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Five Differences between B2B marketing and supply chain managers

Here are five differences between B2B marketing and sales managers and supply chain managers as a sort of continuation of my earlier post:

1. Marketing managers being outward facing are constantly looking for opportunities sometimes without regard to what their organization can really do. Supply Chain managers first look inside before looking outside at suppliers - to ensure a good fit.

2. Marketing and Sales managers are more social compared to Supply Chain Managers who are more conservative. The former do the chasing of prospects while the latter need to stave off marketing people who are the firm's upstream suppliers.

3. Marketing and Sales people are measured by sales (volume and price) while Supply Managers are assessed first on availability of goods and services required by the firm,  then on cost.

4. Marketing managers work on an open canvas of the market and prospective customers and use techniques like segmentation,targeting,market research and the 4 P's. Supply Chain managers also have an open canvas of suppliers but they need to make supplies work in their firms value add process- any snags and they are in the direct line of fire! Supply managers are therefore much more risk averse and deliberative.

5. On a more fun and more social note you'll find many more marketing groups on the web and off it than supply chain managers. And when it comes to professional meetings marketing people may have extremes of no food to open bar at a high price ticket. Supply chain meetings will stay steady with modest burgers, pizza, strict cash bars, and a predictable member fee.

Organizations need to understand and mobilize the strengths and traits of these quarter backs of the firm as they grapple with global supply chains at the back end and global markets on the front end.

Input-process-output and the supply-firm-marketing chain

The input-process-output (see ICT model) is a way of looking at the firm's value chain. Supply managers handle the input coming in and the marketing folks handle the output coming out.

Like:                  

   global suppliers ->supply chain->[firm-]->marketing->global customers

Supply and Marketing folks are people who sit at either end of the firm and look at the world outside in the firm's value chain. The marketing manager reaches out to customers and supply chain managers reaches out to suppliers and also need to reach "in"to internal firm users.Both off course don't formally talk to one another - organizations are not set up to encourage the talking.  Unless there are operations review meetings, that can become mindless and boring. ERP systems can help but ERP speaks to only data and not the gut feel of these important folks.

If you look at the firm as just a processor - focused on creating superior value for its customers-you start realizing how much firms miss out in tapping on to the combined knowledge and expertise of their input and output side teams.

Complexity in the supply chain and assortment in distribution - reason for auto dealer woes ?

A Chrysler dealer providing testimony to the Senate Committee  reminded me what complexity does to not only the upstream supply chain but really makes things difficult to manage in the downstream distribution channel.Supply chain complexity (too many suppliers, too many different parts, too many color options) is a nightmare for supply chain managers and supply managers spend a lot of efffort in trying to consolidate supplies and suppliers.

On the customer side of a business though, marketing managers love offering something to every segment of the market. All the offerings on the market side are called "assortment." Businesses start  a new product line based on good market prospects. The distribution side then builds up with more dealers,more marketing and service support,service training,aftermarket spare parts and so on. Unfortunately, there is no manager standing in the showroom end and looking backward at all this "complexity" - at the showroom managers are happily showing the assortment to prospects !

Closing product lines or product deletion is a complex activity, that does not bring glory to the marketing manager. Consequently, it does'nt get done till there is a crisis as currently, as  in US Auto.

Procurement Reform bill becomes law and Memorial Day

Today is Memorial Day  and it is significant that President Obama and Congress strove to get the Procurement Reform Act ( officially  the Weapon Systems Acquisition Reform Act of 2009 ) passed before Memorial Day.

The defense industry and supply chain is remarkably "production" oriented. The focus is passively on what the Government  wants rather than proactively understanding the changing needs of  combat in different theaters. To quote:

 “By and large the government gets what it wants, when it wants it, for the price it’s wiling to     pay,” said Alan Chvotkin, executive vice president and counsel at the Professional Services  Council, who spoke this week at a panel discussion about the federal acquisition workforce. However, he said the procurement system still has room for improvements.

At the same discussion, Steven Schooner, an associate law professor and co-director of the Government Procurement Law Program at George Washington University, pointed out the Obama administration views contractors as lining their pockets at the taxpayers’ expense. Schooner said the president, Congress and the news media can’t treat contractors as pariahs because the government can’t operate without contractors’ support."

The intense public scrutiny of defense contracting results in contractors being treated as pariahs,as Schooner says. Consequently, mindless and irrelevant projects take a life of their own while combat troops have changing needs on the ground.Choosing and changing projects quickly is a top requirement in today's globalized world.

Let us hope, that efficiency and communication in the supply chain, right to the brave soldier whether in Afghanistan or South Korea,improves with the Procurement Reform Bill.

New Business Model for Music Industry needs new ways of capturing value

First record stores were closing in the US as everyone wanted to download music.The record stores were affected as distribution moved online with iTunes selling millions of downloads. The music recording industry was kind of okay with this as they still had a method of capturing value or monetizing their efforts of promoting artists and marketing music. But that was in the US.

