Why Marketing Procurement should focus on removing waste

By | Lean Manufacturing, Lean Thinking, Point of Purchase, Productivity, Quality Assurance, Retail Fixtures, Supply Chain | No Comments

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The number one priority for Marketing Procurement is to reduce cost. We all understand this. The problem is generally the way that a marketing procurement function goes about achieving this. The issue is that the focus always end up being on the supplier rather than on the process that was used to procure the goods or service.

I remember when I was the CMO in a Fortune 500 company, the marketing procurement team would invite me to a review meeting. When I arrived there would be a General Ledger print-out from the ERP system with a long list of suppliers ranked by the level of business we conducted with them. We would then spend a significant amount of time discussing each and every one of the large suppliers so marketing  procurement could establish a strategy to obtain better prices.

There are a number of key flaws with this approach:

  • The size of business we conducted with a supplier often did not correlate with the importance or impact of the goods or services delivered (from a customer influence point of view)
  • The focus was squarely directed on the supplier, whereas it should have been directed on what was being sourced, as you should not assume that they were the optimal supplier for the specific need
  • As the approach was supplier based, the strategy tends to be one that is focused on margin reduction. This has implications on the potential end product as suppliers may not invest as much or provide their best people to deliver the best possible result.
  • Ultimately and most importantly, the process and overall supply chain was ignored

A key reason that marketing procurement take this approach is a lack of data. It is not just the lack of information but it is the impact of the knowledge gap that is created. In many cases it is very difficult for marketing procurement to understand precisely what marketing is trying to achieve, how the entire end-to-end supply chain works, what is required to ensure seamless flow and thereby how to optimise the final outcome based on the total investment made.

As Arthur C. Clarke once said The Information Age offers much to mankind, and I would like to think that we will rise to the challenges it presents. But it is vital to remember that information — in the sense of raw data — is not knowledge, that knowledge is not wisdom, and that wisdom is not foresight. But information is the first essential step to all of these.”

Clearly marketing procurement need to work hard to improve the data that is available and to ensure if possible that it is as real-time as possible. The closer to real-time, the greater the ability to influence and add value. However I will address the subject of real-time data in a forthcoming post. What I want to highlight now is the second key reason that marketing procurement struggle to make headway and this is mindset. Rather than spending efforts on margin reduction, the approach should be one focused on removing waste. This benefits everyone, is recurring and is sustainable. It is a real win : win for all parties.

I would like to recommend that marketing procurement adopt the principles of Lean Manufacturing as translated in the Toyota Production System (TPS). The concept of TPS is to embrace the principles of Continuous Improvement and Respect for People and in so doing to improve the productivity and value delivery to the customer through the removal of waste. They define the three key forms of waste as Muda, Mura and Muri. Here is a great post providing more detail on how these objectives can be applied to product development as a great example of how they can be applied to any part of a business.

In summary,

  • Muda is any process that seeks to consume more resources than needed and this results in waste. Try and look at this from the customers / consumers point of view. Great examples include rework, or materials that are over engineered or not used
  • Mura is any process where there is unevenness in work and lack of uniformity. Great examples of this are where roles and responsibilities are not clear and there are delays in decision-making, leading to increased costs through overtime. It is also how well the process of handovers are managed and overall the utilisation of capacity that has been set aside.
  • Muri is a process that due to its complexity is beyond one’s power and is too difficult for an individual to improve. This is addressed through standardisation. Great examples are a lack of structured processes, poor quality assurance (defining the need), no understanding of the entire end-to-end supply chain and the interdependencies that exist.

Lean Manufacturing principles have transformed operations and are now being adopted by other functions as they seek to gain better control, improved data, more insights and improved productivity for critical business processes. Now is the time for marketing procurement to change their mindset, adapt lean principles and transform their ability to add value.

