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D.K. Agrawal
Marketing and Supply Chain Management,
Rajiv Gandhi Indian Institute of Management,
Nongthymmai, 793014 Shillong, India
E-mail: agrawal_dk2001@yahoo.com
E-mail: dka@iimshillong.in
Reference to this paper should be made as follows: Agrawal, D.K. (2012) ‘Demand
chain excellence: a case study of HUL vis-a-vis P&G India’, Int. J. Manufacturing
Research, Vol. 7, No. 2, pp.213–228.
1 Introduction
Conceptual and empirical research on market orientation has long suggested that
inter-functional coordination is a key to achieving the main goal of marketing – the creation
of superior customer value (Jaworski and Kohli, 1993; Day, 1999). As a consequence, the
relationship between marketing and Supply Chain Management (SCM) has rapidly become
a strategic priority (Christopher, 1998; La Londe and Masters, 1994). SCM has been
defined by the Global Supply Chain Forum as “the integration of key business processes
from the end user through original suppliers providing products, services and information
that add value for customers”. The synergy between SCM and marketing has been widely
acknowledged (Martin and Grbac, 2003; Ellinger, 2000; Svensson, 2002), leading some to
Copyright © 2012 Inderscience Enterprises Ltd.
214 D.K. Agrawal
conclude that better coordination could define competitive superiority in new ways (Piercy,
2002).
Since the last decade of the 20th century, corporate enterprises have been facing a number
of challenges due to increase and change in customer needs and expectations that resulted
in increased market turbulence and intense competition. Simultaneously, rapid Information
Technology (IT) advancements have provided an opportunity for marketers to be more
customer-centric (Kotler et al., 2002). Superior market responsiveness in terms of real-time
delivery of superior value in cost-efficient ways has become a necessity in a complex and
uncertain world (Walters, 2002, Agrawal et al., 2006). But Fisher (1997) identified that
market-responsive supply chains use strategically placed buffer inventories and capacities
to achieve responsiveness and allow inventories to be kept as generic products. Trommer
(1999) estimated $21 billion worth of excess inventory in warehouses on a typical day and
inventory depreciating at 1% per week in the electronics industry. Sage (2000) estimated
$50 billion worth of finished goods inventory – typically a 60-day supply – at dealer ends
or in transit to them on any given day. This supply chain drives results in a huge stockpile
of finished goods inventory. In the USA, a $1.1 trillion inventory supports $3.2 trillion in
annual retail sales (Lee, 2002).
As a result, the business world needs a shift from supply-side to demand-side thinking
(Rayport and Sviokla, 1995). A supply chain has a ‘make-and-sell’ view of the business that:
competes by estimating market demand, planning production, and building up inventory to
match supply and demand for achieving economies of scale (Kotler et al., 2002); is primarily
focused on cost reduction, but contributes little in terms of growth and profitability (Wayland
and Cole, 1997); manages the supply base, including sourcing, supplier integration, and
in-bound management (Copacino, 2003). While responding to dynamic market scenarios,
these measures are not enough (Hoover et al., 2001); the demand chain is often overlooked
(Lee and Whang, 2001); they lack demand-side initiatives (Deloitte and Touche, 2003); they
do not properly understand and estimate the demand, resulting in crashing of the market
hype of the late 1990s about SCM (Caruso, 2003). Keeping the above issues in mind, the
Council of Logistics Management (2004) redefined SCM and emphasised integration of
supply and demand management within and across companies. Despite it, Simchi-Levi
(2010) identified that inventory has increased by more than 60% between 2002 and 2008 in
the USA, requiring demand chain optimisation. So far, most contributions to Demand Chain
Management (DCM) have been based on best practice examples (Lee and Whang 2001;
SAP, 2003; Deloitte Research, 2002) and lack consensus on conceptual foundations.
This paper explores the key market responsiveness factors of DCM through a comparative
study of two leading fast moving consumer product firms in India, namely, Hindustan
Unilever limited (HUL) and Proctor & Gamble India (P&G India).
DCM is a recently introduced approach that seems to capture deeper synergies between
SCM and marketing by starting with specific customer needs and designing the chain to
satisfy these needs, instead of starting with the supplier/manufacturer and working forward
(Heikkila, 2002). While most DCM contributions to date stem from SCM and operations
(Vollmann and Cordan, 1998; Lee and Whang, 2001), selected citations among marketing
academics can also be traced (Roger, 1997; Kotler et al., 2002; Baker, 2003).
