How to Establish a Successful Marriage Between Logistics and Promotions

(2015-04-09 17:40:08)

Promotions are often implemented as successful marketing tactics to assist in attracting new customers, retaining existing customers, testing new product concepts and quickly reacting to changing consumer demands. Not only do they provide brand recognition, but they also give marketers, product developers and sales people an additional avenue for creativity. While specialty products and limited-time offers can build brand revenue, implementing promotions isn't as easy as one might think when factoring in supply chain management requirements such as fulfillment and distribution.

Effective and efficient logistics processes are built on reliable and predictable distribution networks that are carefully calculated through analytics. Promotions can disrupt this model as they may be less predictable and require more moving parts than usual, or different parts. Promotions can mean limited production runs in new places, products or ingredients with a limited shelf life, new suppliers in new locations, new packaging and a need for new modes of transportation. Perhaps, though, promotions can be more predictable, if not as predictable as normal operations. And maybe the best-run logistics processes can play a more proactive role in promotion execution.

Planning is Key to Promotional Success

To maintain an efficient fulfillment and distribution process throughout the lifecycle of a promotion, logistics professionals need to work hand-in-hand with marketing teams as they consider new campaigns, versus being an after-thought. If this collaboration doesn't occur from day one of the planning process, complexities and unknown variables can turn a potential revenue machine into chaos.

At the end of the day, logistics managers need to get the ingredients to the processing facilities and the finished goods to consumers when they want it, in the condition they expect it.  Products need to arrive in consumers' hands fresh, clean, visually appealing and undamaged if a promotion is to succeed.  But successful logistics management involves more than that.  To maximize the bottom line impact and increase the financial success of a promotion, those responsible for the supply chain need to effectively manage costs and efficiency – from fulfillment and distribution to shipping and transportation. Logistics needs to provide marketers with information on availability, potential challenges and pitfalls for each component of the promotion, as well as insight into distribution plans and prices.  This can only be done successfully if the logistics planners are included during the planning phase.

For instance, if a promotion requires a new ingredient, marketing must coordinate closely with procurement to identify where they can buy the ingredient from and for how much.  But they may forget the step of including the logistics team to ensure the existing distribution network is able to get the ingredient from where it is today to the necessary manufacturing facility. Even if the ingredient is available, logistics providers must make sure the item can easily be shipped to the right location, through the right mode of transportation, and through the right distribution partner.  A new ingredient may require special storage or have a shelf life requiring expedited transportation.  As an example, you can’t just necessarily add spinach to the weekly shipments of goods from California to the West Coast, if the current goods being shipped are dry ingredients with longer shelf lives.  That doesn’t mean it can’t be done, but rather that considerations need to be made, and costs evaluated.  Too often when projections are made on the bottom line impact of a promotion, logistics costs are a last thought.   A similar challenge could occur with finished goods if a piece of electronics has specific handling requirements, or a food product requires refrigerated transportation versus the usual frozen truck transportation.

In more extreme examples, logistics could be faced with moving goods from new geographies.  New locations may require new distribution partners, new quality assurance processes or even new customs management. 

The sooner logistics teams are brought into planning conversations and know what items they will need, where they will need it and when they need it by, the sooner the promotion can go from an idea to a reality.

Executing Promotional Processes

The planning phase is just the start and as promotions get underway, logistics will need to ensure that its processes are executed flawlessly.  Logistics teams need to coordinate product delivery with distribution partners to ensure the items are arriving as promised. However, the best logistics teams go beyond that.  Just as integration is key in planning, open communication between logistics, marketing professionals and the entire supply chain needs to continue throughout the life of the promotion.  Suppliers and logistics partners need to have visibility to supply chain data to ensure they are ready to handle anticipated volumes.  They need to make sure they have the capabilities ready to meet the promotional needs.  And they need to react to the promotion as it evolves.  Promotions are not static animals and many situations can occur, such as:

  • A promotion is not as successful as expected, and logistics teams need to identify ways to cut costs on distribution or identify new routes to get products from point A to point B.  If a mild winter in one part of the country has negatively impacted a promotion on winter clothing, logistics may have to work out how to get a product to another part of the country or another region of the world.
  • A promotion may be much more successful than anticipated and the last thing your organization wants is to have stores, restaurants or retail outlets notifying customers that they have run out of the latest promotion.  Logistics needs to move more raw materials than anticipated and more finished goods.
  • A promotion may experience a high level of success in certain geographies, and less in others meaning that the initial distribution plans need to be readjusted.  As an example, a hot summer on one coast and wet one on another could impact the success of a frozen-food promotion. 

Although implementing a promotion can be less predictable than regular business operations, early alignment across marketing and logistics teams can ensure promotions realize their full sales potential.   And by maintaining communication and integration throughout the promotion, and making sure that everyone is looking at the same data and reacting accordingly, logistics can become a key player in ensuring that promotions don’t just run well, but deliver the anticipated financial results.

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