A large fast-food chain hired executives from a fast-moving consumer goods (FMCG) multinational. The owners of the fast-food chain wanted the best and the brightest and they thought that the former executives from the multinational FMCG would best meet their expectations.
They were almost right.
The former executives spent a lot of time revamping the fast-food chain’s marketing strategy. They introduced changes in the menu, renovated branches, as well as added new ones. They also initiated an aggressive advertising campaign to combat the competition.
The executives’ marketing strategy resulted in higher sales growth and gains in market share, to the extent it became the number one fast-food chain in the country.
The chain’s branch operations were deemed efficient. Employees served customers within a few minutes. To further improve operational efficiencies, executives invested in a new information system to integrate branch operations with the commissary and the finance department. They thought that a new information system would streamline communications between the branches and the commissary, which would result in reduced waste and lower costs.
Within weeks of implementing the new information system, the chain was in crisis. The commissary complained the information system was slow and complicated to use, which resulted in delays in deliveries to branches. Branches ran out of food and ingredients, and they were unable to serve customers looking for their favourite items. People complained in social media about the fast-food chain’s poor service.
The executives temporarily closed the fast-food chain’s branches for a week. Officially, they blamed shortages in supplies from vendors. The real reason was they used the time to fix the information system. When the fast-food chain resumed operations, services were a little better. But some items occasionally went out of stock. Competition, meanwhile, picked up market share and the fast-food chain had to market aggressively to regain what they lost.
We have two (2) tasks as managers of our enterprises:
1) create demand;
2) fulfil it.
We can’t do one without the other. We cannot survive just by creating demand without fulfilling it. And we cannot fulfil demand that is not there in the first place.
Demand creation is about convincing a targeted market to choose an enterprise’s products and services. The aim is to not only sell to obtain revenue but also to persuade people to prefer its products and services.
Demand fulfilment occurs when the enterprise satisfies the demand created. It is not only about delivering products & services to customers completely and on-time. But also, it is about end-users availing of the enterprise’s products and services, utilising them, benefiting from them, and compensating the enterprise for purchasing them. Fulfilment happens when the segment of the trade the enterprise serves expresses satisfaction and an ongoing preference for its products and services.
Demand creation to fulfilment is a cycle which taps the drivers to enable continuity. Marketing managers work to create demand. Operations managers work to fulfil it.
Most of us may have a comprehensive demand creation strategy but chances are we don’t have one for demand fulfilment.
The newly hired executives of the fast-food chain transplanted marketing strategies from their experiences with their previous FMCG employer. The new executives felt what worked at an FMCG company will also work for the fast-food chain. They implemented a successful marketing campaign that created demand. Unfortunately, their also-transplanted fulfilment strategy fell flat, resulting in a reversal of demand, not to mention costly losses.
The FMCG executives the fast-food chain hired thought that a simple transplant of strategy from their former employer would work. But fast-food isn’t FMCG. While they may have succeeded in demand creation, they didn’t in fulfilment. The cost-centred fulfilment strategy they copied from their former FMCG employer didn’t work for the fast-food chain.
Our enterprises are as different from each other as every industry is from one another. While it is true that many of our enterprises have captive markets and sell identical products, such as commodities (e.g. wheat, rice, metals) or offer the same services (e.g. medical clinics, funeral homes, automotive maintenance), our customers will opt for those who can fulfil closest to their preferences, expectations, and at best value for their money.
Hence, our success counts on the strategies we adopt for demand creation and demand fulfilment.
It’s easy to transplant a system we’ve been accustomed to a new employer, never mind if the system is coming from a starkly different business. If it worked where we came from, why shouldn’t it work where we go to? And because we were the successful experts there, why can’t we also be experts for any new employer?
Demand creation requires a strategy tailor-fitted to the enterprise’s products and services. The demand creation strategy must consider a product’s nature, features, and the segment of the market it targets. Services should be catered to the clients they are specifically for. The demand creation strategy is therefore unique to the enterprise as it should be. Successful marketers know this, and we see this in the differences in advertisements and methodologies they execute.
The same logic applies to fulfilment. It must also be tailored to our products and services. And not just how orders are received, processed, and delivered but also how the supply chains of our products and services are set up and run.
And transplanting or copying from other industries or enterprises isn’t the best way to manage operations to fulfil demand.
We, unfortunately, don’t develop a demand fulfilment strategy as much as we make one for demand creation. We believe that fulfilment comes naturally. Just deliver the goods when there’s an order. It’s harder to create demand so more resources and planning should be put into it. Fulfilment is easy and straightforward. We think that automation and computerisation already are enough as operations strategies. The case of the fast-food chain shows that this kind of thinking results in messy outcomes.
The factors that lead to failure in fulfilment include we as leaders not formulating a strategy at all. We would just tell middle managers to serve orders. We would sign contracts with 3rd party logistics providers to manage inventories and deliver the goods. We would leave it up to information technology (IT) vendors to install new computerised systems to automate operations. In effect, we delegate the operations strategy to subordinates or 3rd parties. We would focus on creating demand as the one and only important task of the enterprise.
When it comes to managing the enterprise, we need to have two (2) clear answers to two (2) questions:
- What’s the strategy to create demand for our product and services?
- How will we fulfil it?
Many of us have succeeded in answering the first question.
And many of us have fallen flat in answering the second.
To develop a demand fulfilment strategy, we just need to start with the demand creation strategy. And from there, tailor the strategy to the language of its operations.
In FMCG, a demand creation strategy can be marketing low-cost fast-moving consumer goods that meet daily household needs. The demand fulfilment strategy would be mass producing and deploying finished products that would available everywhere in targeted locales.
For fast-food, the demand creation strategy can be setting up a network of branches that would serve communities in a wide geographic area that would offer a variety of food and beverages in-store or via delivery. Demand fulfilment would be via always having in stock ingredients and condiments coupled with efficient serving systems and an organisational structure supported by an always ready and responsive delivery transportation fleet.
And not just for fast-food and FMCG. We can tailor strategies of creation to fulfilment to other enterprises as well. We just have to tie in the cycle of demand creation and fulfilment.
Demand fulfilment applies to, at minimum, the enterprise’s supply chain, those operations we have influence over. Ideally, we and our vendors and our mid-tier trade customers (e. g. distributor, dealers) should be enrolled in a collaborative demand fulfilment strategy
The supply chain offers the most splendid platform for a coherent demand fulfilment strategy. It not only links operations from raw materials procurement, manufacturing, and logistics toward a common purpose but also unites them to execute a fulfilment strategy. There are no varying goals among functions; everyone has the same idea, same objectives.
We adapt the enterprise’s operations to the demand fulfilment strategy we develop. Not the other way around.
For every industry, every enterprise, it’s always the same two tasks. Create demand; fulfil it.
We are familiar with creating demand and focus a lot on it. We, however, neglect the fulfilment of demand by either transplanting it from other enterprises or delegating it to subordinates or third (3rd) parties. As a result, the demand cycle fails, and we suffer.
Supply chains offer the best platform to develop a demand fulfilment strategy. It’s applicable to whatever the enterprise, whatever the industry.
But as much as we may have realised the importance of supply chains, we first need to accept that fulfilling demand is just as important as creating it.