Marketing Services procurement – structuring the supply chain

Our new briefing paper is available for download free of charge here. It’s called "Decoupling Creative and Production Procurement – Handle with Care!" Sponsored by ProProcure, the Marketing Spend Management solutions provider, we look at the idea of ‘de-coupling’ spend – the separation of different elements within the marketing process in terms of commercial management. So we start with a bit of history.

“Once upon a time, a single Marketing Services firm, usually known to its clients simply as “the Agency”, did everything for the brand owner. As well as advising the client, and coming up with brilliant creative work .. they bought whatever needed to be purchased to service the brand. That might include goods or services to produce creative output such as television advertisements, or even branded collateral and point of sale items.

That was good news for brand consistency, but sometimes less good for the clients’ pockets. Most agencies worked on a cost-plus basis, adding a margin of their own onto those third party costs. Indeed, that element of income was a key contributor to most agencies’ profit. And of course, unfortunately, that structure generated highly perverse incentives. If an agency could add a 15% margin onto third party costs, it is clear that they actually had a financial incentive to be profligate with the client’s money, in order to drive their own income. Any firm would be tempted to exploit that, and some certainly did”.

So these practices needed addressing, and de-coupling was seen as a key way of achieving a better commercial model. However...

“No-one wants to go back to the bad old days of agency mark-ups and opaque billing. But good creative work has to be funded somehow, and stripping out everything else by over-enthusiastic ‘de-coupling’ can leave the agency in a position where the client simply isn’t attractive any longer, or good creative work is diluted by what happens elsewhere in the delivery process and supply chain”.

Procurement and marketing executives therefore need to look carefully at the options for how they structure their supply chains. The briefing paper then suggests some approaches: here are just some of the recommendations.

  • Procurement must always be aligned with overall corporate and stakeholder strategy in order to make a sustainable contribution. In this case, that means supporting wider marketing and brand objectives. Consider carefully brand value, consistency, speed to market and creativity as well as cost when looking at de-coupling and other options for structuring the supply chain.
  • Organisations need visibility and understanding of their own internal requirements in order to best manage the external supply chain – not as easy as it sounds in large, complex organisations.
  • An optimal supply chain operating model is key. Buyers must understand who is doing what, from whom suppliers are acquiring sub-contracted goods or services, and the interactions and transactions between players in the supply chain. This all must be structured to the benefit of the buyer and the brand.

Download the paper and read more here.

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