Exploring the Intersection of Marketing Analytics and Supply Chain

Stefanie: Prior to coming into this role at Kinaxis, I primarily focused on storytelling. As analytics folks and data-minded folks know, data is important – but I think the piece marketers often miss is the emotional connection and the story. As consumers, we often buy things because they have some sort of meaning to us – so it’s really important to consider that emotional and storytelling piece. I think back to a conversation I had with our CEO in my first interview here at Kinaxis where he said that supply chains are as old as time. Thinking back to the beginning, it all started with hunters and gatherers. What they exchanged at that time was all about necessities – food, shelter and water – and that’s how supply chains started. Now that they have continued, we also use them to get our niceties. Supply chain is also the biggest user of Earth’s natural resources. All to say – the work we are doing as a company to help power supply chains around the world is meaningful and impactful. That’s the kind of storytelling I want to do for the brand and get out there in a way that connects to what our buyers relate to.

Polly: The simplest definition I can think of for a supply chain is that it’s our job to figure out how to get the right stuff to the right place at the right time. That sounds super simple, but it’s incredibly complicated. We have to figure out what we’re going to make, how we’re going to get it to our customers and how to get it there on time without getting damaged. There are lots of elements to that – and a lot of metrics to consider regarding a supply chain’s ability to contribute to the bottom line. Think about a company like Apple. When you think about Apple, you probably think about your iPhone or computer – and you think of it as a design company. And it is a design company. But, I want you to think about how important the supply chain is to that design experience. First of all, Tim Cook, the CEO, grew professionally in the supply chain – which is not a commonly known fact about Apple. Now, with the iPhone, Apple has to think about how to make it so they can ensure they get the supplies they need. For people like me, who order their Apple products in the mail, they also have to think about the unboxing experience – yes, that’s also supply chain – and how to get the product all the way to me so that I can unbox it, use it, have value and have fun. They also have to make sure it gets to me on time and that I’m communicated with along the way. Those are just a few elements I want you to think about related to what supply chains do.

At Kinaxis, we help companies – especially those in the orchestration phase – think about how to plan for all those steps. How many do we make? What materials do we need? Where do we have inventory and distribution centers? How do we make sure we have the right packaging we need in the right places at the right time? All those are planning questions. Concerning  execution, you might have heard about the problems with the rebel attacks in the Red Sea. That has had a disruptive effect on supply chains and execution. Maybe you’ve got finished goods on the boat that you’re trying to get to customers. In the analytics space, we often think about about analytics giving us insights – but we don’t just want to admire problems. We don’t just want to say, “Oh, look at that – our stuff is stuck on the boat. It can’t get through the Red Sea.” That doesn’t do a lot for you. You actually need to figure out what to do about the fact that the stuff is stuck on the boat, how that impacts your supply chain end-to-end and what decisions you need to make in the execution phase. 

Stefanie: Prior to joining the company 10 months ago, I wasn’t familiar with Kinaxas – and now part of my job is to make sure all the right people around the world are familiar with Kinaxas and what we do. What I would say is that we are a very humble, hardworking company. We take on the biggest challenges in the world around supply chain and solve them – but not in a way that says, “Oh, look at us.” We’re about trust, reliability and solving really difficult problems. Powering the world’s supply chains is what we’re all about. We want to be the pipeline behind the operations behind your supply chain that you believe in and trust. Our customers in different regions might say different things that resonate with each of them. For our North American customers, that’s resilience and agility. In Asia Pacific, speed is really important. And to our European colleagues, safety, visibility and sustainability are key. Without visibility, how do you improve on the sustainability front? Behind all of that is a trustworthy company – and that’s what we want all of our customers to know about us. They can rely on us no matter how challenging the situation is.

