Marketing Strategy: Supply Chain Management

I am trying to expand marketing as we know it. Since my proposal is, marketing as a strategy and customers are central to marketing, it directly impacted the way organisation look at strategies and types of deployment towards the customers we serve. One of the things i would like to touch is Supply Chain Management and Logistics Management.

This content is rather unique to be captured but i personally think it is relevant. In fact, assuming you have your Chief Marketing as the 2nd man, supply/logistic chain is a major concern. On the other hand, assuming you are your own boss, wouldn’t you be concern about these as well?

I am trying to rationalize marketing beyond advertising, sales or technology. Like i said in my Marketing Plan S6PEC, marketing is a strategy and a strategic business tool. And i am going to stick to that. I try to make this post light and yet meaningful. if you found this useful, let me know because i think it is timely to expand (rather change), marketing to broader understanding.

Logistics management is a subset of supply chain management. Whilst supply chain management focus on the overall integration of business functions and the supplies from suppliers to stores and customers, logistics management focus on how those items and data being transported and disseminated and support the overall supply chain management. Logistics management is key to supply chain management planning because it helps to determine the effectiveness and efficiency that effects the topline and bottomline of a business.

Supply Chain Mgmt Main Components

Definition of logistics management from Council of Supply Chain Professionals:

“Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”

One example is assuming an aluminum smeltering plant that is located at Sarawak. The suppliers or raw materials are located at Sabah. The question logistics management should as is “How do we transport those materials or supplies to the plant to be processed?”. Say we choose land transport, next we need to know is the cost effectiveness, time and also risk. Wouldn’t it be better if the smeltering plant is set up in Sabah instead? Probably.

On the same example, supply chain management questions would be, “how much of those materials do we need to buy from Sabah?”, “Is the raw materials can be found somewhere else that is much more convenient?”, “Does the quality meets the customer’s requirements?”

Definition of logistics management from Council of Supply Chain Professionals:

“Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.”

Second example is let say we managed to transport those items to Sarawak from Sabah using land transport, logistics management should ask how do we transport those items to the customers e.g. distributors. And assuming majority of our distributors are located in Pahang and some are importers from Taiwan. Logistics management then again has to rationalize the transportation plan to the distributors. Other than “physical transport”, logistics management also concerns about the infrastructures such as how information technology can assist all the information integration such as designs, shipment tracking, data processing vis-à-vis the orders from distributors, warehousing and also availability of such transport especially for an international operation. In some instances, logistics management also has to look into the security of the logistics.

Supply Chain Mgmt vs Logistics Chain Mgmt
Thoughtful and Well-Planned SCM and LCM helps to serve customers better and increase profitability.

On the same scenario, supply chain management will look into matters such as inventory, supplier’s contracts, product design, production sourcing and also pricing.

Unless the manufacturer works up to only distributors, logistics management has to also expand its planning up to reaching the actual consumers that consume or use the products. Nevertheless, in logistics management planning the manufacturer can decide whether to own the transport or outsource or partner with other companies to smoothen the operation.

Logistics provider such as 3PL (Third Party Logistic) partner e.g. UPS, Federal Express and DHL are good example how logistics management can be a separated altogether in a supply chain but pertinent to the overall supply chain planning.

I still believe that focusing on customers as main driver of profits and lever to increase business profitability will be here for the next 50 years or so. With current development in many emerging economies and BRIC, more and more customers will have the power to buy and make purchase decision. Furthermore, did you know that it’s only less than 50 years ago that women beginning to have purchasing power? What about teens now? Where they have higher disposable income from their parents? These are customers. And yes, they are multi-segments and ultra fragmented.