As marketing organizations spend more and more on digital tactics, content development, and technology, they often find themselves looking for ways to fund initiatives. The most common approach is to increase the annual budget. Because the digital transformation is a process that takes time, marketers still have to manage “traditional” activities while deploying new initiatives… thus increasing the budget.
However, when Procurement and Marketing are aligned around a common set of objectives, significant budget dollars can usually be found by optimizing the print and marketing communications supply chain. By optimizing the traditional marketing process, forward thinking organizations are funding much of their digital transformation within their existing budgets.
Consider these two recent statistics:
• According to the 2017 CMO survey (co-sponsored by Deloitte, Duke University’s Fuqua School of Business, and the American Marketing Association), CMOs anticipate an 11 percent year over year marketing budget increase, with the majority of that going to digital tactics.
• In McKinsey’s Procurement 2017 report, “Turning Indirect Sourcing into a Multi-Million Dollar Profit Center,” the company found a direct correlation between indirect sourcing improvement and cash flow opportunity, noting that, “implementing a world-class indirect sourcing process can yield 100-150 basis points of incremental [margin] within 12 to 24 months, plus year-over-year profit improvements of 20 to 30 basis points.”
The print and marketing communications supply chain represents one of the largest categories of indirect spend in consumer-oriented businesses, yet less than one in five organizations are fully optimized. And according the CMO Club, 56% of Marketing Executives have never assessed their marketing operations and supply chain processes.
So there you have it. Marketers plan on spending more, and yet most aren’t optimizing their traditional spending in order to fund their digital initiatives.
Why Not Work Together?
According to McKinsey, there are three common scenarios that keep marketing and procurement from working together to optimize the print and marketing communications supply chain:
1. Distributed spend authority [and service needs] – often marketing departments believe that sourcing does not have the required knowledge to meet their needs. In large organizations, the challenge can be exacerbated when departments are fragmented and have diverse needs based on business units, product groups, or sales channels.
2. Limited incentives to manage spend – due to the nature of the work, marketing departments are often focused more on expediency and relationship effectiveness than overall cost. Where this dynamic is in place, marketers may perceive a “sourcing initiative” to be a threat to their ability to get their work done.
3. Single-minded emphasis on pricing – on the other end of the spectrum, when procurement focuses exclusively on price, as opposed to demand and specification management (which truly add value) then marketing departments perceive no additional value to working through the procurement organization.
Any one of these three scenarios can create resistance to change. When they are all present, it can be next to impossible for marketing and procurement to come together for a common goal.
The Solution: A Strategic Assessment
So, the challenge is one of misaligned perspectives and incentives. We have found that alignment can be improved by creating a joint project between marketing and procurement. An optimization assessment is very different from a “sourcing initiative” or “RFP”. Rather than focusing simply on price – an optimization assessment looks at supporting technologies, process, quality, organizational factors, and the supplier panel, to create a holistic view of the print and marketing communications supply chain environment.
It’s designed to uncover not only savings opportunities, but also to document the needs and requirements across an enterprise, identifying sub optimal characteristics, while architecting the solution designed to improve speed to market, reduce business risk, improve scalability, and drive brand continuity.
SupplyLogic is a third party management company providing specialized managed services within the print, marketing communications, and branded merchandise categories. To learn how other companies have brought marketing and procurement together to create value for the organization, visit www.supplylogic.com or call us at 1-877-767-5644.Back…