July 19, 2012

When Marketing and Supply Chain Fail to Communicate

by Nancy Appelquist, Director of Operations

It’s been said that communication is the glue that holds, well, pretty much everything together. It’s true in personal relationships. And it’s certainly true in business.

A friend of mine who works for a specialty gas company recently told me a story about a communication snafu that cost her company sales revenue and caused a great deal of embarrassment. The company had launched an aggressive new promotion that generated significant new sales, but once customers began placing orders, there wasn’t enough product in stock. Although a forecast for increased sales was generated for financial purposes, it was not communicated to inventory management. As a result, the product was in short supply and not placed properly to capitalize on all the increased sales the promotion had generated.

In a similar story, one of the nation’s largest office furniture manufacturers decided to source their raw materials from China—a brilliant idea and strategic decision made in supply chain to lower production costs. It was high fives all around until it became clear no one accounted for the lag in production resulting from longer lead times when shipping the components from overseas. Next thing they knew, inventory was dangerously low, many products were on backorder, and ultimately they lost sales. If only the marketing department had been clued in to the change, they could have ceased promotions temporarily—or better yet, proactively communicated with customers to prepare them for the delay.

These are classic examples of what can happen in any industry, any place, at any time. I've spent almost two decades working in supply chain and logistics, so I’ve witnessed the breakdowns from that vantage point; and I’ve witnessed them from a business development and marketing point of view as well. Generally there’s not one particular division to blame for a breakdown, just poor planning and poor communication. But the outcome is harsh: decreased sales, lost productivity, increased cost in transportation and raw materials, erosion in credibility; not to mention the emotional toll of frustration and negativity. It’s painful.

The food and agribusiness industry has one of the most complex value chains out there, so it’s even more important that the chain stays intact. Your marketing strategy may be solid, but if your business processes aren’t in sync with that strategy, you are doomed to fail. Conversely, you can run a tight ship when it comes to production and inventory, but if your marketing team doesn’t know how it works, they could be sabotaging your system without knowing it.

What is the cost of communication breakdowns? That’s almost impossible to calculate, but depending on the size of your organization, the cost could amount to millions. Hours of wasted time from drawn-out, unproductive meetings; costly mistakes because crucial information was not shared; redundancies because the right and left hand were unknowingly performing the same task. These costs are mostly hidden, but they make a direct strike at your bottom line.

Here are some important practices that will help keep the chain intact:

  • Make sure everyone has the same goal in mind. Make sure it centers on your customer. A common objective should be defined and agreed upon before work begins, no matter how big or small. Ultimately, meeting customer needs should be the focus, and you want every aspect of the process to support that. Otherwise you’re just making promises you can’t deliver.
     
  • Talk to each other regularly. You need solid communication processes. A common supply chain term is S&OP – Sales and Operations Planning. It’s the process of synchronizing what sales plans to sell and what supply chain and manufacturing need to do to make those sales happen. Schedule master production schedule meetings with all disciplines represented, timed accordingly with important milestones, and use that time to share mission-critical information. Face-to-face is ideal, but in the least conduct them by phone or video. This kind of interaction prompts discussion and serves as an excellent cross-check. You’d be amazed at what comes to light that your team wouldn’t think of otherwise. Provide reports on how sales are going. Share marketing strategies, and changes to pricing structure. Let supply chain report on trends and how production and distribution are coming along.

    You also need a fool-proof method for communicating changes outside of those meetings. If your culture is such that everyone operates in silos, then by nature information will not flow freely and critical updates will not be shared. It could be as simple as setting up an email distribution list that is tapped to share new information.
     
  • Take time to understand how you depend on each other. Each link along the chain plays a very integral role, and effective collaboration begins with knowing “who does what” and where there are interdependencies. A little cross-training can form a strong foundation for productive working relationships—conduct “supply chain 101” for the marketing division and the field, and vice versa.  For example, have your supply chain staff ride with sales reps and meet some customers to hear their perspective. This helps establish a mutual respect for what each function contributes to the chain. It helps you understand each other’s language, too, so you can decipher all the technical mumbo jumbo that creates communication barriers.
     
  • Put yourself in their shoes. We tend to make assumptions about what goes on “over there”—meaning, the mindset and activities of divisions outside your own. Perception is not always reality. Encourage your employees to try looking at a situation from the other’s perspective, as they might be surprised how their perspective changes. Perhaps it will show how any decision made causes a chain reaction as the process moves along the chain. You want your decisions to improve, not derail, the flow of progress.

When it comes to business development, Entira sees these internal processes as a make-or-break part of the equation. If there is a breakdown, the one who ultimately suffers is your customer. Backtracking with customers and repairing damage to your reputation can be immensely costly to you.

The bigger your company, the more challenging it can be to bridge these chasms, especially if these divisions are not physically located in the same geography. But it’s worth it to invest in the time necessary to communicate well so there are no catastrophic surprises.

Entira has helped companies think through the entire equation and connect the dots within the organization. We have a client who recently started marketing a new commodity, but the storage requirements were completely different than what they’d used for previous products. Visualizing the scenario from start-to-finish is what we do best at Entira, so we helped this company think ahead and make sure supply chain was part of the equation, not an afterthought.

If you would like to talk through your company's supply chain challenges, please contact Nancy Appelquist at 845.544.1985 or nappelquist@entira.net.