Demand chain excellence: a case study of HUL vis-a-vis P&G India 215
Juttner et al. (2007) define DCM as a new business model aimed at creating value in
today’s marketplace, combining the strengths of marketing and supply chain competencies.
Demand chain design is based on a thorough market understanding, and has to be managed
in such a way as to effectively meet differing customer needs. It involves managing
integration between the demand and supply processes; managing the structure between
integrated processes and customer segments and managing the working relationships
between marketing and SCM. Chase (2001) defined the demand chain as a dynamic network
of company’s customers, customers’ customers and direct and indirect marketing, sales and
service providers who facilitate the firm with the capability to get, keep, and nurture profitable
lifetime relationships in better and faster ways. According to Lee (2002), a demand chain is a
network of trading partners that extends from manufacturers to end consumers. The partners
exchange information, and finished goods flow through the network’s physical infrastructure.
Agrawal et al. (2006) advocated that DCMs are demand-driven processes and systems that
manage organisational activities based on responsiveness to market demand. Caruso (2003)
stressed that it is an IT-led strategic concept that enables firms and their resellers to rapidly
respond to rapidly changing customer wants and conditions that affect demand. Blackwell
and Blackwell (1999) explained that the essence of demand chain management is to define
and understand customer demand on real-time basis, followed by a rapid response to it.
According to Lee and Whang (2001), the key to success for many demand chain leaders
is the smart use of information. They make use of a rich set of well-chosen and timely data
to drive their replenishment processes. Understanding demand requires a comprehensive
knowledge of who your customers are, what products/services they like, how they make their
purchases, how often they order, and what constraints they place on the purchasing process. In
DCM, this demand knowledge can then be used to drive a replenishment system that generates
the right inputs from suppliers and reliably delivers the products and services to customers.
Agrawal et al. (2010) explained that DCM involves capturing of demand-related information
by market sensing, followed by various business decisions related to fulfilment of sensed
demand through the network of different organisations or units who keep stock of finished
goods on a real-time basis. In a customer-centric marketplace, the focus of DCM is on real-time
flow of demand-related information from the point of inception (end-users) to the point of use
(vendors). The idea is to make optimal use of the distribution-related functions of marketing
and ensure coordination with other value adding processes of the supply chain. In the demand
chain, some locations of business units – like the Central Warehouse (CW) and Regional
Distribution Centres (RDCs) which, in effect, are internal demand chain members – are owned
by the firm itself. Independent business units – like C&F agent, distributor, wholesaler, retailer
or retail chain stores – are external demand chain members, as shown in Figure 1.
Thus, DCMs are demand-driven processes and systems that manage organisational activities based
on responsiveness to market demand. Melnyk et al. (2010) defined responsiveness as an ability to
change quickly in terms of volume, mix or location as a function of changing conditions. DCM
is a generic framework of consumer-centric business models to enhance market responsiveness
capabilities. It is based on the ‘sense-and-respond’ philosophy that focuses on acquiring new
capabilities to offer maximum customer value in dynamic market conditions. It redefines the
network structure, the information and knowledge sharing mechanism and relationships (Haeckel
and Nolan, 1996). For this purpose, the market responsive demand chain model synchronises
the strengths of marketing and supply chain capabilities by integration of various processes and
activities in a radical new way, as shown in Figure 2.
Figure 2 Market responsive demand chain model
The Fast Moving Consumer Goods (FMCG) industry is the one of the largest sectors
in the Indian economy, with an annual revenue of about Rs 72,000 crore ($160 billion).
The future prospects of this industry look bright, as household incomes are rising. However,
the per capita income level in India is still very low compared to the developed world.
The penetration level of many products is relatively low, and several categories remain fairly
unbranded. All these factors provide a huge untapped potential for the industry. In contrast
to other manufacturing sectors, FMCG is a relatively less capital-intensive and largely
fragmented industry that demands immense market sensing skills, strategic expenditure on
Demand chain excellence: a case study of HUL vis-a-vis P&G India 217
promotion and branding, product availability and demand chain optimisation. Most firms
in this sector create value through product differentiation, package innovation, differential
pricing and highlighting of the functional attributes of products. The top five FMCG firms
constitute nearly 70% of the total revenue generated by this sector (The Economic Times,
August 04, 2008). Firms like HUL, Procter & Gamble, ITC, Nestle, and GlaxoSmithKline
Consumer Healthcare traditionally comprise the first category of FMCG firms. They
generally spend nearly 10% of their revenues on an average on advertising and promotion
of products, which is the highest advertising expenditure figure in the industry. Another
category is non-traditional FMCG firms, which is dominated by home-grown firms like
Dabur, Tata Tea, Marico and United Spirits. These firms have grown to become market
leaders in their respective segments, giving strong competition to the MNC brands.
