Marketing Owns Inventory

Marketing Should Own Inventory

I’ve seen Marketing expected to manage these business success metrics:

  • Market share
  • Profit margin
  • Sales forecasting

To support these goals, Marketing is generally supported out of the following costs:

  • Payroll for employees
  • Media & collateral
  • Public Relations
  • Trade Shows
  • Training
  • Advertising

In two of the companies I have worked with, Marketing felt hampered in its efforts to reach its goals due to product lead times. In both cases “Lead Time” was not formally considered a Marketing Metric, and in both cases “Inventory” was not considered a Marketing cost.

This seems to me to be a fundamental organizational defect. Delivery lead time is a competitive consideration in many markets (I might dare say most markets), and it’s widely recognized that inventory can be substituted for lead time, and lead time for inventory. This equivalence is a fundamental theory of the Toyota Production System.

It’s true that the need for inventory below the shippable SKU level is partly determined by the manufacturing process capability. Manufacturing clearly owns the responsibility to continually improve the reliability and speed of the manufacturing process. But it still seems quite achievable for the responsible Marketing representative to say, “We have X inventory position in order to support Y delivery expectation.” If challenged as to why so much of X inventory is in WIP (not yet shippable), it should be fairly straightforward to show the inventory required to buffer against the supply chain performance.

As all production and supply chain managers know, a great deal of the need for inventory comes from variance between the demand forecast and the actual demand. It’s also sometimes been my experience that Marketing (or Sales) wishes to divert inventory that was built for Customer B in order to satisfy Customer A – but will still sometimes unabashedly complain about the lateness of fulfilling Customer B’s order. Sometimes these sacrifices have to be made; but Marketing should be paying out of their own pocket.

Simply put, Production and Supply Chain should have fiscal responsibility for inventory covering supply chain and manufacturing process variance, and Marketing should have fiscal responsibility for inventory covering demand variance. Somewhere out in the wide world I’m sure it is so; but I wonder why it is not the rule everywhere.

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