Stefanie: Supply chain is a brand differentiator. I truly think that is how you should be thinking about supply chain – and it’s how many of our customers think about their supply chain. Think about our experiences with Amazon, for example. We use Amazon because we know we can rely on them to get something from A to B within 24 hours of when we want it – and the way that’s set up expectations for consumers has made things challenging for some of our customers. It’s not easy to compete with that sort of expectation. Another example is one of our customers, Unilever. They are very focused on purpose – and their brand is making sustainable living commonplace. That’s how they talk about what their goals are – and certainly, supply chain is one of the ways they do that. In November of this past year, they opened up access to their patents around the reformulation of ice cream and their cold chain and distribution process. Instead of keeping it at -18 degrees Celsius, they warmed it up a little bit to -12 degrees and shared the patents so the entire industry could be more energy-efficient. Talk about a brand differentiator – they set an industry standard. I think many of our customers think of their supply chain in that way. Customers want to be associated with and buy from companies like that.

Polly: There’s a similar example from Colgate, another one of our customers. They invented a recyclable toothpaste tube and shared the design of that tube so the whole market could use it. What you have to think about is the fact that if your packaging changes – whether that’s a recyclable tube, a different box, or no box at all – it can change your placement on the shelf. It impacts how many you can put on the shelf and how your retailer puts it on the shelf. So, that’s a supply chain question that affects placement – and placement all the way down to placement on the shelf. That’s not to mention all the changes we’re seeing with omnichannel and direct-to-consumer strategies. All those have supply chain implications going on behind the scenes that impact your product, pricing and placement. 

Polly: I’ll shift and give another example of diapers. Diapers, to my knowledge, are not typically sold direct-to-consumer, but the point I want to make relates. One reason companies like the direct-to-consumer model is that it gives them the ability to connect directly to the customer. They want to be able to have that close relationship. Now, what diaper companies will do is sell infant diapers at a loss, essentially, because they know if you start using one brand when your baby is first born, you’re more likely to stick with that brand. They have a lot invested in that relationship. 

The same thing applies to direct-to-consumer companies. Whatever they can do to build that relationship with a consumer allows them to get data on end buyers, which can give them a richer source of information to make decisions. But from a supply chain perspective, it complicates things. If you think your demand is going to be for 19 widgets, but your widgets come in pallets in lot sizes of 50, you can’t just order 19. You have to order 50. So, you have to think about supply chain implications – and that goes all the way to the direct-to-consumer model. Again, you have to think about flexibility – because consumer patterns change. Direct-to-consumer went up significantly during the pandemic, but has gone down in some areas and hasn’t played out exactly like everybody thought. So, you have to build a flexible supply chain and think about those costs. 

Polly: Supply chains are historically seen as a cost center and are saddled with this idea of “get the right stuff to the right place at the right time for the lowest cost.” But that’s not easy to do – it’s an oversimplification. Let’s go back to our example of our boat stuck somewhere out in the sea. Should it wait outside the Red Sea and see if things clear up? What should it do? Maybe there are multiple things on that boat. Some are high-volume, but low-margin products that you’re willing to let wait. They’re low-margin, so you don’t want to expedite. But maybe you have a high-margin, highly valuable product that you’re going to pluck off the boat and expedite and put it on a plane to ship it to the customer. So, you need to have that transparency in your supply chain so you can understand how to make those decisions. What should you expedite, and where should you not waste money? Any cost you incur that is in excess of what you thought about, you’re going to have to think about whether to pass it on to the consumer, or the customer if you’re a B2B business. Another example is if you want to have more environmentally-friendly practices. If you’re the first mover, you don’t necessarily face an advantage – you may incur a higher cost to have more sustainable packaging that costs you more to make. Now, if you can get the whole market to adopt it, there will be more suppliers of those materials that will drive the costs down – so you don’t have to pass those first mover advantage costs onto your customers. So, supply chain is really a business of trade-offs – a decision you make may increase the price, but if it increases customer satisfaction, customers may be willing to pay for that.

Stefanie: From a B2B perspective, it’s all about the value you’re delivering to the end user – which is the customer in this case. If your customers value natural ingredients, or sustainable packaging, those are the things you need to think about when you’re thinking about price. Again, do you pass that through to the consumer as part of your brand differentiator? In Amazon’s case, that’s speed. So, it really is about value and trade-off.
 Polly: Speaking of Amazon, I’m sure you’re all experienced with those “nudges” they give that say, “If you’re willing to take this delivery not tomorrow, but Friday, we’ll give you this credit.” If it’s going to cost them more to get it to you tomorrow, what are they willing to give you in exchange for you waiting? And how do they market that idea? So there’s a marketing angle to this and also a trade-off decision. How do they make that decision on the fly? They have to have a platform that can make that analytical decision immediately – and then later, ex post facto, look at what decisions were made and figure out how to use that data and the insights from it to tweak their supply chain. A lot of companies are using analytics to make supply chain decisions that have marketing implications. 