While inflation restricts the industry’s growth, FMCG firms thrive under inflationary
pressures. Most firms pass on cost inflation to consumers, via a judicious blend of price
hikes, packaged size reduction and change in product mix. Nevertheless, while the FMCG
double-digit growth story is likely to continue, margins may come under pressure, as the
industry is finding it difficult to pass on cost inflation without impacting consumer demand.
The massive proliferation of SKUs (stock keeping units) has complicated the business of
FMCG firms. Consumers’ choice patterns have become highly dynamic these days that
choose any size depending on their usage pattern, budget and storage. The easy availability
of FMCG products in a large number of SKUs has also made the consumer buy lesser
quantities, though with greater frequency.
4 Research methodology
To explore and understand the various dimensions and concepts of DCM and its market
responsiveness capabilities in emerging business environments, an exploratory research was
conducted through extensive literature survey and focus group discussions. Focus group
discussions were conducted among a few senior level FMCG sector professionals to gain a
deeper insight into the prevailing complexities in this industry, and to investigate the scope
and relevance of demand chain optimisation. For the purpose of development of the case
study, a field study had been conducted in the months of May and June 2009 in the National
Capital Region of Delhi, India (the largest market for FMCG industry) to collect actual data
about the status of performance on various critical success factors of the demand chain. This
study was conducted in 100 retail stores, 15 wholesale traders who deal in products of both
firms, and five Redistribution Stockists (RS) of HUL and Super Stockists (SS) of P&G India
(who may be called distributors). Various products of these two firms were physically checked
and analysed. Owners of such stores were also asked to give their general opinion about their
business experiences with both firms. After the field study, focus group discussions were
conducted with the same set of people for better understanding of the implications.
Based on the characteristics of the Indian FMCG industry discussed in the previous section
and on the focus group discussions, it is considered as one of the most competitive industries
in India. As a result, net margins for the FMCG industry have been falling. In this scenario,
218 D.K. Agrawal
FMCG firms have two options: either they increase the prices and maintain their margins;
or they control costs and improve their net margins. With many players fiercely struggling
for mind share and market share by increasing prices, they are left only with the second
difficult option, i.e., cost control. To understand why cost control is a difficult choice, as well
as the only one, the FMCG industry needs to analyse each aspect of the costs. Among all
measures of cost control, the best and the most effective one in a dynamic market scenario
is optimising and managing the demand chain in new ways. The present initiatives of most
of the FMCG firms, including HUL and P&G India, support this hypothesis. Demand chain
cost control can prove to be the crucial differentiator between market dominance and failure.
Based on above scenario relating to the Indian FMCG industry, Table 1 lists key issues of the
demand chain for superior market responsiveness in India.
Hindustan Unilever Limited (HUL): HUL, formerly Hindustan Lever Limited, is India’s
largest consumer products firm. It was formed in 1933 as Lever Brothers India Limited.
It is a market leader in most FMCG product categories, and its products have become daily
household names in India. Since its early years, HUL has vigorously responded to the stimulus of
India’s economic growth. Its growth process has been accompanied by judicious diversification,
in line with consumers’ tastes, opinions and aspirations (The Economic Times, August 04, 2008).
Demand chain excellence: a case study of HUL vis-a-vis P&G India 219
Procter & Gamble Home Products Limited (P&G India): In comparison with HUL,
P&G India is relatively a new entrant to the Indian FMCG industry. In 1993, Procter &
Gamble Home Products was incorporated as a 100% subsidiary of The Procter & Gamble
Company, USA. It deals with hygiene, health and home products. It has very strong and
powerful brands like Tide, Ariel, Pamper, Pantene, Head & Shoulders, Rejoice, Oley,
Whisper, etc. With its innovative marketing and supply chain strategies and practices,
P&G India has been recognised as one of the fastest growing FMCG firms with operating
profits that are very much higher than industry standards. As a result, most of the age-old
firms like HUL are in the process of benchmarking its practices (The Economic Times,
August 04, 2008).
HUL has been the market leader in many product categories, and is the biggest FMCG firm
in India. On the other hand, P&G India is the fastest growing firm, and has caused major
dents to HUL. As a result, it is worth studying a comparison of the demand chain practices
of both firms on the various parameters stated in Table 1.
