Supply chain professionals have had their hands full of issues since March 2020 when Covid hit full force. Supply chain has dealt with among other things: market and transportation variability, shortage of capacity in both transportation and warehousing, unexpectedly high-rate variability. and just for fun some spectacular cost increases. Just some of the major issues Supply Chain has dealt with.
But feel empathy for the Marketing and pricing people in your organization who have the conflicting priorities of increasing business for the firm while making an increasing profit. Supply Chain issues have thrown a number of curve balls to their work. Periodicals focusing on the supply chain have been focused on the supply chain issues but I am not seeing much written on how this is affecting the rest of the organization, besides busting the CEO and CFO budgets for the year. But the supply chain bumpy ride also needs to be viewed holistically. Here we will look at one aspect of this, the marketing process dealing with the supply chain.
Customers want stable and low-cost pricing. While Supply Chain is not the only thing making this impossible it is a major contributing component to making prices are not stable nor low.
Marketing and pricing personnel incentives are to grow the business and increase the margin. So what options are open to them in a chirpy environment. What maybe “right” for one set of suppliers and customers may not work in a different situation. Some options:
- Ignore the issue and hope for the best. Drawback: This does not help either the organization or its customers. Plus side: Way too easy to implement.
- Have variable pricing on every order to reflect the market. Drawback: Organizational complex and information being input may not be perfect. Plus side: Helps to preserve margins.
- Have set pricing but for short periods of time. Drawback: Will not perfectly reflect costs. Plus side: Organizationally simpler, preserves some margins and easier on the customer
- End providing supply chain services to the customer. See the next paragraph for detail. Drawback; The transportation and supply chain service may a selling point to the customer. Plus: Less variability in costs to worry about, helping to maintain margins
Maybe your “A” customers may have sophisticated supply chain capabilities and may be better cost wise to arrange their own freight. Maybe your B and C customers are not so capable dealing with the supply chain. There are situations where B and C customers contribute significant profit to the firm, and making easy and not to costly to buy from your organization may make marketing sense.
The role of the supply chain people here is to provide Marketing people with a realistic view of the supply chain landscape as its effects the organization and its customers. It is fair and useful, to ask what do their customers want from the organization to understand the market and maybe provide some productive thinking the Marketing people may appreciate.
Ultimately the supply chain’s role is to make the marketing area of the firm successful. Many times, asking the right questions may be the most efficient way to deal with issues.