Sales & Marketing Management - November/December 2008 - (Page 12) MARKETING STRATEGY Sometimes pricing practices annul lean’s benefits. Back in 2000, new CEO Donald Washkewicz identified the cause of Parker Hannifin’s mediocre financial performance: Parker’s mark-up pricing, commonly 35%. “No matter how much a product improved,” said The Wall Street Journal, profit margins were unchanged. When costs were cut, Parker “ultimately cut the product’s price as well.” Lean and other improvement initiatives hadn’t a chance. [THE PULSE] 75 PERCENTAGE OF SENIOR MARKETERS WHO EXPECT SPENDING ON NEW MEDIA AND ONLINE INITIATIVES TO INCREASE IN THE COMING YEAR. potato, with neither party wanting it on its books. When user A pushes inventory back on supplier B, purchasing and finance at A smile, shake hands and say, “We’ve met our inventory turnover goals.” No they haven’t. This is accounting gamesmanship. The reality—the excess inventory—is still there. If B produced it for A, then A owns it and its costs regardless of legalities, physical location and whose books. The issue calls for finance, operations and marketing to jointly pin down the likely negative impacts of inflated inventory: carrying costs, slowed response to changing demands, reliance on age-deteriorating forecasts, costs of service recovery when a defect contaminates the whole lot and so on. Next is strengthening collaborative bonds between user A and supplier B. Along the way, A buries the performance metrics (accounting numbers and goals thereupon) at the root of the gamesmanship. SOURCE: MS&L/PRWEEK SURVEY Practicing lean—jointly Wal-Mart is the world’s grand champion of lean supply chains. While advanced IT gets most of the credit, collaboration is the foundation. Wal-Mart’s 2,000-odd suppliers near the retailer’s Bentonville, Ark., headquarters maintain multifunctional teams on site. Daily, along with their Wal-Mart counterparts, they work out pricing, packaging, logistics, promotions, product options, product coding, weights and measures, sharing of actual and forecast demand data, and so forth. The on-site team from Acme Apparel or Widget Hardware must get itself together at home before it can present itself collaboratively with Wal-Mart. Doing what’s right requires a unified attack on the obstacles. There surely is no better unifier than the chronically impatient customer. Lean—correctly defined, presented, planned and managed—directly responds to that impatience. It yields quick response all along the value chain, carrying along greater flexibility, better quality and higher value. In lean’s customer-focused mission and quest, waste is not the dominant target. Nor is waste reduction the sole or even the dominant methodology, but rather a valued enabler. Losing weight is not the aim of a good diet; improved health, increased capabilities and longer life more appropriately qualify. So it must be for lean. Marketing 101 students are taught that the discipline revolves around product, price, place and promotion. Adding lean to the mix expands the arsenal, providing marketers with quick response, flexibility, quality and— collectively—value. Call it lean marketing. www.salesandmarketing.com www.salesandmarketingmanagement.com Parker’s new, competitive pricing is based on such factors as quick response, quality and uniqueness. Sales, return on investment and share price have soared. Inventory turnover, long stuck at about 4.0, has risen year by year—in 2007, up to 6.5. Parker’s enlightened pricing might be expressed simply as: ■ Raise prices on (or back off in promoting) complex, hard-to-make/provide products with long lead times. ■ Lower prices on (and/or promote and push) simpler, easy-to-make, quick-time products. Bulging logistics pipelines Outsized inventories in warehouses and transit should be lean’s primary target. Many times, more inventory (and associated long lead times) reside there than in factories. Operations may finger marketing for the glut, but globalization looks to be a weightier culprit. Oceanspanning supply lines and shaky infrastructures increase what’s in the shipping channels. Yet there is another, perhaps greater reason for un-lean supply pipelines. Again, it’s accounting. For all the talk about supply-chain management, with cross-docking, RFID, pick-to-light and third-partylogistics, the bloat persists. In-channel inventory is a hot Correction: In the September/October article “Take Heart With Cause Marketing,” the editors were provided with incorrect information that attributed a cause marketing program to Purdue Pharma L.P. Purdue Pharma did not implement said program. Partners Against Pain is an educational resource provided by Purdue Pharma L.P. For more information, visit www.partnersagainstpain.com or www.purduepharma.com. 12 SALES &MARKETING MANAGEMENT NOVEMBER/DECEMBER 2008 http://www.partnersagainstpain.com http://www.purduepharma.com http://www.salesandmarketingmanagement.com
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