“Manufacturing, Meet Marketing"
By merging your front office with the back office, you can reduce inventory, increase throughput, streamline logistics and improve customer service.
by Allen Delattre and David Cooper, Accenture
Darwin would be shocked. For much of the 1990s, his vaunted theory of Natural Selection failed to apply. Sure, the fittest companies thrived; but so did weaker ones. In effect, the world's love affair with technology created a bull market of such magnitude that the strong and the weak not only survived, but thrived.
Of course, things are getting back to normal now and under-performing companies are dropping like flies. Particularly the dot-coms that never had good fundamentals in the first place. But now that the Darwinian theory is back in force, an interesting dichotomy has become evident. Clearly, technology helped create the business boom of the mid- to late-1990s. But because the rising tide lifted all boats, a great many companies weren't sufficiently compelled to leverage technology to operate more efficiently or compete more effectively.
One of the starkest examples is the still-shaky link that exists between most companies' manufacturing functions and their marketing operations. The potential of these alliances is awesome: from more accurate forecasting and demand management to more streamlined manufacturing processes and leaner inventories. But, so far, it's not really happening. How come?
Interestingly, it's not really a technology issue in the strictest sense. After all, most companies have implemented the IT capabilities that manufacturing and marketing need to create a more intimate relationship. Some of those "core ingredients" include:
• ERP systems: uniform technology infrastructures for the accumulation and exchange of intra-enterprise business information.
• Electronic communications (a.k.a., the Internet): conduits for information exchange among suppliers, manufacturers, business partners, supply chain service providers, retailers and customers.
• Data warehousing/management technologies: repositories for large quantities of leverageable customer information.
• Customer relationship management (CRM) systems: focused applications for extending customer insight and illuminating customer opportunity.
The hang-up seems to stem somewhat from low systems integration priorities (not hooking the aforementioned technologies together or linking them with existing business processes), but more from a process-related failure to create collaborative, integrated operations. In a manufacturing/marketing context, this disconnect contributes to a host of uncomfortable maladies: bloated component inventories and safety stocks, clumsy JIT, back-ups at the dock, excessive cycle times, ineffective pricing approaches, non-existent customer-segmentation strategies, an inability to configure products to order, and poorly orchestrated line-changeovers. All these things are the result of a too-loose relationship between what you're making and your understanding of what customers want and when they want it.
On the other hand, a tight linkage between marketing and manufacturing tells you where the value-added opportunities are. It ensures that the right manufacturing capabilities are available to meet customer requirements, and that near- and long-term demand has been considered in the formation of manufacturing plans, inventory strategies and material handling practices. Leading-edge capabilities such as configure-to-order, custom delivery, short or single-unit manufacturing runs and shipments, and on-line ordering all are a function of tight manufacturing/marketing linkages.
What marketing knows
These alliances must begin at product design/conception stage, when marketing (whose job it is to monitor and stimulate demand) shares its insights with the company's design and manufacturing constituents. In an enlightened organization, this coming together may produce a bona fide "product team" that remains in force as long as the product lives. That team will determine if the (eventual) product can be manufactured cost-competitively within the time window marketing requires. It also will work to avoid demand spikes that force manufacturing, production planning, procurement, order management and even logistics into reactive modes that are costly and uncoordinated. Toward the end of the product's life, they also will help avoid the same problem happening in reverse: product phase-outs planned by marketing that are not shared, thereby resulting in scrapped production plans and excess inventories.
Manufacturing and marketing teams also will see to it that packaging and product-sizing conflicts are reconciled at design time. After all, marketing is principally interested in surface area for graphics and display, while logistics wants compactness, "nestability" and "stackability." Somewhere in the middle is a decision that manufacturing must be comfortable with. The bottom line is that a manufacturing/marketing alliance speaks to both ends (as well as the middle) of the product lifecycle: tight coordination of product phase-ins and phase-outs with (ideally) no loss of volume or continuity, or hitches in lead time.
All these elements fit neatly into a football analogy that you're welcome to use at the next sales meeting: Throughout the week, each team works on a general game plan that considers its strengths and limitations, and what it knows about the opposition. But during the game, the players huddle together to create specific plans of action based on a constantly changing array of shorter-term objectives and constraints. The strategy doesn't change but the tactics must.
Next, when the offense reaches the line of scrimmage, an audible might be called if last-minute shifts are detected in the landscape. Ultimately, the winner is the team that combines superior ability with a talent for constantly repositioning itself according to shifting opportunities, recently revealed weaknesses in the competition, changing field conditions, and evolving objectives.
But what makes it all possible is the constant availability of information and the ability to communicate effectively in real time.
Go where the action is
If you'd like a quick snapshot of how well manufacturing and marketing work together in your company, try visiting your line supervisor at 2 a.m. on a weekend. Chances are good that he's working off a plan, and that the parts he needs to build his product are on hand. But what does he know about the customers for whom those products are destined? Could he make effective re-prioritization decisions if he had to? Could he gauge the impact of those decisions on customers, manufacturing costs and profit margins?
Chances are, that in a company with good manufacturing/marketing synergy, your graveyard shift supervisors will have that information at their fingertips. Maybe it will be in the form of a packaged application that helps companies perform assembly sequencing and scheduling, stage "what-if" scenarios, disaggregate forecasts, consolidate customer orders, monitor material availability, and develop capacity-feasible manufacturing plans.
What it all comes down to is integrating front office with back office, and thereby ensuring the survival of your species by reducing inventory levels, increasing manufacturing throughput, deploying factory personnel more efficiently, streamlining logistics operations and improving customer service.
About the authors
As an associate partner with Accenture, Allen Delattre oversees the firm's supply chain work in the electronics and high-tech industry in the western United States. He also works extensively on startup, acquisition and new venture programs. Delattre holds an M.S. in mechanical engineering and applied physics from the University of Rochester.
As a partner with Accenture, Dave Cooper oversees the firm's supply chain work in the electronics and high-tech industry in the southern United States. He also works extensively in manufacturing strategy, operations and outsourcing. Cooper holds an M.S. in finance and management science from Virginia Tech.
Visit Accenture on the Web at www.accenture.com.