- Learning Objectives
- Evolution of the Supply Chain Concept
- Total Systems Approach and Boundary Spanning
- Conceptual Foundations of Demand Chain, Value Chain, and Supply Chain
- Strategic Alliances and Partnerships
- Organizational Learning from Strategic Alliances
- Interfaces among Purchasing, Production, Logistics, and Marketing
- Theory of Constraints (TOC) for Supply Chain Management
- Change Management for Supply Chain Management
- Chapter Summary
- Study Questions
- Zara's Rapid Rise as a Cool Supply Chain Icon
Interfaces among Purchasing, Production, Logistics, and Marketing
According to Ballou et al. (2000), there are three dimensions of supply chain management:
- Intrafunctional coordination, which administers the activities and processes within the particular function (e.g., logistics) of a firm
- Interfunctional coordination between logistics and purchasing, logistics and production, and logistics and marketing among the functional areas of the firm
- Interorganizational coordination, which takes place between legally separated firms such as manufacturers and their suppliers.
This section emphasizes the interfunctional coordination between several business functions. For instance, the production of finished goods requires acquisition of raw materials, parts, and components, which triggers a set of purchasing activities. Also, the quality of incoming materials and parts obtained through purchasing often determines the quality of finished goods for sales and distribution. Thus, purchasing is tied to production, marketing, and logistics.
From cost perspectives, an effort to lower logistics costs by consolidating smaller shipments and using a slower mode of transportation would increase lead time and consequently increase inventory carrying costs, while hurting customer services through the delayed deliveries. That is to say, a change in logistics activities directly influences the effectiveness and efficiency of production and marketing. In particular, logistics is closely linked to marketing through their roles in customer services. As graphically displayed in Figure 1.6, logistics contributes to the “place” dimension of the marketing mix by creating both “spatial” (moving products to the customer’s location) and “temporal” (holding inventory until the customer demands it) utilities for the customer (Lambert, 1976, p. 7). By the same token, real-time point-of-sales information fed by the retailer would prepare for the manufacturer to produce and keep the appropriate stock level and requires less need for large warehousing space. This example illustrates the influence of marketing on production and logistics. Considering these interdependences among purchasing, production, logistics, and marketing, a balancing act is needed to achieve the desired benefits of the firm as a whole. Such a balancing act can be put together effectively through supply chain integration.
Figure 1.6. The logistics and marketing interface