Marketing strategy: The aim of a marketing strategy is to achieve the overall corporate
objectives of growth and long-term performance with distinction in the marketplace. For
this purpose, the marketing strategy is articulated in such a way that there would be superior
value to all stakeholders. Some of the demand chain-related issues of marketing strategy
that need to be examined are the push vs. pull system, the volume vs. value mindset and the
present level of operating profit.
The push system is largely in practice as HUL plays a volume game. During the course
of the focus group discussions, it was identified that the aim of Territory Sales Officers
(TSOs) is to sell existing products and create demand. At HUL, Area Sales Managers
(ASMs) and TSOs meet every month. They review the performance of the last month, assess
the sales potential for the next month, and seek a performance commitment from each TSO.
TSOs bring market feedback, while ASMs explain corporate sales strategy in the form of
schemes, discounts, marketing push, promotions, new products and market intelligence. At
the end, a sales target is arrived at (typically more than the TSOs like to commit to and less
than the ASM would want). These numbers are then aggregated for all sales regions at the
branch offices and further aggregated upstream before going to corporate headquarter, where
production planning is done. The net result is that the actual sales differ from production by
as much as 25% at the factory level. While analysing collected data from field studies on
physical verification of available stock at retail outlets, it has been identified that about 65%
of the products of HUL are supported by some kind of point-of-sale promotion, both meant
for retailers as well as consumers, in terms of extra quantity, cash/price discounts, ‘buy this
get that free’, etc.
On the other side, P&G India has deliberately adopted a pull and value-based
marketing strategy. Sales officers primarily focus on collection of orders for the stock
as per demand of retailers. During the course of conduct of this study, hardly any
sales and trade promotion schemes on any of the products of P&G were available.
Furthermore, sales people of SSs generally emphasise more on availability of total
product range in small quantities and not on dumping of certain products while visiting
retail outlets.
Distribution reach & network: Distribution and its costs is one of the crucial success
factors for any FMCG firms in India. The large scale geographical diversity in retail outlets
spread across the country has forced all FMCG firms to have maximum market coverage
220 D.K. Agrawal
and penetration to achieve economies of scale. Firms like HUL, ITC and P&G have built
their distribution networks diligently. In these perspectives, the Indian FMCG distribution
system is regarded as one of the best and most cost-effective distribution systems (even
a small village with a population of about 500 is being served one way or the other by
FMCG firms). Some of the key elements of distribution include sales return on territory,
distribution outlet mix, sales volume per outlet, market coverage and penetration, trade
promotion policy, and ROI of channel members. Critical success factors in demand
chain excellence include minimum number of links in the network for replenishment
of products to customers, promotion schemes and defective delivery claim settlement
procedures, and partnering channel relationships.
The channel structures of HUL and P&G India are significantly different from each
other. In the case of HUL, normally a product passes through five to six hands (links)
like the Mother Warehouse (MW), RDCs, Carrying and Forwarding (C&F) agents, RS,
Wholesalers (Ws) and retailers while moving from plant to consumers, whereas, there
are only two to three steps in the case of P&G India, as exhibited in Figure 3.
Figure 3 Distribution Channel Structure of HUL and P&G India
Assessment of other elements of the distribution system at distributors (RSs and SSs),
wholesalers and retailers levels based on field studies about physical assessment along with
their opinions about working systems are shown in Tables 2–4.
Real-time information flow: As discussed earlier, DCM is based on the ‘sense and
respond’ philosophy, where real-time information flow across the network is a key
222 D.K. Agrawal
to success. Information flows across demand chains in two directions – backward and
forward. Backward information flow facilitates quality feedback, customer orders,
product specifications, strategic capacity, production and dispatch planning. The forward
information flow deals with operational activities consisting of availability of goods, order
processing and management, order status, invoice, transportation and shipping advices,
quality assurance, etc. Delay in information flow costs major losses to the firm, ranging
from higher transportation cost to lost sales and corporate image (Agrawal et al., 2010).
Thus, real-time information flow leads to a more streamlined value flow in terms of
quick market response as well as quick flow of cash from customer to firm. It has been
observed during field studies that most of the FMCG firms are leveraging information
technology extensively for this purpose. They have ERP, market intelligence systems
and data aggregation tools in place to prevent distortion of information; they also
have knowledge- and intelligence-based qualitative decisions and monitoring of
performance along with better product tracking.