What’s not widely known is that a frightening amount of returns end up in the landfill. So, companies have a big incentive to think about those trade-offs. How can they satisfy the customer by letting them have anything they want at any time – and letting them return things with no questions asked – while knowing that they’ll get pennies on the dollar back for those returns? There are sustainability, cost and brand implications they have to consider. Burberry got in big trouble years ago because they didn’t want Burberry-branded products at a Goodwill – so they burned them. They got terrible attention for this – there are people who don’t have enough goods in this world to start out with, and they were burning this luxury brand. These supply chain decisions have brand implications. 

Stefanie: As marketers, we think about return on marketing investment (ROMI) – what we’re going to invest in and how much it’s going to cost us to sell a product or acquire a new customer. So, we think a lot in those terms when we’re thinking about promotion strategy. One brand that comes to mind is an athleisure company. They have a ton of brand equity in their merchandise bags, and they were making all of those bags in one factory in Southeast Asia – which means that all of that equity was sitting in that one factory. If a fire or tsunami happened in that region, what would be the impact of that decision? That’s one way that supply chain can impact promotion strategy. I also want to go back to Polly’s example of Apple and the unboxing experience. Every decision that they make, whether it’s sustainability or cost, goes back to that ROMI metric and supply chain plays a critical role in those decisions.

Polly: There’s a very important phenomenon in supply chain called the bullwhip effect – which was coined by a professor named Hau Lee at Stanford – that also relates to marketing. One example is Volvo and green cars they had made that weren’t selling very well. What’s complicated as a marketer in the automotive business is that original equipment manufacturers (OEMs) don’t sell direct-to-consumer – they have a dealership model. That means they don’t have the end customer data. So, what happened is that dealerships were sitting on all these green cars that wouldn’t sell – so they started doing a ton of promotion. Suddenly, there was an increase in buying of green cars, so somebody back in Sweden assumed there was more demand for them and decided to ramp up production. However, that was the problem they had in the first place. So, you want to have good data analytics and visibility. Most of us just go to the lot and buy what’s available – you wanted a green car with a sunroof, but they didn’t have any, so you buy a red car with a sunroof. You didn’t want red, but you wanted a sunroof, so you buy that one. Automotive companies have had to figure out how to plan for all this and that has supply chain implications because of the parts and materials they need – and promotion is at the root there. 

Polly: Thinking about sustainability, a lot of consumer goods companies have realized that many cleaning products have a lot of liquid in them – and when you’re shipping liquid, you’re shipping excess weight. Considering shelf space and packaging as well, they’re looking at how to make these products more concentrated and use less packaging. What they have to do is work backwards – thinking about what the customer wants and how to satisfy them. They want a good-quality product at a reasonable price – and supply chain has an impact on that. Companies are also thinking about nearshoring to be closer to their customers. Maybe a company will decide it wants three suppliers but wants them closer to their customers – one in Asia, one in Europe and one in North America. That way, if there’s a disruption, there’s not only redundancy in their supply chain, but they’re closer to the customer. Maybe you go with a supplier that costs you a little bit more money, but it gives you greater reliability and trust and allows you to deliver on the customer experience. You’ll be able to get the product on time to the customer because it’s closer to them and there’s less disruption. Again, supply chain is all about a trade-off game. Mars, another one of our customers, did something similar. They had 1,500 suppliers of palm oil and decided to shift to 100 suppliers to reduce deforestation of the rainforest in Southeast Asia. They figured that if they had fewer suppliers, they could monitor them more closely and build relationships with them. That’s another trade-off. In this case, they valued sustainability and reduced to fewer suppliers, which may have implications on product quality or cost.

