Market Oriented Supply Chains

Market Oriented Supply Chains Introduction In most of the presently operational market forms devoid of outside interference the concept of competition is a very real challenge that firms have to contend with (Mentzer, 2004).

The reason for this is that firms essentially get into the most profitable of business segments and these happen to have many other firms operating. In a market where the entire players deal in the same product, much has to be done if one harbors hopes of surviving the competition and eventually growing and expanding. There are several ways of surviving the competition and at the heart of these methods is the concept of product differentiation.

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This is an effective means of basically offering the same product to the consumer, albeit with the consumer preferring your commodity under the impression that they will derive more utility from it. However, product differentiation is not just a step in marketing that is symbolized by packaging; it is simply the penultimate stage. The most successful product differentiation technique starts from how raw materials are gathered all the way through to the production process and eventually culminates with packaging (Svensson, 2003).

It is therefore not simply enough to have different branding in order to reap through the competition, instead what sets a firm apart from the rest is its entire process (Mentzer, 2004).

The management of a firm has to decide on its production strategy and then look into the most efficient means through which its products can reach its consumers. In order to thrive in the marketing bit, a firm has to transform itself into a market oriented organization. This can be achieved through the firm’s adjusting its goals to be in sync with customer expectations. The firm can adjust its services to such a way that customers are able to derive premium value from their products (Svensson, 2003). Eventually the firm also needs to be vastly knowledgeable on market intelligence as it is through intelligence that the firm can judge whether or not its marketing ploy is successful or otherwise (Min & Mentzer, 2000). This paper looks at the specific roles that the management of a firm can play so as to create a market oriented supply chain in their organization.

Production Since the basis of any significant product differentiation is in the production process, it goes without saying that management has to be especially keen on how their products are made.

After conducting sufficient research on market intelligence and what exactly the customers prefer from their products, managers should then ensure that their firms churn out high quality

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products. The best way to achieve this is through the management tasking and demanding the best quality of raw materials from their suppliers and never compromising on the same. This is important especially when one takes into account the importance of product consistency towards the customer’s definition of a premium product. Companies such as Cocoa Cola have been able to remain at the front of the curve in the soft drinks industry by guaranteeing consistency of their product (Kulkarni & Sharma, 2004).

The management also should be at the forefront of ensuring that their products continually meet consumer expectations without compromising on production in order to cut costs. This is a dilemma that many firms continue to face; whereby in a bid to minimize production costs, they end up sourcing cheaper raw materials. This is all good unless those very raw materials end up changing the customer’s perception of the quality of the products. The management is thus paramount when it comes to ensuring that costs do not stand in the way of quality. One way of doing this is to ensure that the firm has in place efficient and detailed market-oriented strategies (Martina & Grbac, 2003). These strategies can be very effective in putting costs in check while still maintaining or even possibly enhancing quality. The management can tinker with its procurement rules in the sourcing of raw materials. Those suppliers meeting the prerequisite quality standards should be subjected to a competitive tendering process so that the firm gets quality raw materials at a lower price. The advantage enhanced from this is that the firm will continue to churn out quality products to the market while keeping costs in check (Kulkarni & Sharma, 2004).

Distribution Postponement

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Once commodities leave the production line, the most important step is that they reach their intended consumers as soon as possible and at the same quality to that in the factory. The role of sound management in the transportation, storage and distribution of commodities can therefore not be taken for granted (Svensson, 2002). All these steps eventually end up adding on the firm’s postponement. Simply put, postponement is the amount of time that it takes a product to reach the point of consumption from the time of production (Waller, Dobholkar & Gentry, 2000). The role of a manager is to ensure that efficiency in the firm is not only reflected on the production line, but is also reflected in the rest of the supply chain. A sure way of judging whether a management team is performing its task properly is to look at their effectiveness in cutting down on postponement (Flint, 2004). The problem with minimizing postponement, however, is that it more often than not translates to an increase in operating costs in the short term (Waller, Dobholkar & Gentry, 2000). A firm may be forced to take up faster distribution avenues, which cost more so as to ensure it remains in pole position to capitalize on competitor shortfalls in distribution. However, if the foray is successful, in the long run the costs of distribution will supplemented by the revenues generated by the increased sales.

Transportation Managers should take particular keen interest on market research studies in order to determine where their niche market resides (Svensson, 2002). This is an important aspect especially when one has to consider the logistics of availing the right quantities of the commodities and at the right condition. The choice of transportation that is chosen should not only be affordable and quick, but also efficient enough so as not to create any artificial demand shortfalls that might alter customer perception (Vonderembse et al., 2006). One can especially appreciate this when dealing with perishables such as farm produce. Take the case of fresh fruits

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such as strawberries; a firm that deals with their growing should be especially invested in how they are transported to the market or to other production companies. The reason is because any unnecessary delays in reaching the intended consumers usually end up affecting the taste of the fruit thus compromising on quality (Mentzer, 2004). To this effect, demand shortfalls are considered as indicative of a failure of the supply chain (Rainbird, 2004).

