When the retail industry embarked on vendor managed inventory (VMI) we focused on the elimination of waste, which was described as the “bullwhip effect” in the supply chain as theorized by Jay Forrester in Industrial Dynamics in 1961.
After realizing the benefits, retailers embraced VMI to reduce uncertainty, variability, and lead times, eventually reducing costs and increasing service levels based on accurate market-generated demand signals.
Sound familiar in today’s "always-on" marketing environments?
Imagine building an environment of effective and efficient processes that drive maximum results while creating sustainable market differentiation — all originating with market-generated demand signals!
Vendor managed inventory is now commonplace, but with the demands of the always-connected consumer, retailers have the opportunity to expand from just VMI to vendor managed marketing (VMM).
Let’s look back at the barriers to the demand-driven supply chain model. It includes a necessary investment in information technology and the creation of a flexible corporate culture that’s willing to focus on customer centricity as the business strategy. Every member of the supply chain must recognize that it can gain more when all members act as a whole. This requires trustful collaboration and information sharing, versus acting in silos as a monolithic entity creating random acts of marketing.In today’s complex marketing environments, new opportunities present themselves with similar challenges. Retailers and manufacturers have access to ever-evolving marketing technologies that can create an environment of collaboration. By sharing information effectively and openly between partners, brands can use VMM to create this ever-elusive advocacy and thus increase value.
For those organizations who sell direct and through channels, the value of first-party data is a clear and sustainable competitive differentiator. The ability to create addressable customer experiences at scale remains the coveted prize, but to fully realize the benefits of addressability, retailers and manufacturers must embrace collaboration. VMM reflects the ability for manufacturers to share data with retailers and their distribution channels, allowing them to deliver highly personalized messaging to segmented markets, driving sales with pinpoint accuracy.
At Merkle, we have helped numerous brands bring this vision to life by leveraging the power of first-party data. Retailers now have the ability to work with manufacturers to create personalized campaigns for specific product offerings to targeted individuals based on market demand signals. Performed properly, vendor managed marketing shares the risk and reward between the parties and creates a differentiated proposition in the marketplace not available solely by either party.
While many manufacturers do selected programs with retailers, I believe we can do more. By enhancing the structure to employ a vendor managed marketing arrangement, brands can gain share, optimize risk vs. reward, and maximize financial outcomes. VMM provides both parties an opportunity to do more, try more, and ultimately benefit more.
At Merkle, we’re partnering with our clients to expand their thinking on what is possible and practical by employing data-driven strategies, supported by a complete range of marketing, technical, analytical, and creative disciplines. The result is an integrated customer relationship management strategy.
As Google would say, the “I-want-to-buy moments” are important for consumers, and they're critical for brands. Are you listening to your market demand signals and taking the appropriate action to win these micro-moments?