Technology Tips

Tuesday, December 27, 2011

Logistics Interface with production and marketing

Logistics Interface with production and marketing
Increasingly, organizations are recognizing the importance of integrating their marketing and logistics activities. According to recent trade publications, "whatever the definition, warehousing and distribution are critical to the successful marketing of products: if the product is not where customers want it, when they want it, it is unlikely to sell." Also, increasingly, marketing managers are operational managers, balancing complex trade-offs along the line."

At a conceptual level, managers may well understand and agree to the importance of integrating marketing and logistics activities, but at a practical level integration is often quite difficult to achieve. Firms that are integrated can expect to provide higher levels of customer service, at lower costs, as well as create more satisfied customers and increase profits over the long term.

This comes about through both improved efficiencies as well as effectiveness in both the marketing and logistics areas and at their interface points throughout the organization. For firms that focus on developing supply chain competencies, process integration and information sharing across firms is necessary to long-term success. Internal integration of a firm's processes has been identified as a key component of achieving supply chain success! Marketing theory, in the form of the marketing concept or its more modern conceptualization of market orientation, provides a rationale for integration, and research supports a direct, positive relationship between integration and performance success or achievement of a competitive advantage.

Although there is a strong rationale for integrating marketing and logistics functions, the process is often left to practitioners to figure out for themselves. The purpose of this article is an empirical investigation of issues relating to marketing-logistics integration within a firm. Little is known about what contributes to or detracts from a firm's ability to these functions. This study does not seek to confirm the integration-performance link but more practically to address how a firm might go about becoming more integrated. The specific research problem is to identify factors related to inter-functional integration that are managerially relevant.

The marketing discipline itself emerged early in the 20th century as a catalyst for solving the "distribution problem" that existed because of the geographic separation of the manufacturer and customer.

This physical separation created the need for strategy development in distribution activities at a time when attention was squarely focused on production methods.

Although marketing was originally conceived as including activities related to demand creation (personal selling, advertising, sales promotion) and demand supply (physical distribution), the discipline has evolved to focus primarily on demand creation (product management, promotional activities). A new discipline called logistics has emerged to address the demand supply activities inherent in the physical distribution functions.

This disciplinary split has been reflected in business practice as well. Marketing and logistics functions have evolved separately in most organizations, where logistics is now often a major corporate function, distinct and separate from marketing and production functions.

Yet, both marketing and logistics functions play an important role in creating satisfied customers. Marketing focuses on demand creation through product, price, and promotion mixes whereas logistics typically is more operationally focused on demand satisfaction, which is, getting the right product to the right place at the right time. The typical interface between the two is in the area of customer service.

Logistics usually is an operational function within an organization, but its strategic importance is increasingly recognized, particularly as part of demand creation activities. Logistics leverage is the "ability to effectively influence market demand through the application of excellent logistics systems, techniques and programs." Porter's value chain clearly points out how both marketing and logistics functions are important and linked in a firm's efforts to create value, which suggests that these two functional areas be coordinated in order to maximize value creation.
Indeed, as Bowersox et al. argue, integration of marketing and logistics functions is necessary in order to achieve the demand creation capabilities of the logistics function. A reason for integrating these functions can also be found in the marketing concept, which emerged about forty years ago as "a corporate state of mind that insists on the integration and coordination of all of the marketing functions which, in turn, are melded with all other corporate functions, for the basic objective of producing maximum long-range corporate profits.

More recent manifestations of the marketing concept have re-emerged in discussion of market orientation, stemming mainly from the work of Kohli and Jaworski and Narver and Slater.
The exact interpretation of market orientation differs across these two groups of work, but each focuses on the core pillars of the marketing concept in some way. Functional integration forms an important part of the market orientation construct in both conceptualizations.