In CSM strategy, supply chains are much more customer focused - they deliver great service at lower cost and a key ingredient of their success is strong collaboration between supply chain partners, as well as marketing group where all are focusing on the customer value proposition as explained in fig.
Otherwise, either excessive leftover inventory or stock-outs will result. Real time analysis of product demand can accelerate development efforts for refinement of product. Real time supply chain - marketing collaboration boosts and creates demand for new products. As customer data and information is shared with the supply chain partners, quality enhancements and product innovation process accelerates and time to market decreases drastically. A tight linkage between supply chain and marketing can improve the product strategy and overall decision making related to it.
In the past, firms have been able to survive with less than optimal supply chain and marketing integration. Most firms have taken the approach of optimizing SCM or marketing processes in isolation.
However greater integration is imperative. The drivers behind this integration needs are two fold. First is the intense pace of competition. This elevated pace of competition and ensuing risk stems from the second driver of SCM- marketing integration: customer demand. Customer demand generally falls into three categories: Customers want the most useful and beneficial product; they want it delivered at the lowest possible price in the shortest possible time; and they want it with the appropriate services and products to ensure the overall purchase successfully meets their needs.
This increased customer demands along with the rise of intense competition mandates the combination of SCM and marketing. To avoid costly scenarios of divergence of supply chain and marketing, firms are moving to integrate their supply chain and marketing activities. Not to do so invites risk. Pursued separately, supply chain management and marketing management can result in missed opportunities and poor performance.
Enterprises must build bridges between them. Supply chain -marketing integration enables the back end to profitably and efficiently deliver on what the front end promises. The fundamental task of any company executive is to increase the value of the enterprise by reducing cost and increasing revenue. To accomplish this goal, many companies have launched SCM initiatives to streamline production and delivery cost reduction and marketing initiatives to identify and optimize customer demand revenue generation.
Independent SCM and marketing initiatives have seen success. In doing so, supply chain management and marketing management can exploit their intrinsic interrelation and bring both to a new level of performance. In order to manage the increased demand caused by short-term marketing promotions, prior to implementation, companies must analyze promotion programs of marketing department and their effects across the entire supply chain partners.
Supply chain partners viz. For all this, better coordination is required between supply chain and marketing so that supply chain partners know the length and timing of the deal, and the volume change in purchasing. Supply chain partners also need to consider the cost impact of the deal on the supply chain. Costs will increase if the additional capacity required added equipment, assembly lines, or plants. Generally, trade deals are regionally based in which the discounted price is available only in a particular area.
This leads to redirecting materials by large retailers to the area where the deal does not exist. The outcome is supply chain strain in the area where the trade deal is running and excess inventory costs in the area where the deal in not running. Moreover, supply chains can benefit from planning deals and promotions to avoid an overlap in the timing of the activities, from better communication between supply chain and marketing to understand the volume impact of the deal.
In order to increase the product demand and reduce finished goods inventory, companies offer price discounts and trade deals to their customers.
These promotional activities create a significant impact on the supply chain as the increase in demand exceeds available inventory. However, the amplifications of the order sizes decrease along with the supply chain when discounts and trade deals eliminate.
Companies must consider the impact of deals and consumer promotions on the supply chain and evaluate the added supply chain costs.
Most firms have not always been as powerful when it comes to integration of supply chain and marketing management. The majorities of firms have seen supply chain as a supportive but separate function with no alignment with marketing and, in the best scenario; have worked on lowering logistics and distribution costs. All this indicates that the ability to converge supply chain delivery and marketing efforts through CSM strategy will become an increasingly important competitive factor. Overcoming the challenges to implement CSM strategy in a firm begins not with a huge business process overhaul or the creation of a new corporate structure.
Rather, it starts with the integration of key linkages between the supply and demand sides of the firm. By connecting and sharing collaboration-based information through effective implementation of CSM strategy, supply chain and marketing management functions can take several big first steps toward aligning themselves with overall business goals.
In order to apply CSM in a company there are both internal and external alignments to consider. Internal alignment focuses on putting together SCM and marketing efforts. Based on marketing and SCM a common demand chain strategy is created. To succeed with this new way of thinking and really achieve increased earnings through an even more effective flow of goods and services, it is vital that marketing skills, and supply chain management including production, inventory and logistics activities are all integrated.
Customer value is created through well planned, systematic use of market knowledge to shape flexible logistic and supply chain systems. The flow of goods and services must be adjusted constantly according to the development of the customers and the market. Conflicts between supply chain and marketing are very common and widely prevalent in the industry. In the cross functional environment, if such 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: 1. Integrated system: 1. Use of communication and information technology is vital in managing dynamic interface of various functions of the organization such as supply side and marketing.
Use of standardized IT system for data collection and acquisition, for better visibility in the forecasts, customer behavior and marketing effectiveness. Analytical tools: 1. Usage of analytical 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.
