How The Marketing Supply Chain May Become More Efficient Than Its Manufacturing Counterpart

One of the DAM News featured vendors, ADAM have an article by a guest author, David Dodd, Streamlining the Marketing Materials Supply Chain:

…the marketing materials supply chain is a large, and largely untapped, source of cost savings and revenue-enhancing improvements. In most companies, the supply chain for marketing materials is fragmented and filled with manual, inefficient processes that result in excessive costs and a lack of both responsiveness and reliability. If not completely broken, many supply chains are dysfunctional and in serious need of improvement.” [Read More]

The key theme of the piece is that marketing materials supply chain are currently inefficient and represent an opportunity for marketing executives to save costs.  The article is mainly concerned with marketing materials where some physical item like print collateral or promotional merchandise is produced.

If you are from a marketing background, you might not be that familiar with Supply Chain Management.  The term is more commonly associated with manufacturing and the basics are that in originating products for use by your customers, the raw materials and services that make them up will go through various processes and potentially numerous suppliers.  The theory is that if the supply chain is coordinated and in alignment then it is possible to speed up the process, reduce mistakes and save costs as a result.  By having visibility of each stage, you can see what is causing a bottleneck and make adjustments to optimise the whole chain.  One of the seminal textbooks on the subject is called The Goal by Eliyahu Goldratt which is presented as a kind of ‘business novel’ where the protagonist runs a factory in his home town which is threatened with closure unless it becomes more efficient and stops losing money (it’s a more entertaining read than that summary suggests but still maybe not one for your holiday).

This subject has been hanging around in MRM and DAM for a decade or so now.  The rise of DAM especially has given many marketing departments a central hub where users of their assets are likely to congregate, firstly to access media assets and then to do more with them.  There is a definite interest in the marketing ‘one stop shop’ where staff can arrive at some central portal, download media, order physical marketing goods  and also customise what they can get out of the other end via various personalisation capabilities.

On the vendor side, this trend is probably driving the more larger and more acquisitive participants who want to corner the market and win bigger and more lucrative accounts that are commensurate with the scale of their own ambitions.  My fellow DAM News contributor, Naresh Sarwan analysed this yesterday.  Since ADAM would probably want to put themselves into that echelon too then it’s no surprise they are eager to educate their audience with material about how you can save money by implementing marketing supply chains – but only if you buy into their suites of course!

I have been involved in a few different marketing supply chain projects in the past and have had some opportunity to form a considered opinion on this subject.  I’m not sure they are going to follow the same pattern as manufacturing supply chain initiatives and the efficiencies that may be obtained might take a different form which relies on an alternative approach than simply copying the strategies used.  There are several key differences between manufacturing and marketing supply chains which might impact the efficiency improvement curve and how that will manifest itself.  I will consider each below.

Supplier Alignment

Manufacturers have had a lot more time to revise the interactions between different participants in their supply chains.  This whole subject has been known and widely understood for 20-30 years or more in manufacturing.  Some suppliers to the marketing function such as logistics companies are masters at it already as a result, others like printers might be a little more mixed with some understanding it quite well and others less so.  There are a further category of providers who offer ‘softer’ services like design agencies who won’t be at all used to being directed via automated systems and they might be either indifferent or actively opposed to them.

More Powerful Intermediaries

On the agency subject, it’s common for marketing departments to place more of the burden of delivery on to their agencies than would be typical for manufacturers.  Some agencies I have been involved with depended solely on the margins remaining from their client’s printing budgets to stay in business.  This might mean it will be the agency who is tasked to do the actual supply chain management.  That raises several key issues about whether the marketing department can trust their agency to do that properly and also what leverage it gives over them if they decide they no longer wish to work with them.  This presents a few potential dilemmas, like if the agency delivers great creative work but can’t organise logistics and also refuses to collaborate with anyone else to do it for them (or the reverse scenario).  In favour of agencies, I should also say a further issue might be them wanting to manage the delivery more efficiently but the client being indifferent to it as ‘not their problem’  also.

Smaller Operational Scale

In many companies the marketing function is far smaller than production because of the logistics of both tasks.  The primary currency in marketing is good creative ideas, albeit with well organised execution coming a very close second.  Supply Chain Management works by incrementally shaving costs.  To do that in a way that is worthwhile, you need scale.  It has to be a big marketing operation to justify the hassle involved in setting all this up.  Therefore, a value judgement needs to be made to measure how much will be saved as against what setting all this up will cost.

Lower Capital Expenditure Budgets And Faster ROI Expectations

Marketing departments generally don’t like big capital expense items – spending a lot of money on something that will see a number of years of steadily depreciating value.  That is not to say they won’t do it, but marketing managers get justifiably nervous when being asked to lay down a lot of cash for a system or supply chain management initiative which might not yield a return before the end of their next budget period.  A typical marketing manager is expected to deliver positive ROI in a short period of time as that is quite often the criteria they will be judged by.

Declining Role Of Physical Marcomms Collateral And The Implications Of Digital Delivery

It’s undoubtedly the case that although print media and marketing goods still form an essential element of the marketing communications arsenal, their role is gradually usurped by online marketing materials.  Supply Chain Management applies equally to the online realm as it does to physical marketing delivery since time still equates to money – however you spend it.  But, there is a big difference between the cost and expense of systems involved to track physical product with online process and delivering digital assets.

In the past if you were a manufacturer, you had little choice but to invest into SAP, Oracle, JD Edwards etc (some of the better known providers of this type of technology) or at least adapt your own systems so they worked with whatever was preferred by your customers.  They would be expecting you to adhere to a specific (usually closed) standard and you needed to be compliant to be invited to the party.  That is probably far less the case now as most modern digital media supply chains rely on the Internet as their modus operandi and the delivery of a digital file is a far less demanding logistical task than physical goods.  If you combine that with the other challenges of the marketing supply chain, it’s going to be both more difficult to impose an expensive proprietary standard on your suppliers and also an arguably pointless exercise anyway that might make it more difficult for you to change your mind later too.

Just as Naresh mentioned in the earlier article I referred to, I suspect there is an expectation among the mega-vendor fraternity in DAM that there is a ready-made market for these suites of marketing supply chain solutions – they are hoping to become SAP for marketing in other words.  I don’t necessarily agree with his perspective on the demise of the mid-range DAM, but I do think Cloud hosting platforms will provide the foundation of an application architecture to allow marketing managers who want to gain greater control over their media supply chains to do so without incurring the major capital expenditure that these systems will necessitate.  Either with the help of consultants, or just in-house alone plus some moderate background research they may well be able to assemble their own custom suite and be reasonably confident that it will all work together too.  That’s probably still not fully the case right now in 2012, but it’s definitely the way things are shaping up.

The future is going to be more about ad-hoc interactions and being able to quickly change your mind about who you want to work with, on a per-task basis sometimes too rather than big IT/marketing projects with budgets to match.  The key benefit of adopting a Supply Chain Management strategy is your ability to continuously improve and incrementally optimise each aspect of your delivery process.  Investing into large scale software platforms runs contrary to that.

The type of digital marketing management tools that will gain pre-eminence will be those that can interoperate with each other but fulfil a tightly defined task  very well.  A vendor might make more than one type of each of them, but they won’t require you to use the whole suite; you can pick and choose the ones that work for your circumstances.  The logistics of modern day marketing and the systems built to facilitate this business function means that they may become more efficient than manufacturing supply chains, even though the process of optimising them has started some years afterwards.

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