Managing shortage

As a result of the sudden appearance of economic recession, the over supply of products and services has settled in our markets. Companies have had to adapt their strategies quickly in order to live and compete with one another in a state of ‘crisis': shorter productive series, less real value, more reduced margins, alliances at a disadvantage with respect to the distribution, increase in logistic stocks, etc.

The over supply along with an increase in stocks (as a result of market reduction), has caused consumers to have an ‘attitude of demanding constant offer discount on the price of products.’ In the last months, a great number of physical and virtual outlets have appeared, becoming an alternative distribution channel.

Fortunately, today we can consider that we have bottomed out. There is almost no company which does not envisage the effects of the new situation in its strategies; we could say that we have finally learnt to live together in a ‘state of prolonged recession’.

Fortunately, today we can consider that we have bottomed out. There is almost no company which does not envisage the effects of the new situation in its strategies; we could say that we have finally learnt to live together in a ‘state of prolonged recession’.

The battle between manufacturers and distributors for the control of the channel and the margin constitutes another aspect to be considered. Today we know that it is a lost battle for the manufacturer; many of them work to keep their productive structures; practically without benefit and submitted to the dictatorship of the channel and the distributor’s brand. The pressure from the distribution and the consumer’s attitude in a constant ‘crisis management’ mode have produced a ‘clamp effect’ in the productive class, bringing it face to face with the harsh reality. Production by production itself without control of the channel has little sense.

Today some manufacturers have begun questioning the equation: ‘Great production, little margin without control of the channel’, against: ‘Little production, great margin, with control of the channel’. On the basis of this, we are going through a ‘return to origins’ phenomenon of the productive business, building from the beginning a relation of ‘from you to you’ with the consumer. Productive companies are re considering the importance of the brand and its management, taking positions (in many cases thanks to new technologies) in their own distribution and communication channels with final clients.

Like the ‘pendulum law’ based on the limitation of the supply, nowadays we are going through a phenomenon whose explanation is difficult: the shortage of some products or services in the market. Paradoxically, facing the outlets’ commercial opulence, consumers are learning to live with the shortage of some products.

A new commercial strategic stance is emerging vigorously among manufacturers: The management of shortage: What does managing shortage involve? What rules is it based on and which benefits does it have?

Managing shortage consists of becoming aware of which of the products offered constitute a limited asset and consequently, an exhaustible one. In order to do so, we rely on three basic strategic factors:

• Geographic positioning (in some cases with guarantee of origin),

• Time or seasonal factor and finally,

• The productive and manufacture process.

As long as we can transmit these factors to our consumers, it will be easier to ‘manage shortage’ successfully. It’s all about becoming aware of the fact that productive processes require a processing and manufacturing time, their resources are limited (in some cases they must be regenerated) and climatological seasons allow and at the same time determine some results and properties of products.

There are sectors in which managing shortage and transmitting it to the client is relatively simple and it becomes a key factor for the management of the final value and margin of products. Sectors like the agricultural, food processing, leisure and tourism, culture, democratic luxury product are favourable to introduce this strategy.

Managing shortage requires transparency in communication and in management with our client; therefore, the control of the channel, the bidirectional communication and the use of new technologies will be fundamental.

Managing shortage also requires a process of superior client loyalty; we must make them accomplices to our processes in order to make it possible for them to understand some changes in their consumption habits; we must turn them into ‘Accomplice Clients’ to our interests, which should be considered as their own interests.

Finally, managing shortage also involves managing logistics; adapting it to the servitude of shortage, to client loyalty, to their habits and tempos. French people set an excellent example of management of shortage for us many years ago: Le Beaujolais Nouveau.

 

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Mª Luisa Vives – Jaime Gross

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