Marketing Channels and Logistics: Guinness GB - Essay Example

?MARKETING CHANNELS AND LOGISTICS: GUINNESS GB Introduction Marketing channels refer to the avenues that companies use to enable its products to be availed to the customers or consumers (Banyte, Gudonaviciene and Grubys, 2011, p. 319). This is a very important function of any successful company. The market channels therefore include wholesalers, distributors, retailers and sales agents. Marketing logistics on the other hand is used to describe the physical flow of a company’s products, information and services from the point of production to consumers (Dow and Sungwoo, 2011, p. 108). Within marketing channels, inventory management is a core determinant of effectiveness and efficiency of the flow of information, services and goods. Inventory management is defined as the regulation of a company’s inventory with a view of striking a balance between what is considered to be too little and too much inventory. Through inventory management, managers of a marketing channel are able to buffer shortages and manage related costs. A Co-Managed Inventory (CMI) is that which involves active collaboration of supply chain parties or marketing channels in facilitating the flow of products to the final consumer and meeting the needs of the market in an efficient and effective manner. This paper is based on the Guinness GB case study. The four main challenges that the company’s senior management faces in the implementation of the company’s CMI are described. Moreover, the paper gives explanations of the most appropriate recommendations for the company as solutions for the challenges in CMI implementation. Challenges in implementation of CMI within Guinness GB Conflicts There are evident conflicts within Guinness GB’s marketing channels which is challenging the implementation of the CMI. This is demonstrated by the fact that “different parts of the business working to different versions of the plan” (Pech, 1998, p. 10). This means that the management team at Guinness GB is facing challenges in bringing together all parties of the marketing channel to collaborate and work towards a common goal. As a result the implementation of the CMI is faced with a challenge. Lei (2011, p. 267) points out those conflicts within a marketing channel would either be horizontal or vertical. Horizontal conflicts result from disharmony among parties of a marketing channel which are at the same level. On the other hand, vertical conflict results from disharmony among parties of marketing channels that operate within the same supply chain (Dow and Sungwoo, 2011, p. 110). Within Guinness GB, the management is facing a challenge of harmonizing the various parts of the company’s market chain both within the same level and at different levels of the supply chain. This situation within the company has resulted into inefficiency in the movement of inventory. This is due to reduced collaboration and communication between the various parts of the company’s supply chain. Daugherty, Haozhe, Mattioda and Grawe (2009, p. 4) argue that some level of conflict within a marketing channel would reflect healthy competition within the company. Within Guinness GB, the senior management is faced with a dilemma between allowing the parties of its marketing channels to compete and controlling then m centrally. This has in return led to the conflicts within the parties of the channel and a challenge to the implementation of the CMI. The various parts of the company are trying to achieve more than other parts. From the case study, it is apparent that the senior management of Guinness GB is faced with a challenge of ensuring that the goals of the various parties of the marketing channel are compatible. Banyte, Gudonaviciene and Grubys (2011, p. 320) explains that goal incompatibility is one of the major challenges and conflicts with a supply chain which managers have to deal with. This is exemplified by a situation where the dealers, suppliers and producers may have different goals related to the price. There are also differences in perception among the senior management of Guinness GB which is causing a conflict and a challenge in the implementation of the CMI. Increasing Involvement or Cooperation of Parties The senior management is specifically faced with the challenge of involving all parties of the marketing channel for successful implementation of the CMI. David Ingram and John Cochrane agree that they would have preferred “more involvement of the sales and order processing areas” (Pech, 1998, p. 1). It is argued that successful, efficient and effective marketing channels are characterized by collaboration and flow of information between parties (Sa Vinhas and Anderson, 2008, p. 513). Moreover, the parties of a marketing channel must work towards the attainment of a common goal. Harmony within a marketing channel must be facilitated by managers so that the management of inventory involves all parties (Daugherty, Haozhe, Mattioda and Grawe, 2009, p. 15). The challenge that the senior management is facing at Guinness GB is to ensure that the parts of the company’s marketing channel are involved in healthy competition while at the same time working collaboratively towards the achievement of a common goal. In order to overcome the challenge of lack of adequate involvement of parties in the marketing channel, Guinness GB’s top management has however endeavored to employ some strategies. For example the proposed changes to the marketing channel resulted to a situation where “all aspects of product supply were brought under a single head” (Pech, 1998, p. 7). Nonetheless the senior management of the company is faced with the challenge of effectively and adequately bringing together the logistics, production and quality units of the company into a unified whole. As a result, the implementation of the CMI within Guinness GN is challenged. Dow and Sungwoo (2011, p. 108) illustrate that in order for a company to achieve effective management of its inventory within the marketing channels, the production function must collaborate with the logistics and quality control aspect of the company. The challenge that Guinness GB faces in promoting this collaboration is demonstrated by the fact that “functional production and customer objectives are inevitably at odds with one another” (Pech, 1998, p. 7). It is therefore in the light of this illustration that it is arguable that the management of Guinness GB is challenged in their endeavor to promote