Your business needs two strong legs

Roger OakdenGlobal Logistics

Wine in time.

Marketing and Logistics are two sides of the same coin and so both must be strong elements of your business. Marketing supports the demand or value chain, identifying and maintaining the channels and their associated products. Logistics supports the supply chains by ensuring availability of products in the channels.

The new CEO of Treasury Wine Estates (TWE), a major global beverage business, has emphasised these points when talking recently about the problems at his company.

He says the company has “…got its supply chains about right…We have one strong leg in supply chains and a weak leg in marketing and sales. And if you have one strong leg and one weak leg, you go round in circles…we need to start getting the two legs to be strong”. His words will ring true for many businesses.

Marketing and sales problems at TWE appear to be around the 83 brands the company has in its portfolio and not deciding which brands to support or close. This was coupled with indecision about what commercial brands to discount at the retail level and which premium brands require strong marketing investment and support.

So, even if the supply chains are “about right” and logistics is able to support the supply chains, the investment and effort to provide availability of product is likely to be misplaced. Here is the need for a comprehensive Sales & Operations Planning (S&OP) process, to enable a structured planning of the business.

Doing the basics

But, preceding S&OP is the decision concerning which brands to keep. While the accountants will have costed each product line, management also needs to know the contribution to overheads from each SKU and the ‘cost to serve’ for current channels and customers.

Availability is critical to the marketing effort; it means meeting customer requirements. To achieve availability requires what Logistics does; the ‘time-related positioning of resources to provide availability of goods and services for customers at lowest total cost’. Availability also refers to available physical resources (i.e. production and storage capacity) and Tier 1 suppliers – the immediate suppliers to an enterprise.

Prior to implementing S&OP, Marketing and Logistics will need to agree on the channels selected, the products to be supplied in each channel and the level of customer service (which relates to time-related positioning) required for each channel or customer. Once this is in place, then the S&OP process can begin.

Without being inside the business, the complexities of the TWE situation can never be fully known, however for all consumer packaged goods (CPG) and fast moving consumer goods (FMCG) enterprises, the essentials identified in this blog are the core needs for understanding your business.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...