The Marketing/Manufacturing Interface: Strategic Issues

Karmarkar, Uday S.; Lele, Milind M.

doi:10.1007/0-387-25002-6_11

Cited by 13 publications

(10 citation statements)

References 17 publications

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“…Moreover, conflict can arise between the marketing and manufacturing departments due to internal compensation schemes. Often, manufacturing is evaluated based on costs, operational efficiency, and on‐time delivery, while sales/marketing is evaluated based on the firm's revenue and sales volume (Balasubramanian & Bhardwaj, ; Karmarkar & Lele, ). The division of responsibilities and conflicting incentives lead to each department making its own decisions, independent of others, which can be suboptimal for the firm as a whole (Tang, ).…”

Section: Introductionmentioning

confidence: 99%

Centralized versus Decentralized Competition for Price and Lead‐Time Sensitive Demand

2016

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We study two firms that compete on price and lead‐time decisions in a common market. We explore the impact of decentralizing these decisions, as made by the marketing and production departments, respectively, with either marketing or production as the leader. We compare scenarios in which none, one, or both of the firms are decentralized to see whether decentralization can be the equilibrium strategy. We find that under intense price competition, with intensity characterized by the underlying parameters of market demand, firms may suffer from a decentralized structure, particularly under high flexibility induced by high capacity, where revenue‐based sales incentives motivate sales/marketing to make aggressive price cuts that often erode profit margins. In contrast, under intense lead‐time competition, a decentralized strategy with marketing as the leader can not only result in significantly higher profits, but also be the equilibrium strategy. Moreover, decentralization may no longer lead to lower prices or longer lead‐times if the production department chooses capacity along with lead‐time.

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Section: Introductionmentioning

confidence: 99%

Centralized versus Decentralized Competition for Price and Lead‐Time Sensitive Demand

2016

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“…In many firms, manufacturing is evaluated as a cost center that seeks lower costs and operational efficiency, while marketing is evaluated as a revenue center with control over price and other marketing elements (Balasubramanian and Bhardwaj, 2004;Karmarkar and Lele, 2004). However, this is not necessarily an effective strategy.…”

Section: Introductionmentioning

confidence: 99%

Coordination of marketing and production for price and leadtime decisions

2008

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We study a firm which serves customers that are sensitive to quoted price and leadtime, with pricing and leadtime decisions being made by the marketing and production departments, respectively. We analyze the inefficiencies created by the decentralization of the price and leadtime decisions. In the decentralized setting, the total demand generated is larger, leadtimes are longer, quoted prices are lower, and the firm's profits are lower as compared to the centralized setting. We show that coordination can be achieved using a transfer price contract with bonus payments. We also provide insights on the sensitivity of the optimal decisions with respect to market characteristics, sequence of decisions and the firm's capacity level.

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“…Promotional activities influence sales and increased sales lead to an increased load on the production system. Karmarkar and Lele (2004) point out that promotions require inventory to be built up several periods in advance and that tighter lead time requirements by customers imply a larger stockpile of inventory. On the other hand, when orders are not fulfilled from inventory, excessive promotion may cause a large order backlog, leading to longer delivery times and loss of time sensitive customers.…”

Section: Joint Promotion and Production Planning Modelsmentioning

confidence: 99%

Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions

Upasani

Uzsoy

2007

Ann Oper Res

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In many industries the pricing of a product over time can be used to manage demand for the product. Lead time, or promised delivery time is often a significant factor in price negotiations. However, the production planning literature has largely treated pricing decisions as exogeneous while focusing on the allocation of production capacity between products over time. On the other hand, the marketing literature has generally ignored the effects of capacity constraints and focused on the effects of pricing.In this paper, we begin by reviewing the existing literature on integrative productionmarketing research, focusing on those models that consider lead times and capacity. We suggest a number of directions for future research that take advantage of recent developments in production planning models, as well as explicit modeling of feedback loops governing key parameters, which suggest a broader view of the problem.

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The Marketing/Manufacturing Interface: Strategic Issues

Cited by 13 publications

References 17 publications

Centralized versus Decentralized Competition for Price and Lead‐Time Sensitive Demand

Centralized versus Decentralized Competition for Price and Lead‐Time Sensitive Demand

Coordination of marketing and production for price and leadtime decisions

Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions

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