My definition of modern marketing-logistics management’s umbrella of responsibility and authority encompasses all tasks between the point of finished product in the package to retail point of purchase. In addition, on the inbound side, that also includes the management of replenishment activities for all ingredients and packaging supplies up to the production process door.
In the not-so-distant past, most of these off-site processes and activities – such as transportation, distribution, replenishment and fleet operations – were largely out of sight and could only be managed after the fact based on end results. However, today’s availability of a broad range of economical and incredibly powerful real-time technologies plus real-time data, voice and visual communications make virtually all aspects of marketing logistics manageable as they happen, and in real time if desired.
That said, it should be easier to do than ever before, right? Not necessarily!
Dairy and ice cream industry challenges to modern and comprehensive logistics management come in two broad categories: external and internal. External challenges are generally the most obvious and dynamic in that they are constantly evolving and frequently multiplying. Regulatory challenges and limits to operating methods are a growing challenge.
For example, just a few years after major revisions, the Federal Driver Hours of Service are again under review for possible major reductions to driver hours limits. In addition to constantly changing local, state and federal operating restrictions such as metro-area time-of-day access restrictions, there are newly developed local limits on noise, vehicle and refrigeration unit emissions, and in some areas even the types of engines permitted or size and type of vehicle used.
Internal management challenges to modern logistics management and organizational structure are generally less recognized and their negative effects on company profitability and the potential for competitive advantage are less understood within the dairy and ice cream industry. Ironically, the industry’s internal challenges are by far the longest standing, most damaging and continue to present the greatest limits on growth and profitability improvements.
The traditional industry management and organizational structure remains sales/marketing, production and accounting with the various logistics management functions and processes scattered, at lower and secondary management levels within all three departments. Logistics management is not considered a primary operating function. Change in management and operating structure goes against industry and company tradition, challenges departmental empires and runs head-on into the immovable object of intuitional inertia: “It’s worked this way for 75 or 100-plus years, why change it?”
With few exceptions, the dairy and ice cream industry still has not learned the Wal-Mart lesson. Wal–Mart recognized more than 40 years ago it was in the logistics business, not the retail business. Its senior management comes from the logistics side of the business, not the retail stores. The company developed pioneering logistics management technology, processes and methods that provided a competitive advantage not recognized or understood by its competition. It put the right product in the correct amounts at the right place at the right time and at the cheapest cost.
That retail point-of-purchase success enabled Wal-Mart’s rate of growth and profitability increase to literally overwhelm its competition and help nearly put big-box discount pioneer Kmart out of business. Superior inventory and replenishment management enabled Wal-Mart to fly past Kmart before it ever understood what was really happening. Kmart’s retailing skills simply could not compete successfully.
I personally know of only two dairy companies today that have an executive in a senior management position (president, CEO or chairman) with a logistics background or at least an understanding of modern logistics management. Even those companies, however, have failed to fully incorporate a modern logistics management structure into their operating models.
Beyond the Filler
December 1, 2009