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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.

The Stimulus and Procurement Reform

Ever since the stimulus package was announced I have been asking friends in the supply chain community as to whether the stimulus package will create new jobs in supply chain and procurement. Logically if you are sourcing stuff, you need managers to both buy (supply chain) and sell (B2B).There were two opinions on this - one was that you can always get contractors to do more if you have a rate contract already set-up. The other opinion was that many local governments will ask for fresh bids . In fact, asking for fresh bids  could really cut down supplier quotes by as much as 45% , given the slow economy. This could in turn free up money for additional projects.

Yesterday, President Obama talked about bi-partisan  procurement reform primarily for the Department of Defense. Any reform means more work for supply chain and procurement management professionals and more jobs for for both B2B marketers and supply managers. Good news as far as this blog is concerned !

Managing outsourcing - in tough times upcoming ISM Workshop

I am scheduled to speak at the 94th ISM conference on Monday, May 4 and the brief of the talk entitled " You have a  Great Global Outsourcing Contract- Now What? - Managing Transition Issues in Global Outsourcing" posted on the Institute for Supply Management website  is here.

As markets slow down cost cutting through outsourcing continues to be a priority in organizations. Both outsourcers and providers need to do a better job in managing outsourcing transitions so that innovation is accelerated and everyone emerges stronger from the recession.

I am also planning to add some ideas to my presentation about dealing with existing contracts so that innovation is "retrofitted" to existing relationships. Crucial for these tough times.

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.

Managing risks, actuaries and lessons from AIG- where was the human factor?

Actuarial sciences are primarily mathematical and depend on past data. Since there was no past data the risk of insuring the mortgage-backed securities was underestimated. AIG insured banks for the securities they bought and these debt swaps were an unknown collection of mortgages- some of whom were simply bad loans.

It is not yet clear as to what happened to the human factor in all of this. Maybe the insurance piece was handled from London and there was no real understanding of what was happening on the ground in the US as AIG went on taking on balooning risks. For example, several years ago someone mentioned about a real estate agent he knew who just collected her 6% commission on a home sale being totally uncertain as to how the buyer was going to pay the mortgage. This kind of information was available and discussed accross communities in America as the AIG crisis was building up.

The buyer,seller, real estate agents, real estate closing lawyer, the bank's lawyer in every now defaulting loan closing day would have had a sense of the dubious nature of the loan. Why did not the risk guys at AIG pick it up? Or did they -and nobody listened? 

Banks know that there is risk  and that is why they buy insurance and that is why AIG is paying up and US tax payers have to foot the bill of this now enormous risk.

Going forward, business will have to re-examine their methods of gathering not just past data but new data that is readily available but in this case had not been built into the actuarial models. Raw numbers and technology cannot replace the human factor where human, qualitative real time input must be sought from the ground to get a better sense of the real risks.

From Culture's Consequences to "Project Match" - IBM needs to add home country fixed costs

IBM has come up with a rather controversial "Project Match" offer for laid off employees to work in "growth" markets in India, Nigeria, Eastern Europe etc. IBM is telling its laid off employees to look at opportunities in the IBM subsidiaries where the local market is growing. The catch is that you get paid the local salary which might be just 20% of the current home salary.

If your job is outsourced then the logic seems to be to  move you to the "source".

While IBM's idea seems blasphemous to a high cost country employee- it tells us something about the full circle that globalization has come to. In the 1980's IBM was perplexed as to why various subsidiaries understood and implemented "central commands" so differently. So the now famous Geert Hofstede was commissioned to figure out why this was so. Hofstede came up with culture's consequences and changed the way we look at national culture and its impact on work at subsidiaries of an MNC.

Today, what would a laid off IBM-US employee do with his/her kids college expenses and 401K and mortgage  if they took a job at 20% salary ? IBM and other multinationals need to look at the possibility of covering some of these "fixed" costs if the idea is to work.

But if you have an expat offer (which takes care of these costs) and have not yet been laid off - this is the time to take it up!

What can suppliers learn from job seekers and job keepers ? Understanding "value" contribution

Given the economic slowdown the media is full of advice and tips for individual job seekers  as well as "job keepers". 

Just like individuals, suppliers in all value chains (everyone is a supplier- remember!) need to examine if they can keep their "job" with existing clients and seek "new" clients. The key question to answer here is what exact value you provide to your supplier's business. Research has shown that, at least in good times, suppliers become complacent and even arrogant.  For example,with brisk business, suppliers would not even consider delivery and would like the customer to "pick-up".  Naturally, with such an attitude you are completely clueless about what exact value you provide to your customer.

Just trying to understand what exact value your business  brings  to your customer's business is a worthwhile activity in such slow times. Very similar to individuals taking time to educate themselves and become more competent in the job market.

Outsourcing and innovation - Hackett Study and NESCON Workshop

Apparently there is a new study  by the  Hackett Group that finds that while Business Process Outsourcing (BPO) is on the rise because of cost savings , outsourcing executives are generally unhappy with the innovation by suppliers. I will address some of these challenges in an upcoming talk at NESCON.

Here is the summary of the upcoming talk on October 6, 2008 at Marlborough MA.

Your organization has crunched all the numbers and evaluated offers and signed the global outsourcing contract. You are rather pleased with your efforts including involving your internal users in the RFP, perhaps organizing a great global reverse auction and concluding some great win-win supplier negotiations. Your CFO and CEO are delighted with the projected savings that will come from executing the global outsourcing contract. In fact your CEO (followed by your HR) proudly mentioned that all displaced employees might be possibly absorbed in other parts of the US organization, avoiding layoffs.  This would be possible as global outsourcing will reduce costs and many more new product development and innovation projects might be speeded up –substantially. More and speedily developed new products for global markets would actually mean more jobs in the US organization! You knew that global supply chains were the way to go….

Two years down the line you find that the envisaged contract volumes have not emerged. The suppliers are complaining, your internal organization had changed with the outsourcing contract, and it’s difficult to find the people who knew what was going on in the first place.  The global innovation engine is moving much slower than expected.

Check out the program here. Should have some interesting feedback.

How do you green the upstream supply chain ?

Recently there is a great deal of discussion about sustainability and the importance of going green with the supply chain. For example, SCDigest has a great summary of the recent McKinsey report that mentions that 80% of the carbon footprint for many companies comes from the upstream supply chain. Also, there was a Zurich summit in February that tried to put arms around greening logistics and transportation.

The question  is, how do you action some of these genuine concerns in the running of your upstream supply chain? For starters, just asking suppliers by way of introducing a clause in RFP's would help, straight away. Many suppliers would tell you that small lot orders  on a part-truck basis or by urgent airfreight simply add to the carbon footprint. Similarly rationalizing secondary packaging could go a long way in both reducing cost and improving the environment. "Green metrics" very similar to calorific values of foods would make decisions easy to make. The IT industry is attempting to do this, more traditional businesses need to follow suit in obvious,somewhat routine subjects  like a defining a "Green" RFP clause, coming up with a "Green Transportation metric" and reviewing secondary packaging "green" options.