New logistics Another reason why managers should be keen on market research is that they are very helpful when it comes to deducing new markets. The emerging markets may require a significant product differentiation and a distribution network capable of satisfying the demand. The new market could be a different country or even continent that has a completely different belief system and culture (Flint, 2004). The distance between the point of production and consumption may require a complete overhaul of production and distribution techniques. It is therefore imperative that the management takes charge of the emerging trend so as not to ensure the new market gets a premium quality product. The management should also ensure that the venture into the new market does not hurt the bottom line (Waller, Dobholkar & Gentry, 2000). An example of the change of production and distribution in the supply chain is the Alaskan fishing industry.

The large quantities of fish in the surrounding waters meant that there was always plenty of fish to be exported. However, the logistics of hauling large quantities of fish for processing before exporting contributed to a lot of postponement in the sector. The alternative was an innovative idea at the time to combine fishing with a processing plant within the vessels. Instead of taking the processed product back to shore for distribution, the vessels could simply set sail to the target market areas of Japan and mainland America to deliver the product to the consumers (Fernie & Sparks, 2009).

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Quality of Distribution The management also ought to pay a particularly close interest on the quality of the distribution network of its products. In a nutshell, the firm has to have a team in place that overlooks the sailing of its commodities from production all the way to consumption (Vonderembse et al., 2006). It is the firm that ultimately bears the responsibility of ensuring that the quality of its products are not compromised even in instances where distribution is done by other parties (Flint, 2004). The reason for this is that a failure in the distribution ring by a supplier ultimately hurts the producer and end up reflecting negatively on the firm’s bottom line (Vonderembse et al., 2006). It is for this simple reason that firms normally prefer to set up their own warehouse and storage facilities. In cases where the costs of running their own facilities are too great, the alternative has been to appoint authorized enterprises that specifically cater for their commodities as per the firm’s standards. What this does is to ensure that not only is efficiency in delivery attained but also that quality is maintained. The management of the furniture giants IKEA partnered with the logistics behemoth DHL so as to ensure that their products reach their intended markets, such as the US as efficiently as possible (Kulkarni & Sharma, 2004).

Conclusion The most important part of a market oriented supply chain is the efficiency of how the commodities reach the target consumer base (Martina & Grbac, 2003). The entirety of the situation though is that it is simply not enough to avail products to the consumers. Much has to be done to ensure that in a market whereby many producers offer the same product, an individual firm sets itself apart from the rest in terms of product quality. The management can achieve this quality by ensuring that the production process makes use of quality raw materials and that

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quality does not injure the firm in terms of costs. The role of the management expands further into ensuring that the firm has in place an efficient distribution network for its premium product (Svensson, 2002). This is achieved by ensuring that the storage facilities do not compromise on quality and that transportation is efficient enough so as not to create a demand shortfall in the market (Rainbird, 2004).

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References Fernie, J. & Sparks, L. (2009). Logistics and retail management: Emerging issues and new challenges in the retail supply chain, 3rd Ed. Philadelphia, PA: Kogan Page Limited.

Flint, D. (2004). Strategic marketing in global supply chains: Four challenges. Industrial Marketing Management, 33, 45-50.

Kulkarni, S. & Sharma, A. (2004) Supply chain management: Creating linkages for faster business turnaround. New Delhi, India: Tata McGraw-Hill.

Martina, J. & Grbac, B. (2003). Using supply chain management to leverage a firm's market orientation. Industrial Marketing Management, 32(1), 25–38 Mentzer, J. (2004). Fundamentals of supply chain management: Twelve drivers of competitive advantage. Thousand Oaks, CA: Sage Publications, Inc. Min, S. & Mentzer, J. (2000). The role of marketing in supply chain management. International journal of physical Distribution & Logistics, 30(9), 765-787.

Rainbird, M. (2004). Demand and supply chains: The value catalyst. International Journal of Physical Distribution & Logistics Management, 34(3/4), 230-250.

Svensson, G. (2002). The theoretical foundation of supply chain management: A functionalist theory of marketing. International Journal of Physical Distribution & Logistics Management, 32(9), 734-754.

Svensson, G. (2003). Holistic and cross-disciplinary deficiencies in the theory generation of supply chain management. Supply Chain Management: An International Journal, 8(4), 303-316.

MARKET ORIENTED SUPPLY CHAINS Vonderembse, M., Uppal, M., Huang, S. & Dismukes, J. (2006). Designing supply chains: Towards theory development. International Journal of Production Economics, 100(2), 223–238 Waller, M., Dobholkar, P. & Gentry, J. (2000). Postponement, product customization, and market-oriented supply chain management. Journal of Business Logistics, 21(2), 133159.

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