collaboration of parties as a way of facilitating the implementation of the CMI. Priorities The priorities of the senior management within the company are a challenge to the implementation of the CMI. This is demonstrated by the assertion that “CMI would be just one of the several worthy initiatives currently underway across the company” (Pech, 1998, p. 2). In this sense, it is evident that the top management of the company has not prioritized the implementation of the CMI regardless of its great significance and importance to the success of the company in relation to the performance of its marketing channels. It is therefore the lack of proper prioritization of programs and projects within Guinness GN which is acting as a challenge to the implementation of the CMI. The lack of proper prioritization to the implementing the CMI within Guinness GB has resulted to negative implications on its market share. It is demonstrated from the case study that Guinness GB is only enjoying a 5% share of the market. This is relatively low compared to the 33% market share that is enjoyed by Scottish and Newcastle, which is one of the large competitors of Guinness GB. These illustrations concur with the assertion that when the implementation of an effective inventory management system is not prioritized by the management of a company, poor performance within the market is to be expected (Daugherty, Haozhe, Mattioda and Grawe, 2009, p. 8). It is apparent from the case study that the senior management team has prioritized the costs of production over the need for improving the quality of services to customers (Pech, 1998, p. 7). This means that setting the right priorities is a major challenge and hindrance to the successful implementation of the CMI within Guinness GB. Lack of prioritization of customer service is likely to cause untimely supply of goods and services to the consumers (Banyte, Gudonaviciene and Grubys, 2011, p. 326). This would lead to a situation where consumers are inconvenienced in their pursuit to access and consume a company’s products. Eventually the loyalty of the consumers to the company’s brand will be lost if their needs are not given the first priority and met. The challenge that the management of Guinness GB are evidently facing is ensuring that all parties of the supply chain are involved at facilitating the flow of products to the consumer through a Co-Managed Inventory approach. Since the management have prioritized the costs of production over customer needs, the management of inventory is likely to lead to a state where the demand within the market and the needs of the consumers are not met effectively. Planning and Reduction of Stock Holding Challenges in planning are evidently being faced by the management of Guinness GB as reflected by the case study. This is revealed by the fact that different parties within the company’s supply chain are implementing different versions of the original plan (Pech, 1998, p. 10). It is explained that if the demand plan in relation to demand sales forecasts is not designed well, there is likely to be confusion within a company’s marketing channels (Dow and Sungwoo, 2011, p. 112). This will act to derail effective management of the company’s inventory and consequent inconsistencies in the supply of goods to the market. In return the demand of the market will not be satisfied satisfactorily (Lei, 2011, p. 270). This seems to be the actual challenge within the management of Guinness GB and the resultant difficulties in the implementation of the CMI. Sa Vinhas and Anderson (2008, p. 512) further point out that supply planning is the role of the management of a company’s marketing channels which must be designed well with an aim of promoting the efficiency in the flow of goods and services from production to the level of consumption. The challenges that the management of Guinness GB are faced with include proper material requirement and capacity planning. This has in return caused inefficiencies in the implementation of the CMI within the company. The challenge with stock holding within Guinness GB is also reflected within the case study. The effectiveness of CMI in the reduction of stock holding is revealed by the fact that “CMI had reduced stock by around 30% during the first year of operation with a further 10% reduction anticipated for 1996 (Pech, 1998, p. 14). It is the challenges with reducing stock holding which motivates the company’s management to endeavor in implementing the CMI. Banyte, Gudonaviciene and Grubys (2011, p. 322) explain that a Co-Managed Inventory approach of a company’s supply chain will ensure a reduced stock holding. This is due to the collaboration which is mediated by CMI and the effective communication among the marketing channels to prevent unnecessary holding of stock. In return, the company is enabled to meet the demand within the market and hence satisfy the needs of the consumers. This will further improve sales and the performance and share of the company within the market. The following sections describe the recommended solutions for the challenges that the senior managers are facing within Guinness GB in the implementation of a Co-Managed Inventory. Recommended Solutions Mitigating Channel Conflicts It is recommended for the senior management at Guinness GB to endeavor at mitigating the conflicts within the company’s marketing channels as one of the most effective ways of overcoming the challenges in CMI implementation. Sa Vinhas and Anderson (2008, p. 508) explain that some level of marketing channel conflict is inevitable. This is more especially when a product in mature within the market. Nonetheless conflicts within the marketing channels must be mitigated to ensure that all parties of the supply chain are involved in the management of inventory (Lei, 2011, p. 271). In this regard, Guinness GB management team should design and implement distribution policies and philosophies which focus on long term initiatives rather than short time opportunistic business endeavors which are likely to curtail the relationship among the marketing channels. Moreover, the management of the company must motivate all parties of its supply chain through an appropriate and fair system of economic. Through this approach, conflicts among the parties of the supply chain will not exist which will motivate them to work towards a Co-Managed Inventory system. Furthermore the top management should resolve conflicts within the marketing channels through less restrictive and flexible