LeanPie helps both brands and retailers design and source retail fixtures and Point of Purchase (POP) materials. We founded the company with the single focus on removing waste but we know that this is not an end to itself, it is a journey. The TPS principles continue to remind us that we need to always seek to improve, whilst ensuring that we respect all the stakeholders we engage. Through this approach we believe everyone can benefit, both now and continuing into the future.

Focus on Quality Assurance to transform regional POP investment

By | Leadership, Point of Purchase, Quality Assurance, Shopper Marketing, Value engineering | No Comments

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Brands and retailers invest in Point of Purchase materials to influence shopper behaviour and to encourage the customer to choose a specific brand or product at the precise time that they are making a buying decision. The type of investment will be highly dependent upon the opportunity available within the retail store. Each store will be different in some way and will influence the type of POP investment that can be made as well as how it is installed and merchandised. Influencing factors will include level of space available, the shop floor layout and how this influences how shoppers navigate the store as well as other factors such as the retail design and branding of the retailer. It is also likely that there will be differences in the range of items stocked by the retailer, which may also be further influenced by seasonality and climate.

All of these factors create differences from one store to another and these differences can be significant when you start to compare the retail environment from one country to another. Then add in the fact that the consumer has different needs and expectations from one market to another and combined these reasons go a long way to explaining why marketers state “BUT … my market is unique and different”.

This provides the rationale for marketers to go it alone and do their own thing from one country to another. When it comes to POP investment the result is that each market develops its own programme with its own unique set of materials, just for their one market. In almost all cases, they work with local suppliers who provide both the design as well as the sourcing and manufacture of the materials. Having seen this from both a client and a supplier perspective, I can say hand on heart, that the end result is significant waste with average quality materials supplied at inflated prices. Not only is it an inefficient use of funds but more importantly the level of shopper influence achieved is poor and in many cases, not even assessed.

BUT there is a way to overcome this challenge and to deliver better outcomes regionally at significantly lower levels of investment and waste. Brands need to decouple design (how they are seeking to influence) from manufacture (the efficiency in how they translate design into actual materials).

Here is an approach to consider: 

1.) Establish a core purpose for what you want to achieve and ensure complete alignment on desired outcomes on a regional basis.

2.) Identify a representative from each market and create a “design team” that want to work together to create a regional programme that will set them apart from their competitors. Remember “Collective wisdom outshines individual judgement” evert time!

3.) Build a real understanding of every market. Conduct research, undertake audits and interviews and share the results across the team. This will build everyone’s skills and expertise and enable a very strong sharing of best practice, based on own as well as competitor activities.

4.) Find a great company who really understands shopper marketing and work with them to design a range of concepts, agree on key prototypes and work towards the development of a range of materials that, through customisation, will work in every market.

5.) At this point you will have a set of technical drawings for a range of materials that are fit for purpose and will give your brand differentiation in-store.

By focusing on Quality Assurance (QA), you have ensured that your investments will work. The actual sourcing is now easy. Whether the markets want to produce the materials locally (through their local suppliers) or actually aggregate with the other markets becomes highly objective. Any supplier briefed has to quote on the same specifications, “apples with apples as they say”, as all quotations are now 100% comparable. The sourcing becomes a science rather than a decision based on relationships, locality and subjective preferences.

If brand teams can work together across markets to agree on QA then the way that POP materials are currently sourced will be transformed with significant benefits accrued. Just think of what can be achieved:

  • More consistent, on-brand execution across different countries and retail formats
  • Greater innovation through sharing of best practice (more people participating)
  • Greater understanding of retail environments and trends
  • Materials fit for purpose (supported by testing in-store)
  • Improved execution with regional retailers
  • Less duplication of effort and less waste
  • Better prices through aggregation of production runs and tooling etc.
  • Control and ownership over design and Intellectual Property
  • Ability to tender and source materials from any supplier in any location

Come and talk to us at LeanPie if you wish to understand more. With 80+ years of combined experience in the leadership team we understand the challenges and can help brands cut through the complexity to achieve great results.