While it’s perhaps an oversimplification, the strategic misalignment of these seemingly parallel processes produces most of the erosion in return on invested capital (ROIC) and competitive advantage. For example, if the operating strategy is focused primarily on reducing cost in every way possible and the marketing strategy is focused on increasing market share by providing exemplary customer service … Houston, we have a problem. The demand and perception created by marketing will end up unfulfilled by operations.
There are five operational attributes that really matter: Reliability, Responsiveness, Flexibility, Costs, and Assets (how well you are generating ROIC from operating your supply chain).
Your operating strategy will determine what your investments in achieving superior performance will be. Most companies can’t afford to attain superior performance in each attribute relative to the competitive market landscape. However, competitive advantage is derived by achieving superior performance (over competitors) in those attributes that matter most to your key customers and prospects.
The competitive lever is the intersection of marketing (demand creation) and operations (demand fulfillment). The marketing organization defines the market and customer segment that the company is targeting along with the strategies, i.e., product capabilities, pricing, promotion, sales, service perceptions, etc.
Operations uses this information to determine its sourcing, production, and delivery requirements to meet the competitive marketing objectives of the company that will be the basis for setting the operating strategy. Operating performance will be set based on which attributes contribute most to fulfilling the marketing strategy.
The alignment of the two strategies is used to balance the budget. Investments are made to improve performance in those attributes that will contribute most to successful fulfillment of the marketing strategy and profitable growth.
Managing the intersection of marketing and operations requires:
* Understanding the financial objectives and constraints of the company
* Development of a marketing (demand creation) strategy and budget aligned to the financial objectives within the constraints
* Development of an operating strategy that aligns performance to support the marketing strategy and to achieve the financial objectives within the constraints
* Consensus among management that the strategies, investments and performance objectives are aligned and achievable
* Continual review of actual performance to plan and adjustments made to respond to variance
Successful alignment of marketing and operations strategies and performance is the lever to competitive advantage and shareholder value.
In 2013, expect to see more emphasis placed on internal collaboration and information systems to support alignment between demand-creating and demand-fulfilling strategies. Companies will engage in more transformational initiatives as the gap between leaders and laggards widens, new competitors enter markets, and new game-changing technologies emerge.
Keywords: supply chain management, value chain, value chain IT, supply chain management IT, supply chain solutions, demand strategies, logistics & supply chain