It turns out that in China most music ( over 99%) is simply acquired free ,violating copyright laws and disabling the music industry from capturing value. Google in China is offering free music downloads and hoping that AdWords will help capture some tiny piece of value through ad revenues. This ad revenue will be shared by the music industry and Google. In other words, music companies have given up on trying to implement the US business model in China.

Musicians and artists I suppose love all of this as their music gets exposure and anyway they did not make big money in the traditional model where record companies,distributors and retailers made most of the margins and customers had to pay. This industry is sort of different because the musicians work primarily on the premise of "live to work" rather than "work to live" in sectors like banking and auto which seems to be having trouble in recent times.In fact,bankers are leaving banking (they don't love banking ?) given the cut back on bonuses.

The restructuring of the music industry in China  should spread to the US in due course and dis-intermediation of the distribution channels and record companies will create interesting opportunities. You can be sure that musicians and artists will proliferate and new ways of "capturing" value will have to be built.

The G-20 meeting and global supply chains

World leaders are gathering at the G-20 meet in London to find common approaches to deal with the global financial crisis. Let's hope that there is some solid movement forward despite some concerns with more bailouts by France and Germany. A quick ,common and global approach is imperative to bring some measure of stability to global supply chains.For supply chains run on flow of money,goods and services and information. Both money and goods and services are not flowing well and the recession is fueling unrest in the developed world raising risks in parts of supply chains - not used to risks.You load a truck with goods in Western Europe and expect it to reach and don't need to have contingencies in place as in many developing markets.

A positive aspect in all of the current situation is that today there is instant global information flow and media coverage - and this should help resolve the crisis at multiple levels including at the G-20.

The Stimulus Package, Recovery and Diffusion of Innovations

Innovation is about change, change in a product, in a service or process. However, no matter how appropriate the innovation is it takes an understanding of innovation diffusion to get the target market to adopt it.

The stimulus package is an innovation to deal with the recession and hopefully most pieces will work. The "diffusion" of each initiative will take time.And every time you get stuck in traffic because of lanes closed due to repair think positive ! Maybe it's the stimulus package making its way to your town or commute....

Local Governments should consider  putting  up signs at construction locations that are funded by the stimulus - so that drivers feel more upbeat as they get through traffic congestion.

Some visible and physical signs will also start reducing the fear that people feel in a recession.

Supply Chains and Distribution Channels (B2B) really don't talk to each other

The recent IBM Study points out that visibility and risk are important concerns of supply chain managers. The summary of the report  suggests that companies seem to be more in touch with their suppliers than their customers when it comes to aligning supply with demand. More bluntly the buy side and the sell side have little clue about what's developing on either side of the firm's value chain.

The stark differences in orientation,training and lack of communication between the market end of a company (the B2B end or distribution end) and its back end supply chain function is intriguing. There was a time when these functions were combined together as a "commercial" function which went out of fashion in the late eighties and business school academia,consulting companies and companies themselves pigeon holed sales, marketing and distribution in one bunch and the the supply chain,materials,logistics and procurement as another bunch of functions. If the CEO did'nt actively promote the communication and co-operation between these functions - you landed up with things like the mortgage mess. Those coming up with derivatives never really needed to understand the different types of mortgages that were actually being given out.

ERP systems and particularly Web 2.0 applications will hopefully help better co-ordination in organizations and till they  kick in - some old fashioned "talking" between the marketing and supply functions should help keep the value chain straight.

Banks must start lending for supply chains and B2B to work

Supply Chains and B2B is about the flow of goods and services across links of the value chain. Three components that make up this flow is the actual good or service, information about demand and supply at various points of the value chain and money that moves from B2B in reverse. The money pays for the variable costs (like direct raw material) and other fixed costs like salaries, rent etc.

Normally payments take 30 days or more to materialize and in the meanwhile businesses work on bank credit for working capital. With payment uncertainty from the customer businesses must be able to borrow if the economy is to move. This is not happening and Banks are acting "once bitten twice shy". The US Fed is also reluctant to intervene. 

Unless Banks loosen up and loosen up fast, this downward spiral will continue.

Auto Industry Bailout next week ?

This blog discussed over two years ago how the US Auto industry has been ignoring the very research they funded and supported for decades.  These studies had clearly identified better supplier relations,more innovation and customer focus  as priority areas. Just handing out money is probably not going to change things  with the auto industry  leadership at Detroit. When they have successfully ignored consultants,researchers and professors for decades, it seems very unlikely that mere exhortations with bailout money will work.  In fact, unless there are decisive management changes, it is very unlikely that entrenched managers would change their ways.

Estimates of job losses in the upstream supply chain and the downstream distribution (dealer) channel are so immense that some solution must be found. When managers and company leaders neither manage nor lead-  they can bring ruin to their entire value chain partners and associated  stakeholders. In the auto industry that number could be as high as three million jobs lost. Clearly,  just too much is at stake.