496 The Marketing Book
the main point of contact was between a
salesperson from the supplier and a buyer from
the retailer. Figure 19.6(b) depicts the alter-
native approach where multiple contacts are
established, e.g. the supplier’s R&D team with
the customer’s marketing team, the supplier’s
logistics team with the customer’s operations
team and so on.
Such a relationship should prove to be
more enduring because it is built upon the
search for mutual advantage – not just narrow
self-interest. In this scheme of things, the role of
the key-account manager is to manage a team-
based approach to relationship building with
the customer. Whilst this approach has been
adopted with success by an increasing number
of suppliers to the retail trade, it is equally
powerful in any type of business-to-business
marketing.
The impact of superior SCM performance
As customer service comes to be recognized as
a highly effective way to differentiate the offer
- even in a commodity type market – then the
challenge becomes one of how to structure and
manage supply chain systems capable of meet-
ing customer requirements consistently and
efficiently.
Effective supply chain systems can both
enable a supplier to achieve lower costs and at
the same time enhance the impact it has upon
the customer’s performance. A prime objective
of any business should be constantly to seek
out ways of reducing the customer’stotal costs
of ownershipwhilst lowering their own costs.
The concept of total costs of ownership is
quite simple. Essentially, any transaction will
involve the customer in a number of costs – not
just the price that is charged. These costs might
include inventory carrying costs, warehousing
and handling costs, ordering costs, quality
inspection costs and even stock-out costs, for
example. Anything that the supplier can do to
reduce or eliminate these costs will enhance its
attractiveness to the supplier. On occasion,
because total costs of ownership are lowered
through superior supplier logistics, it may even
be possible to justify a higher price.
One way in which customer ownership
costs can be lowered is by the establishment of
‘quick response’ logistics systems. In quick
response logistics, the aim is to capture infor-
mation on product usage as far down the
supply chain as possible and to translate that
information rapidly into physical replenish-
ment. The key to making quick response work
is shared information.
One chemical company, for example, has
installed remote monitoring equipment in the
storage tanks of its major customers for bulk
liquid chemicals. It can monitor, through tele-
metry, the actual level of product in the tanks,
and with that information it can schedule
production optimally and consolidate deliv-
eries with other customers to achieve transport
economies. The benefit to the customer is that
they no longer need to manage their own
inventory and issue purchase orders, but only
pay for what they use, and their inventory
carrying costs are eliminated, yet they never go
out of stock! To the supplier, the benefit is that
they can now manage their materials flow
optimally and not be taken by surprise by
‘rush’ emergency orders.
In North America, major retailers such as
Wal-Mart have linked the laser scanners at their
checkout counters direct to suppliers such as
Procter & Gamble. In real time, Procter &
Gamble can monitor off-take of their products
store by store and, on the basis of that informa-
tion, plan production and delivery to optimize
their own costs, as well as reducing the amount
of stock that Wal-Mart needs to carry. The
change that these types of SCM and CRM
developments have brought about in buyer–
supplier relationships is radical. The idea is
now one of ‘vendor managed inventory’, where
the supplier becomes responsible for managing
the customer’s inventory to the benefit of both
parties. For example, at Wal-Mart there are