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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.

Turbulent times make B2B and Supply Managers more important in organizations

Think about it - if things are going smoothly in the environment like the economy is humming along, there is general peace where you conduct business and the weather is predictable you have steady demand for your products and services. On the supply side you can put together long term contracts, try Just in Time (JIT) and suppliers can drive down costs and bring steady improvements to quality. Generally, the sales forecast is working well and the sales people are making good commissions. Your internal operations are your only concern when you craft strategy.

But in turbulent times,such as these, both boundaries of the firm face uncertainties. On the supply side long term contracts are a "no-no" and on the demand side uncertainty in quantities and payment has your marketing severely challenged. You find that your boundary spanning managers (Supply chain managers and Marketing managers)  are the only ones who have been looking up (the supply managers) and down (your marketing and sales managers) your value chain. Suddenly, managers at both ends of your firm become much more important.

This was brought to sharp focus at the Keynote Session  of the 94th ISM conference,with ISM Chair Shelley Stewart where Christina De Luca   started off with a call to action by all supply managers as their work was "not good enough" for the times. Her somber example of the oil industry was powerful because while price dropped to half demand also dropped significantly, putting all calculations in jeopardy. The other panelists, including Lisa Martin  offered valuable tips to deal with this huge turbulence. The bottom line was that Supply Chain Managers suddenly find themselves center stage in their organizations and its a great time to step up.

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.

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.

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.

When Machiavelli and Plato collide- supported by Bill Gates- change and innovation may not be difficult !

Innovation and attendant change is difficult - for people are normally opposed to change.  Many people are resistant to change in even silly things like the cup we use for our  morning coffee ! In good or even in moderate times, leaders have a real tough time in promoting innovation and change. 

Machiavelli has a great quote on the difficulty that leaders face in facilitating change :

"And let it be noted that there is no more delicate matter to take in hand, nor more dangerous to conduct, nor more doubtful in its success, than to set up as the leader in the introduction of changes. For he who innovates will have for his enemies all those who are well off under the existing order of things, and only lukewarm supporters in those who might be better off under the new." (Machiavelli, Niccolò. [1513] 1992. The Prince. )

However, the current global financial crisis will make change and innovation easier for leaders  countries,companies and individuals.

Why ? Because as Plato said "Necessity is the mother of invention."  Sure, if there was a time that required change - it is this. Bill Gates seems to echo a similar view when he said that the pressures of the current crisis will mobilize the American innovative spirit and big things will happen.

Staying still is not really an option both for corporate leaders and entrepreneurs today.