Hindustan Unilever Limited, one of the earlier firms in the Indian FMCG industry,
has initiated IT leverage with the vision “Connect, Attract and Fulfil” on a massive
scale (The Economic Times, February 12, 2009). It has connected all offices, plants
and warehouses, and about 100 vendors and 5000 stockists spread over 1000 locations.
Their present tracking system for product and stock availability is up to the stockists’
level. Thereafter, they have manual paper-based data collection systems from wholesalers
and retailers. On the other hand, P&G India has timely and online information flow on a
continuous basis all through the demand chain. In fact, P&G is the first FMCG firm in India
where the sales forces of distributors use palm tops to track product availability from retail
outlets.
Inventory management and replenishment policy: DCM has become a necessity due
to increasing concern over issues of excessive finished goods inventory holding
throughout the network. Fisher (1997) identified that market responsive supply chains
use strategic buffer inventories, resulting in huge stockpiles of finished goods inventory
(Trommer, 1999; Sage, 2000). More specifically, the US Commerce Department
indicated that a $1.1 trillion inventory supports $3.2 trillion of annual retail sales. This
inventory is spread out across the demand chain, with $400 billion at retail locations,
$290 billion at wholesalers or distributors, and $450 billion with manufacturers, but it
is still not able to prevent stock-outs at the retail level. On an average, 8.2% of shoppers
do not find their products in stock in the USA (Lee, 2002). In India, on an average,
45–60 days old FMCG products are available in the marketplace, excluding perishable
products (Agrawal et al., 2010).
This calls for immediate action to prevent drainage of resources in terms of locking
of working capital and storage space by optimisation of finished products inventories.
To address this issue, firms need to have more forward-looking inventory management
and replenishment systems in place. Such systems could include availability of products
as per normal demand; flexibility to meet unforeseen demand; fixed, small and continuous
replenishment cycle time systems; prevention of forward buying policy (such kind of
promotion policy that creates stock pileup); quick conversion of products into cash (maintain
freshness); inventory tracking across demand chains; vendor-managed inventory systems,
etc. The prevailing inventory management systems and replenishment policies of HUL and
P&G India are depicted in Table 5.
Demand chain excellence: a case study of HUL vis-a-vis P&G India 223
Table 5 Inventory management and replenishment policy of HUL and P&G India
On analysis and appraisal of the comparative study of HUL and P&G India on various
dimensions of demand chain management, it appears that P&G India is more proactive than
HUL. The marketing strategy of HUL successfully focuses on push of existing products
with an objective to maximise its profit volume with maximisation of sales volumes.
As a result, it is a market leader in most of the product categories. P&G India has adopted a
significantly different marketing strategy, where they prefer the pull option with the objective
of maximisation of value to all stakeholders.
On distribution reach and network dimension, Figure 3 exhibits that the distribution
network of HUL has existed longer than P&G India. During focus group discussions,
industry experts were of the opinion that it is very difficult for HUL to have small
distribution networks like P&G India, due to a significantly larger number of SKUs
and volumes along with much deeper penetration of markets. But from the demand
chain optimisation perspective, Agrawal et al. (2010) identified that too long a demand
chain network (more members) results in inefficiency and poor market responses because
it leads to more stockpiles and handling, carrying and product costs, locking up working
capital. Beside these, it also results in poor relationships among network members due
to poor coordination, collaboration and trust. Furthermore, Tables 2–4 clearly depict
distribution systems across the demand chain of P&G India (distributor, wholesaler and
retailer) as being much more smooth, systematic, transparent, regular and hassle-free. As
a result, most of the distribution channel members are generally more satisfied with the
working system and culture of P&G India, as compared to HUL.
It has already been discussed that for real-time market responsiveness, it is essential to
have real-time intact availability and flow of information. In this era of rapid innovations in
the field of information and communication technologies, firms must leverage it to capture
demand signals and data for optimisation of their demand chains. They also need to transmit
such demand signals and data without distortion for enhancing their market responsiveness
224 D.K. Agrawal
capability, along with mitigation of the bull whip effect. In the field studies, it has been
identified that HUL tracks demand and stocks data up to the stockist level, whereas P&G
India does it at the retail outlet ends. Furthermore, P&G India is leveraging IT more
extensively than HUL. As a result, the information flow of HUL is slower, more manual and
reactive in nature. P&G India is more proactive and adaptive towards emerging technologies,
improving its operational excellence through automated and online information flow.
