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Scenario:
To meet customer demands a company needs to maintain a significant
level of inventory. But, the cost of inventory deeply erodes company's
profits. On the other hand missing an order erodes company's future
profits, the forecasts are inaccurate and replenishment takes too
long. We are stuck between a rock and an abyss.
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Globalization
of products and service along with technology enhancement, has
resulted in increasingly dynamic markets and greater uncertainty
in customer demand. Difference in customer requirements across
different regions/countries may require different strategies or
different product designs, brands and packaging.
Supply chain management is the systemic, strategic coordination
of one or more downstream and upstream flow of products, services,
finances and information for the improving performance.
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The
phenomenon of supply chain has challenged the traditional way of
working with introduction of functional departments and division
of work. Supply
chain approach is to view the channel as a single entity, rather
than as a set of fragmented elements, each performing its own function.
Similar to other functions like procurement,
logistics, order fulfillment, Supply chain encompasses Marketing
too as a key function.
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Primary
objective of marketing function is creating avenues for exchanges,
costumer focus, customer satisfaction, products and service visibility,
revenue generation and maximizing profitability. On the other
hand Supply chain management's focus is coordination from suppliers
to customers for maximizing product availability, delivery performance,
order fulfillment, responsiveness to market demand while minimizing
the total cost of the process.
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Conflicts
arise between marketing and supply chain due to difference in
perspectives and focuses regarding department deliverables.
Marketing stresses on the revenue maximization
while supply chain works on cost minimization.
The main areas of conflict between marketing
and supply chain can be
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Control mechanism:
Who encompasses what process, Ownership
of functions and activities for better performance.
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Information and Data
availability: Data unavailability
restricts better control, hampers decision-making capability
and increase in conflicts.
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Risk Reduction:
Difference in Strategy definitions for
mitigation of risk by maximizing product inventory and inaccurate
forecasts.
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Situation and scenario
handling: Crisis situations and
event handling roles definitions undefined
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Failure mechanism:
Responsibility and ownership in case of
underachievement of targets and failure.
These conflicts are very common and widely
prevalent in the industry. In the cross functional environment,
if the situation is not controlled at the initial stages, it can
aggravate in to a fireball giving rise to chaos, buck passing
and loss to the company. The conflicts could be handled or rather
avoided by
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Integrated system:
Standardized IT system for data collection
and acquisition, for better visibility in the forecasts, customer
behavior and marketing effectiveness.
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Analytical tools:
Usage of analytical and scientific
tools for planning processes and policy decisions like Inventory
policy (finished goods and WIP), Forecasting models, Logistics
optimizations for maximizing product availability and minimizing
cost.
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Role
and Job definitions: Restructuring
of the process flows for control on activities of the entire
cross-functional areas. Performance linked job and role definitions
for process owners and teams.
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Alignment of KRA:
Linking of Key review areas and Key Performance
indicators of the marketing and supply chain functions for avoiding
conflicts. IT based Performance management for visibility and
faster corrective actions
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Strategy formulation:
Supply chain and marketing
to work together with Top management in all the strategy formulation
in order to achieve company goals.
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