Companies in nearly all sectors of the economy have invested in networked technologies to reduce costs and increase productivity, and these gains are having a major impact on supply chain management. Likewise, marketing executives are delighted with the ability to gain and utilize customer data never before accessible. But to maximize profits in this "back-to-basics" business environment, the imperative for forward-looking executives is to recognize how critical the information flow and coordination processes between marketing and the supply chain are.
Real-Time Profit Optimization: Coordinating Demand and Supply Chain Management
Thought Leadership Summit on Digital Strategies
January 14, 2002 -- San Jose, CA
Linking the innovations in supply-chain management with the technology-enabled capability to serve customers in a more targeted manner is key to driving profit optimization. This summit discussed the state-of-the-art, and the future, of demand chain and the supply chain interaction. It addressed the use of digital technologies to improve demand and supply chain coordination and make better use of market information. Discussions covered the promise of using networked technologies for managing and enhancing profit by quickly responding to changing markets - matching supply and demand through more accurate forecasting, improved use of market information, rapid product/service configuration and better coordination of pricing and the supply chain.
That was the theme of the center's first Thought Leadership Summit with Cisco Systems held in San Jose, CA on January 14, 2002. The summit was designed as a thought-provoking, roundtable discussion bringing together experts from industry and academia to generate insights into the interaction between marketing and the supply chain.
Participation was by invitation only, and included a dozen executives (SVP and VP level primarily) from a broad range of companies: Cisco, Whirlpool, Manugistics, Deere, Cemex, Colgate-Palmolive, Sabre and Sun Microsystems. Cisco was represented at a senior level by Larry Carter, CFO, and Carl Redfield, SVP Manufacturing. Professor Dave Pyke, a Tuck School professor in operations management, moderated the roundtable and Tuck's Eric Johnson and Praveen Kopalle, as well as marketing and operations faculty from Stanford and Wharton, provided the academic perspective and balance to the discussion. The day included an interesting conversation with Cisco's CEO, John Chambers.
At the broadest level, some of the conclusions supported by the summit discussion are:
- Given globalization and the increased speed at which the economy functions, the costs to the system of sharing bad information or hoarding useful information have gone up dramatically - but companies are again beginning to withhold information from partners in order to extract more value for themselves;
- Digital technology has greatly increased the ability to share information in a timely manner - but organizational cultures are not always keeping pace with the changes technology is enabling;
- Real-time tailored product differentiation is increasingly possible and important - but it requires a different and more integrated and visible way of thinking about manufacturing, component standardization, and product collaboration, thereby producing a solution-centric approach;
- Tailored or dynamic pricing is viable - but unlike in the Amazon.com experiment, it must be accompanied by clear product differentiation or executed through plausible channel segmentation;
- The importance of accurate forecasting has not diminished with the speed of data availability - but it may require forecasting possibilities rather than probabilities - a more scenario planning oriented approach rather than an extrapolation of the past;
- The value of coordinating marketing and supply chain information has been traditionally thought of as offering the opportunity to make the supply chain more responsive to customer demand - but there are just as many gains to be made from understanding the supply chain opportunity costs of pricing, promotion or product configuration decisions.
The center and Cisco are exploring making this roundtable summit format an ongoing series on the impact of networked technology on all aspects of the management of enterprises. Initial feedback form this first Thought Leadership Summit on Digital Strategies was very positive.
"The session allowed me to test my mental models of the supply chain work we are doing at Whirlpool in a very time-efficient manner," stated Reuben Slone of Whirlpool.
"Establishing and extending a set of contacts solving similar business issues and doing so in an intimate setting, rather than a large conference was a critical element," reflected Lisa Smith of Deere. "The decision to limit the 'at the table' group of individuals and facilitate an open discussion forum delivered a greater impact than any day at an industry conference would have."
Pete Fader, a marketing professor from Wharton emphasized, "This was the single best interdisciplinary conference I've ever participated in."