Archive for February 17th, 2009

When suppliers are not (the only ones) to blame

February 17, 2009

Sometimes I wonder if the complete failure of certain supply chains isn’t for the better.

Recently the Chinese ministry of commerce announced that 922 toy exporters in Guangdong province closed shop in 2008, out of the 3,089 toy exporters in 2007. While there are many reasons for this (India recently imposed 6 month ban of Chinese toys come to mind); let me offer this particular anecdote.

My 10 month old daughter received an electronic toy penguin from a friend of the family a few days ago. It has a couple of buttons on its stomach which when pressed causes some lights to flash as it plays a random melody. All in all; it’s a pretty average example of what can be found in any Toys’R’Us across the globe. Of course, it was manufactured in China. Now to the peculiarities:

  • It can’t be turned off. To paraphrase a well known tag phrase; it’s a gift that keeps giving (parents a headache).
  • And so far, the most frequent of the random melodies played is “Take me out to the ball park”. And let’s just clarify one thing; it’s a traditional toy penguin, bearing none of the trademarks of the Pittsburg-based baseball team.

So here I am; with an electronic toy that can’t be turned off, which plays “Take me out to the ball park” if anything moves in its vicinity. And this profanity (for lack of better description) is sold in Sweden – a country with little more than 800 registered baseball players – so the potential target audience who might enjoy a penguin which can play “Take me out to the ball park” is limited, to say the least.

Yet someone, somewhere, has made a business decision that there is probably a market for this toy and set about to source a supplier who can produce it; a distributor who can distribute it; and organized a sales force to bring it to the public.

With the toy in hand; the whole set up seems like a really stupid idea to me; unfortunately I doubt that this sentiment is shared among the workers that now struggle to find work in the affected regions.

Getting deeper involvent in marketing spend

February 17, 2009

Getting through to the marketing spend is a tricky task. Marketing departments have run a tight ship when it comes to deciding which marketing supplier gets the biggest chunks of their marketing spend. But there is a lot of work that can be done in this area; both when it comes to controlling the spend and when it comes down to supporting marketing departments with the right tools to ensure competitive bidding for the contracts.

In many cases; marketing directors have had full control over which advertising agency a company works with. Agencies are often invited to creative pitches; where they have the chance to present their marketing ideas for a certain brand and the best presentation is often awarded the contract (when Swedish media daily Dagens Media did a survey regarding this practice in 2007 they found that the average advertising agency spent between 3 to 5 million SEK annually on pitches ). For creative purposes, this is just fine. Unfortunately, a large portion of marketing spend is disconnected from the actual creative process, yet, by tradition, the advertising agency is free to choose sub contractors for print, media placement, production agency (for tv/radio/web etc) and skims a few Euros off the top to generate some extra revenue.

While this might be rather alarming from a spend management perspective; the scariest bit is that advertising agencies rarely care about sourcing; and in bad times, they tend to keep the creative skills and send the administrators looking for a new job. So chances are the marketing buyers, i.e. the companies who actually pay for this (supply) chain is getting the worst end of the deal.

What purchasing departments need to understand is that they can support marketing departments by providing fundamental competition for parts of marketing spend; leave the purchasing of creativity to the marketing department; take control of the less cerebral side of marketing spend. Media, print, distribution etc are very suitable for e-sourcing, and there is a lot of potential savings available.

Many media providers posted record results in 2008; for instance Swedish TV4 increased revenues by 8 percent and European broadcaster MTG increased their sales by 16 percent; this during a year where TV for example lost 0,4 percent of advertising share in Sweden.

As the financial situation cuts budgets across the board, the first month of 2009 has seen a dramatic drop in advertising volume (in the range of 20-40 percent in Sweden according to Sveriges Mediebyråer); meaning that there is an overcapacity in a market which according to many media buyers long have been overpriced and with little price transparency due to discrepancies between list price and the actual prices paid by the advertisers.

Media spending is just waiting to be addressed by some real sourcing strategies.


Follow

Get every new post delivered to your Inbox.