Supply Chain Management

The result in savings leakage or miss, overpayments and lower contract compliance rates in marketing spend is because, marketers are ready to sacrifice costs to achieve high quality products and services that can help position them and their products well in the market, especially in the organizations where marketing is just not a cost center and drives the organization business. Typically a sourcing specialist (licensed to spend the company $) priority is - follow the procurement principles, save $$ for the organization, provide quality service through their suppliers, collaborate with their suppliers and manage their relationship - in that order (very debatable). Though both the departments look at having a marketing campaign as a very important and a possible differentiator to their competitor, but their focus is slightly different. For example, look at a small print campaign – Marketing objectives are Brand Management, Revenue Generation, Response Rate and later cost of print production. But the procurement team looks at forecasting this better, standardization of the print materials, time to market and supplier machine utilization. Probably the above 3-4 points explain why there is an invisible marketing spend and less cross-pollinating of procurement and marketing. Marketing spend, in most cases, creates organization tensions - I have seen in most of the organization I have worked or played a role of external consultant, the marketing department will provide the requirement / scope of work, quote, delivery date and T&Cs to procurement department, just to create purchase order. Procurement department is involved in the fag end of the game and will not have enough scope to negotiate the price.

Collaboration between marketing and procurement functions and applying the procurement basics are possible, but not an easy task. It will take quite some time for the sourcing specialist to win the confidence of the marketers. (That’s why probably the marketing sourcing managers get more bucks). If the organization they work is regional or global, then spend aggregation and leveraging for volume discount is much easier in certain marketing areas like Printed Materials. Involving suppliers and procurement early will help marketing department to conduct a better promotional event or a product launch and researchers have found that 15%-20% savings is possible. Tip: Procurement specialist can consolidate the yearly promotional events, run a full fledge and appropriate sourcing cycle to select a supplier, provide enough time to the supplier to innovate, invest on tools and technology and eventually run a fruitful branding or promotional event. This way cost saving is possible and marketing department commitment to the organization is also met. Also other procurement initiatives like EIPP, spend analysis, supplier consolidation, supplier networks etc can also be extended to the marketing spend.

Final comment, Marketers should believe in Procurement function and collaborate with them, this way the marketers are not required to sacrifice costs to achieve high quality products and services.