Stefanie: Given how much complexity is behind the scenes, I find it fascinating that so many companies make all of these decisions in spreadsheets. As you can imagine – the sustainability team sits somewhere, and the person who manages scheduling sits somewhere else – so it’s fascinating to think about all those different spreadsheets and how it all has to come together. Add to that all of the disruptions we see in the world today… and it’s just fascinating. What Kinaxis does is connect all of those spreadsheets into one pane of glass behind technology. That’s the reason why our customers like Unilever can make the smart decisions they do and make them agilely and responsibly. They can see that view much differently than they could before. 

Polly: Depending on where you are in your career, you may think that what Stefanie just said sounds so obvious. Of course you shouldn’t run your supply chain on a spreadsheet. You would be shocked and dismayed at how many big companies are running their supply chains on spreadsheets or paper binders. What happens when you don’t have connected systems is that you can’t make decisions quickly. Let’s say a retailer approached Procter & Gamble and said, “We’d love to do a big promotion on one of your products – do you have enough product for us to be able to do that?” It used to take them days to figure out whether they could respond to that incremental promotion request. Taking days means running the risk of the retailer going to another consumer goods company who can respond faster. But, it’s a complex decision – they had to look across their distribution centers, see whether they have inventory, look at what orders they promised already and look at the schedule of the factory. Now, they have concurrent end-to-end planning, so everybody can see the same information at the same time to answer that request in minutes. 
Stefanie: When I think about the marketing perspective, customers don’t necessarily know that it’s wrong to still use spreadsheets. So, we’re listening to things they’re saying to us, like “We want to be more efficient. We’re not moving fast enough. We don’t have visibility. I can’t see what my colleague down the hall is doing.” We’re looking for those call-outs to be able to have a conversation with them about end-to-end visibility. It’s using that data as a listening mechanism to stay ahead of what our customers want and be there before they are.

Polly: Give supply chain a serious consideration even if you don’t think you want to make a career in it. Hopefully, the examples we’ve given illustrate the key role supply chain plays in marketing – so even if you do a stint in supply chain, you’ll learn a lot that you can carry forward throughout your career. Mary Barra, CEO of General Motors, made her career in supply chain – so I think it’s a great path to the C-suite. As we learned during the pandemic, supply chain plays an important role in delivering on your brand promise. If your career shows you know how to use supply chain as a tool to execute results for your company, that’s a path to the C-suite. Another piece of general advice I would give is to carefully evaluate new opportunities and roles in terms of who you will work for and who you can learn from. I can almost guarantee that the most fruitful career opportunity will be the one with the team you can learn the most from, even if it’s a job that feels a little less interesting to you on paper. Wherever you can learn, go there – that’s where you’re going to get the most bang for your buck.

Stefanie: I think back to something our CEO says all the time. He’s been in the industry for decades and he says that many years ago, he could go to any party and have a conversation with anyone about multi-echelon inventory optimization – and people would walk away and say, “No, thank you.” But today, you can have a conversation with somebody about supply chain and they’re super interested. Covid has changed that for us – it’s made supply chain real to all of us. But, it’s really just the beginning of the importance supply chain will have in our world going forward. So, give it a shot. It’s super interesting and fun. My general piece of advice, from personal experience, would be to try new things. Try all sorts of different things. I don’t think any of us would say we had our career lined up linearly. Every step you take is an opportunity to learn information as to where to go next. 

Polly: It’s already making a huge impact. Let’s think about demand. Historically, we have made demand and forecasting decisions based on sales data and sales history. The problem with that is that this only looks at the rearview mirror. It only gives us information about what was done in the past, which may not be an indicator of the future. We might want to bring in other outside signals to enrich our understanding. A retailer, for example, may want to look at events happening near their location that may impact demand. If we want to be market-driven, we have to look at external signals beyond sales history – and AI can help us do that. We can use machine learning to bring in external signals, called demand sending, that can increase the accuracy and granularity of our demand forecast. That’s just one example. The pillars of AI are data, data and data. We have a lot of data in supply chain – so getting more data and getting more richness out of your data to make better decisions is important. Generative AI also has incredible potential to allow humans to increase their productivity.