On appraisal of Table 5, it is obvious that P&G India has a better inventory
management and replenishment system than HUL in terms of freshness of products,
availability, prevention of over stocking/stock-out and replenishment systems. This
has facilitated P&G India to have higher inventory turns per year than HUL, resulting
in lesser working capital and space requirements that in turn ensure better operating
profits and superior return on investment and return on assets. A summary of the whole
comparative study and discussions is exhibited in Table 6.
From Table 6, it is apparent that HUL’s business philosophy revolves around the ‘make-and-
sell’ mindset. This might be due to the fact that HUL is more than 75 years old, with a lot of
success stories and cultural heritage. They have been practicing price-based differentiation
in the marketplace, and so have been following the push strategy for generating sales
volume to achieve economies of scale. Hence, it is very difficult to change a complete
system quickly. During the course of the study, most of the demand chain members agreed
that a lot of transformations have taken place in recent times. They have adopted the pull
strategy for procurement of goods for manufacturing to reduce cost of production and a good
number of innovations took place for supply-side optimisation, like contract manufacturing,
relocation of plants to tax-holiday zones, etc., to gain supply chain core competency. P&G
India, being a new age firm, adopted the ‘sense-and-respond’ business philosophy right from
the beginning, focusing on acquiring new capabilities for quicker response and offering
Demand chain excellence: a case study of HUL vis-a-vis P&G India 225
maximum customer value in a dynamic market scenario. It has redefined the conventional
distribution network structure of the Indian FMCG industry, information and knowledge
sharing mechanisms, and inventory flow and management for superior, enhanced market
responsiveness capabilities.
8 Conclusions
On the basis of the above discussions, it can be said that demand chain management is a
new concept based on the ‘sense-and-respond’ philosophy. It is a customer-facing side of
the value chain that increases the process effectiveness capability of firms to respond to
customers’ demands quickly in a cost-efficient manner. It advocates that firms need to relook
at their conventional practices with regard to collaboration and partnering relationships
among all business participants, and integrate various marketing and supply chain processes
and activities.
Over time, the market scenario has become truly global and hyper-competitive due to rapid
innovations in the field of information and communication technologies, and their subsequent
adaptation by corporate enterprises, lending a new pace to globalisation. This acquainted
consumers with new ways of living, consuming and demanding, increasing their expectations.
This business scenario has increased uncertainty and variability in demand patterns, causing
huge pile ups of inventory of finished products throughout the demand chains, resulting in
a significant increase in marketing and distribution costs. Demand chain management has a
major thrust on top line growth through optimum utilisation of resources of the firm, along
with its business partners. It is a new strategic tool to generate revenue, or maintain revenue,
or even reduce the erosion of revenue in dynamic economic and market situations (Agrawal,
2007). Thus, management of demand chains strategically is the need of the hour for superior
market responsiveness. Success comes through integrated and collaborative efforts of the
firm and its demand chain members. It would create a new work environment that encourages
rapid response to customers’ needs and attentive follow-through to grow.
To substantiate the logic of best practices of demand chain management, a comparative
study of two leading firms of the Indian FMCG industry, namely HUL and P&G India, has
been conducted in detail on various parameters. In this comparative study, it has been found
that P&G India has better demand chain management practices than HUL. Being a private
limited firm, P&G India is not a listed firm in the Indian stock market, so actual figures for
operating and net profits are not available. Informally, though, industry sources are of the
opinion that its operating profit is the highest in the Indian FMCG industry.
The above analyses and discussions clearly depict that DCM enhances firms’ market
responsiveness capability through integration of marketing competency and supply chain
capability. Thus, one should not forget about the supply chain and concentrate only on the
demand chain. Without supply chain capabilities, firms cannot have market responsiveness
based on marketing competencies. For this purpose, a high degree of integration of marketing
and supply chain processes and activities is needed, and the outcome is largely called DCM.
SCM is driven by low cost of materials and an uninterrupted flow of goods, while DCM is
driven by information-centric sensing of customer demand and the firm’s ability to respond
them quickly in a cost-efficient manner. As a result, a “Market Responsiveness Grid” is
proposed for more specific and manageable value propositions by integrating marketing
competencies and supply chain capabilities, as exhibited in Figure 4.
226 D.K. Agrawal
These two working together as DCM would result in greater market dominance and
long-term performance of businesses. For any increase in supply chain capability without
superior marketing competency, firms can gain reactive responsiveness capability at an
additional cost. Similarly, an increase in marketing competency without the support of
supply chain capability will be a fatal effort, because firms will be unable to respond to
demand on a real-time basis. Thus, there is a need to have the best possible synchronisation
between them in the form of pro-active market responsive demand chain management.
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