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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 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.

Closing Newspapers changing Ad World

I have found myself not signing up for subscriptions renewals for magazines and papers I love even when the rates are really cheap ( some as low as  10$/year promotional rate). It's simply that I can't find the physical magazine or paper when I need to find it. On the other hand, I can always find the same thing online- pretty easily.

Some time ago I had asked a Wall Street Journal subscription person if I could get only the online version, no - I was told because they need to sell the paper version to show the official "circulation" numbers. I guess - this was one of the drivers that drove the Newspaper business to the ground. Every region has its beloved paper going out of business. The Rocky Mountain News is one such example, closed just short of a 150 year run. How very avoidable!

Some reports suggest that Newspapers lost out to free online advertising on Craigslist. They also suggest that a slow move to "online" editions that were free ( like New York Times - now ) is another reason. I guess Newspapers did not understand the changing business they were in. The "news" business has been changing radically with the Internet and you can choose exactly what news you want to hear,read and see. Online Ad delivery systems like Google AdWords then appear with very relevant ads when you look at a particular news item online. The advertiser does not pay unless a reader actually clicks through. Sales results for Ad spending have become increasingly important- particularly in this tight economy and here again paper editions can't compete.

Should the print media be looking at "what business are we in" ? The perennial marketing question made famous by Theodore Levitt in 1960 in the Marketing Myopia  ....

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.

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!

Why Search Advertising like Google AdWords should work better in tough times

In tough times like these, Ad budgets tend to get cut across  swathes of industries and company sizes. "Tough times get the tough going," is the old adage- so what can tough advertisers do?  Some money on search advertising  may be a good bet.

 As David Ogilvy said “Ninety-nine percent of advertising doesn't sell much of anything,” and Ogilvy was referring to traditional advertising like TV, print,bill boards and so on. Traditional advertising  identifies target markets  and then follows a media plan that matches media to target market. Beer ads during the Super Bowl is a good example where the target audience and product match and sales spikes occur. However, other than Super Bowl where people actually watch the ads we have TiVo, channel flipping that really diminishes "push" traditional advertising.

Things change during Internet searches, you are no longer sitting in front of the TV passively but actively looking for specific stuff. At  this point you will click through on ads that are directly relevant to whatever your search is. The technique of writing effective Internet search ads is tough business - if you want to precisely match your ad to what an individual may be looking for. Search Ads like Google AdWords , Yahoo Search Marketing or Microsoft Search advertising typically charge the advertiser when someone actually clicks the Ad.

Imagine only paying for those prospects who saw your TV or print ad !  The Internet allows two way communication and is much more effective than an expensive   1800 number on TV when you want a prospect to contact you and you want "action." In these difficult times, you need to get "action" from customers and do so with cut Ad budgets. Trying search advertising may not be a bad idea.....

In fact, my students in my B2B Class at University of New Haven  are trying just that , as part of the Google Online Marketing Challenge. Will report more on this as things develop....

Towards global B-to-B trust and transparency in 2009

2008 has been a watershed year in many ways and everyone is talking about 2009 with hopes of better times.

There is one theme that should become important in 2009 given the learning from the Mortgage Crisis, Auto bailout and resulting  union supplier competitor unity and the Madoff scandal. And that is more trust and transparency that would have to be re-built from the ground up.

We should see more online transactions and use of the Internet both by businesses and also consumers as with the recent zoom in Amazon sales. When transactions are digital and open to scrutiny by those concerned on a real time basis- there is a real shot for everyone concerned- to chime in with comments and concerns- in time. So as more systems go online there will be more integration both for the sake of reducing costs and improving efficiency but also bringing real time trust and transparency in dealings.

Wishing readers a Very Happy and Prosperous 2009 !

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.