Extensive market research provides a constant stream of inputs into the product development process rather than discrete decisions in batches. Role and Job definitions: 1. 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. Locating various business functions in close proximity allows the various functions to coordinate and take joint decisions very quickly.
IT based performance management for visibility and faster corrective actions. Some companies have been wise enough to launch initiatives on both sides of the house — that is, in both supply chain management SCM and marketing management through CSM initiatives. It is relatively common to find discrete functional excellence in supply chain side by side with marketing.
In practice, few companies truly integrate the supply chain and marketing as envisaged by CSM. Table 2, below explains impact of CSM on supply chain and marketing initiatives. Decision making is based on 1. Decision making is based on a real time data that is batch wise and old consumer demand 2. Planning process is having 2. Planning process is flexible, fast and limit responsiveness with little responsive flexibility 3.
Is highly collaborative and integrated, 3. Limited collaboration and in nature with synchronized planning, visibility in supply chain manufacturing, distribution and replenishment The traditional marketing model The marketing model in CSM Strategy 1.
It is based on unrealistic 1. It is based on close integration with demand of delivery time and back end supply chain capability with product assortment improved on shelf availability 2. Is characterized by imprecise 2. Is characterized by quick response to short term and long term customer needs forecast 3.
It includes how the retailers select a target market, determine the appropriate retail format, and buisl sustainable competitive advantages. It includes: Defining the overall mission or purpose of the company Deciding on objectives that management wants to achieve Developing a plan to achieve these objectives The strategies will be implemented through pricing, promotion, and physical facility plans in order to accomplish the overall mission of the firm.
The mission of the business may be defined as the fundamental and unique purpose that sets a business apart from other firms of its type. It is a broad description of retailers objective and scope of the operations in terms of product, market and technology. The statement should embody the following elements The basic product or the service to be offered, the primary market or customer group to be served and the technology to be used in production or delivery.
The fundamental concern for the survival through sustained growth and profitability The public image to be sought The managerial philosophy in terms of basic philosophy, values, aspirations and philosophical priorities The self concept that people affiliated should have of the firm, which may include management style and work ethics.
After developing a mission and setting the objective, the next step in the strategic planning process is to conduct a situation audit, an analysis of the opportunities and threats in the retail environment and strengths and weaknesses of the retail business relative to its competitors. Elements in the situation analysis Market factors- size, growth, seasonality, business cycles Competitive factors- barriers of entry, competitive rivalry and bargaining power of vendors Environment factors- economic, social, technological and regulatory Analysis of strengths and weakness- it indicates how well the business can seize opportunities and avoid harm from threats in the environment.
Some issues to be considered in performing a strength and weakness analysis Management capabilities Financial resources Locations Operations Merchandise Store management Customer loyalty. After completing the situation audit, the next step is to identify the opportunities for increasing sales.
Growth strategies Entry strategies. The vertical axis indicates the synergies between the retailers present retail mix and retail mix of the growth opportunities. The horizontal axis indicates the synergies between the retailers present market and the retail mix of the growth opportunity. Market penetration It targets existing market segments with existing formats, seek a differential advantage over competition by a strong market presence that borders on saturation.
Market penetration is often used by retailers because it builds on the firm's existing strengths, which include knowledge of current customers and their preferences and the firm's familiarity with the merchandising lines. Such a strategy is designed to increase: 1 the number of customers 2 the quantity purchased by customers 3 purchase frequency. Increase the number of customers It is one way of increasing sales and profitability.
Adding stores and modifying in-store offerings can lead to more customers. The use of the retailing mix variables to ensure: 1. Extensive width and depth of consumer goods such as health and beauty aids and housewares. Aggregate convenience including location, parking, hours, and ease of purchase; features such as supermarket-like front ends, total merchandise display, wide aisles, easy-to-see-andlocate merchandise groups, shopping carts, and usually a single display floor.
Increase the quantity purchased Improving the store layout and merchandise presentation can help to create an atmosphere that is conducive to more spending. Encourage salespeople to cross-sell: Cross-selling involves salespeople from one department attempting to sell complementary merchandise from other departments to their customers For example, a salesperson who has just sold a pair of dress pants to a customer would take the customer to the shirt and tie area to sell the customer a shirt and tie that complements the pants.
What is the full form of VAT? Mail order retailing is the same as: a. Direct selling c. E-tailing b. In Home retailing d. Catalog retailing All of the following are types of non store retailing, except a. Catalog retailing c. Chain store b. Vending Machines d. Direct Mail Retail Management. Person to person interaction between a retailer and a prospective customer is: a. Direct marketing c. Direct selling b. Automatic selling d.
Buying service Independent retailers who use a central buying organization and joint promotional efforts are called a a. A retail firm owned by its customers in which members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends is called a a. The oldest and most heavily trafficked city area is called a. Central business district Category killers c. Variety stores d. Which of the following is not one of the four major decisions that must be made with regard to market logistics?
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