely together?
When logistics and marketing are aligned, it is easier to ensure customer satisfaction and retention. Given the potential lifetime value of a customer, this is an ideal situation. However, I must agree with Camille Schuster that developing trust (between the two functions) is a huge hurdle to overcome.
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Whoever is at fault, it is becoming essential in the multi-channel, cross-channel environment that marketing and logistics get it together.
It is becoming essential for reasons of efficiency, productivity, inventory control, and of course, customer service.
In a cross-channel world, where customers expect to be able to shop, buy, pick up and return in any channel, a unified view of inventory and logistics–getting the product where it needs to be when it needs to be–will spell the difference between profit and loss, between success and failure.
Marketing and logistics still inhabit two separate universes. What’s changed is that we are know more aware that these universes intersect at a point. Think of the classic Venn diagram from your high school algebra textbook. Imagine marketing as Circle A and logistics as Circle B. There is an area C which marks the intersection of A and B. We call that area the store and Area C has grown to include basic warehouse functions like keeping the store in-stock.
The problem is that not enough marketers or logisticians understand the growth of Circle C. Too many marketers are only concerned with what happens at the points of shopper interface–the shelf, the display, the ad, in-store media, etc. At the same time too many logisticians measure success with essentially industrial tools–orders shipped, perfect orders, accuracy of delivery windows, warehouse put-aways, etc.
What has to happen is that both camps need to learn how to shrink their own circles and grow Circle C. Only when marketing grows to include supply chain considerations and when logistics understands that the real critical “put away” occurs when a shopper loads a good into their pantry or refrigerator are we going to be able to break down the useless walls that separate both camps from increased success.
All too often logistics’ compensation is heavily weighted towards expense reduction. Marketing compensation is is heavily weighted towards sales. When compensation plans clash, so do the people. If logistics and marketing people are put into teams, it helps to align their compensation.
The tradition has been for logistics and marketing to be in separate silos. Breaking down the barriers, beginning the interaction and developing trust are huge hurdles to overcome. Not many organizations have committed themselves to overcoming the hurdles. Until they do, the adversarial relationships will continue, their consumers will not be served well and those consumers are fair game for other companies.
I almost had to laugh and most certainly smiled big. In my almost twenty years of working with retail logisticians this has been an underlying theme. The companies that have integrated the marketing ideas/suggestions into the mix have certainly reduced their cost of distribution and execute more efficiently. A perfect example: marketing comes up with an idea to perfect an existing product; they will add ten new flavors; now you have a strawberry, cherry, orange, kiwi, etc. All are different skus requiring special handling, storage, truck capacity and store shelf frontage. Wow, the cost of that product just skyrocketed…does that mean the margins are better? Usually not. The 80/20 rule usually exists. Another example: DVD and video distribution. The company designs the warehouse to automate the distribution process. Perfect! Until marketing decides to add stuffed animals, etc., to the package…making the multi-million dollar automation equipment a dinosaur! Definitely marketing should be integrated to all areas of the company and I see few companies taking advantage of this. An Opportunity? Yes!
Build me a team in Ryan’s larger Circle C
Where the focus is to achieve what can be.
Then charge everyone to use their brawn and brain
To meet all the needs of the Total Value Chain.
Give no preference to whom should get top tissue
Let everyone get paid the same on this key issue
And when all paychecks are opened for reward goals
Let everyone equally hear “For Whom The Bell Tolls.”
As a part-time college instructor in both marketing and logistics, I find it rather surprising that most companies have not figured out that these two areas are key to business success. One focuses on increasing sales while the other focuses on reducing costs. The combination of the two would be ideal. The inventory cost savings associated with a lower acquisition or operating cost can be highly leveraged–as Wal-Mart has done so successfully.
Logistics is supposed to get the right product at the right place at the right time…at the right price. Marketing is supposed to get the right product at the right place at the right time at the right price TO THE RIGHT CUSTOMER. What better way to do this than to work closely together?
When logistics and marketing are aligned, it is easier to ensure customer satisfaction and retention. Given the potential lifetime value of a customer, this is an ideal situation. However, I must agree with Camille Schuster that developing trust (between the two functions) is a huge hurdle to overcome.