agreements. Premature distribution must also be avoided within the company so that conflicts do not arise among the parties of the marketing channels. More importantly, the senior management of the company should define the boundaries and obligations of every party within the marketing channel so that possible conflicts are avoided. Finally, the management would avoid conflicts and improve the logistics of the supply chain by ensuring that parties understand the “motivations, objectives and constraints” of the marketing channel (Pech, 1998, p. 10). Prioritizing Marketing Logistics The physical flow the company’s good must be prioritized to ensure that the demand within the market is satisfied in the most effective and efficient manner. In this regard, it is recommended that the costs of production must not be the top priority within marketing channels as compared to the market demand. Nonetheless, it is necessary to note that the costs of production must be managed well to ensure that the company achieves its goals for profit and return on investments. Sa Vinhas and Anderson (2008, p. 512) demonstrate that the needs of the market for high quality products must be prioritized by the management team of marketing channels. This will enhance the involvement of the parties within the supply chain in ensuring that the marketing logists lead to efficiency in the distribution of goods to the consumer. Priorities for the needs of the consumers will ensure that the marketing logistics are designed and implemented in a manner that causes Co-Management of Inventory for the sake of meeting the demand of the market and the needs of consumers for quality. It is recommended for the management of Guinness GB to ensure that the marketing logistics especially inbound, outbound and reverse distributions are prioritized depending on the needs of consumers. As a result goods with reach the market at the right quality, physical condition, temperature and taste. This reflects that the parties within the marketing channel are focused at meeting the needs of the market. In return, the company will register more sales. More importantly it is recommended for the company to set goals and objectives that all parties are mandated to follow with an aim of meeting the market needs as top priority. Improving Collaboration It is recommended for the management of Guinness GB’s marketing channel to ensure that all members of the supply chain works cooperatively with a view of attaining the overall goals and objectives of the company. This will facilitate the implementation of the CMI. Nonetheless, the collaboration of parties must not prevent the members of the marketing channel from performing the tasks and roles which they serve best. This means that each section of the marketing channel within the company should be allowed to perform its task with the guidance of common goals and objectives. This will ensure that the marketing channels within the company’s supply chain and the related logistics are designed and implemented with a view of meeting the common goal and objective of the company. In this regard, the implementation of CMI will be facilitated. More specifically Guinness GB must involve its customers, off trade wholesalers, grocery multiples and other brewers in a collaborative was of facilitating the distribution and supply of goods to the market (Pech, 1998, p. 15). The involvement of these parties reflects that the senior management team will be enabled to implement the CMI in a more efficient way. Implementation of technology in management of the marketing channels It is recommended for the management of Guinness GB to adopt and implement technology in the management of the marketing logistics, planning of supply and demand, monitoring and regulation of stock holding. This would be achieved through the implementation of management information systems within the whole supply chain. Through a management information system, the management team will be able to monitor the various parties of the supply chain to ensure that they participate facilitating the marketing logistics. Additionally the use of technology will facilitate communication among the various parties of the company’s supply chain. This will in return enhance collaboration and therefore the implementation of the CMI. More importantly the plans, objectives and goals of the company will be communicated effectively within the marketing channels through technology. This will ensure that the management of the company’s inventory involves active participation of all parties. Banyte, Gudonaviciene and Grubys (2011, p. 319) explain that the adoption and implementation of modern technology in the management of a company’s supply chain is the most effective way of promoting collaboration and communication. Moreover technology applied by managers for efficiency in the monitoring of inventory to ensure that stock holding by members of the marketing channel is prevented. This means that technology will help the management of Guinness GB to ensure that the needs of the market are met through proper planning and communication among the production, distribution and supply functions of the marketing chain. The logistics of distribution and supply will also be monitored closely through the use of technological applications. Finally, confusion within the parties of the supply chain will be eliminated through facilitated communication via technological channels. Conclusion In the light of the above analysis and discussion of Guinness GB’s marketing channel, it is conclusive that the challenges that senior managers are facing in implementing the CMI can be solved. These challenges include conflicts within the parties of the supply chain, improving cooperation, setting priorities right, planning and reduction of stock holding. It is regard to these challenges in the implementation of CMI that the paper discussed recommended solutions. The recommended solutions for these challenges include mitigation of channel conflicts, prioritizing Marketing Logistics and improving collaboration among the functional areas of the company’s supply chain. More importantly though is the recommendation for the adoption of technology in management of the company’s marketing channels as an effective way of implementing the CMI within the company. References Banyte, J, Gudonaviciene, R, and Grubys, D 2011, 'Changes in Marketing Channels Formation', Engineering Economics, 22, 3, pp. 319-329. 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