Marketing and supply chain management are integrated fields. A harmony between the two is essential because it helps the organization pack a powerful punch and attain the results they desire.
For all the professionals involved in marketing and supply chain management, it is important to understand the key relationships between the two fields. Supply chain logistics and marketing are deeply interconnected and understanding their dynamics is essential for the organization and all the individuals belonging to these fields.
There are 3 key relationships between marketing and supply chain management. Understanding these will help unify efforts and decisions together and achieve higher yields. However, a lack of understanding of these intricate and interconnect relationships can trigger dysfunction and even disaster.
Do you know how? The fact is that when marketing and supply chain management departments perform disjointedly, they end up pursuing different internal goals. You can imagine how vastly different and unrewarding the end results will be.
Before we begin understanding the three key relationships, let’s understand the definition of the two business functions first.
Supply Chain Management
This business function is primarily a network of individuals who carry out the production and distribution of the goods and services. SCM undertakes responsibility of a multitude of activities, resources, information, entities and people.
The SCM department of a company conducts all activities concerning the planning and management of procurement, sourcing, logistics and conversion. Furthermore, it also facilitates the collaboration and coordination between suppliers and channel partners, customers, third-party providers and intermediaries.
Marketing on the other hand, is the set of processes, activities, and institutions etc. that create, communicate, deliver and exchange offerings. All of these elements provide value for clients, customers, partners and the whole society.
The 3 Key Relationships
Marketing Facilitates Procurement and Sourcing for SCM
A company’s products and services can stand out in a crowd based on quality. This is especially visible in highly competitive market environments, where the level of trust customers have in a company plays the most crucial role.
If customers trust the qualitative standards of a brand, it will keep them coming back for more. Take Starbucks, for example. Customers regard the level of quality of this brand higher than other coffee brands.
Perhaps it is the fact that the brand sources their coffee beans from three top growing regions of the world very precisely, is the key to success. The consistency in quality is what builds the customers’ trust. This also proves how critical procurement and sourcing are for sealing the high quality and reputation of a company.
This is where the relationship between marketers and SCM professionals comes into play. Marketers have to craft their advertisement messages that clearly communicate they want high quality materials. They formulate marketing strategies that pertain to their target market.
SCM personnel too, bear the responsibility of communicating with marketing to ensure the right production of products. They also must ensure through communication that marketers are sending out the right messages.
If marketers send messages that align with the capabilities of a company’s SCM, it sends out the right information to customers. This in turn builds their trust when they have accurate and complete knowledge of the company’s processes.
Promoting without Stockouts
Marketers use discounts and advertisements to promote products and achieve increased sales successfully most of the times. However, often the possibility of stockouts increases with increased sales, a situation where the entire inventory goes out of stock.
This may sound like a profitable thing to people but the truth is that stockouts are a terrible thing to happen for SCM. Stockouts cause customers to lose interest in the brand if they know they will hardly ever find things in their store when they need it.
Consequentially, it leads the customers to developing alternative shopping habits at other competitor locations. This could be the worst fate for a business and SCM and marketing teams must have a powerful collaboration to prevent it.
Thus, for the mission of preventing stockouts while promoting products, marketers need to develop strong relationships and communication with SC managers. Together, the marketing and SCM experts can develop strategies and measures to prevent stockouts. Some of these joint measures could be as follows:
- Safety stock utilizations
- Forecasting accuracy
- Boosting logistics capabilities of fast resupply
Relationship between Demand and Supply
Although a basic concept, the relationship between demand and supply is the most powerful concept for companies. In fact, it wouldn’t be wrong to say that the entire free market economy bases upon demand and supply.
Here is where the most powerful relationship between SCM and marketing comes into existence. The SCM personnel oversee the supply side of the business. These include vital processes like distribution, inventorying, logistics, procurement and sourcing etc.
On the other hand, the marketing department oversees the demand side of the business. This includes vital functions like sales, advertising, customer feedback and differentiation etc. They use tools like focus groups and surveys for these.
A deep relationship and harmony between these two components help a business maintain effective supply of the goods that its marketers promoted. In short, we can say that marketing is the process of recognizing the needs of the customers. SCM on the other hand, is the process of delivering the same needs of the customers.
At face value, this is broadest definition one can give of the relationship between SCM and marketing. In essence though, the relationship is far more complex and detailed.
Marketing and supply chain management has more than one connection. There are several kinds of relationships these two vital business functions or components have. In summary, it would be right to say that SCM integrates the process of demand and supply across and inside companies.
There exist collaborative relationships between the two: supply chain partners must largely contribute to the satisfaction levels of customers. This is necessary if a company wishes to become the preferred choice of the masses. Marketing on the other hand, must provide information on product prices, availability, incentives, order tracking, sales information and advertising campaigns.