The Gap Between Retailers and Manufacturers

This gap between the retailers and manufacturers can be viewed from a much broader perspective: changes in basic nature of American industries over the past decades. Alvin Toffler describes society as evolving from an agricultural revolution (wave 1) to an industrial revolution (wave 2) to today's information revolution (wave 3). Toffler's basic idea is that land was the chief resource during the agricultural wave, labor and capital the chief resource during the industrial wave, and technology and information the chief resource during the information wave.

As described in Chapter 12 of The Marketing Workbench, Bob King used these ideas to develop a strategy for marketing information systems at General Foods.

Paul Adler has written a very provocative paper which has implications for the consumer goods industry in general and the retailer/manufacturer boundary in particular. The key difference between the information wave and the two earlier ones is given by Adler:

Technology, as a domain of knowledge, has the peculiar quality of not being used up by being used -- indeed, the more it is used, the more there is, since new insights and new knowledge are likely to accumulate.

This idea has been stated many times, but Adler takes it in a new direction to argue that it portends a new type of relationship between parties:

The notion of scarcity is turned inside out, and the central task of those who seek to augment wealth is not only the efficient use of scarce resources but also the encouragement of active cooperation across multiple boundaries for the generation of new knowledge resources.

Adler then uses this theme to explore the implications for organizational structures and team work within a firm, and also between firms. He states that

Cooperation between firms is becoming an essential complement to market relations in the growth of knowledge as a productive asset. This is perhaps the fundamental force underlying the development of joint R&D ventures. At a different level of analysis, it helps explain why intense cooperation between vendors and users of advanced systems -- rather than an arms length transaction -- has become the norm in advanced technology settings.

An obvious place for such cooperation is at the retailer/manufacturer boundary, where data and systems could be used to develop new insights and accumulate new knowledge. We can return to Adler's writing to gain more insight into the nature of the boundary. He introduces us to the notion of "knowledge intensity" as the average educational and training level of the people in the workforce, and argues that the introduction of information and technology into manual processes tend to increase the required knowledge intensity. Adler applies these ideas to the area of manufacturing or operations management, where he shows that the "public good" (a public good is one which does not get used up by being used) nature of knowledge calls for new arrangements among individuals, divisions, and firms involved in the manufacturing processes.

There are lessons from Adler's manufacturing application because marketing, selling, and merchandising are following some of the same technology-based paths as manufacturing. Information and computers are beginning to play an increasing role in the consumer packaged goods area, thus making the manufacturing lessons important ones.