Business Applications:Customer Relationship Management and Supply Chain Management.

5.1 Customer Relationship Management

Customer relationship management is a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with company’s customers. CRM systems create an IT framework that integrates all the functional processes with the rest of a company’s business operations. CRM systems use information technology to support many companies who are reorienting themselves into customer-focused businesses as a top business strategy.

Customer-focused business is one of the top business strategies that can be supported by information technology. Many companies are implementing customer relationship management (CRM) systems as part of a customer-focused or customer centric strategy to improve their chances for success in today’s competitive business environment. CRM systems consolidate and integrate customer information from multiple communication channels- telephones, e-mail, wireless devices and retail outlets. Detailed and accurate knowledge of customers and their preferences helps firms increase the effectiveness of their marketing campaigns and provide higher quality customer service and support. CRM systems capture and integrate customer data from all over the organisation, consolidates, analyses, and then distribute the results to various systems and customer touch points across the enterprise. Well designed CRM systems provide a single enterprise view of customers that is useful for improving both sales and customer service.

CRM software provides the tools that enable a business and its employees to provide fast, convenient, dependable and consistent service to its customers.CRM systems support the collaboration of employees, business partners and the customers themselves in enhancing profitable customer relationships. Siebel systems, Oracle peoplesoft, SAP AG are some of the leading vendors of CRM software. The major application components of CRM include contact and account management, sales, marketing and fulfillment, customer service and support, and retention and loyalty programs, all aimed at helping a company acquire, enhance, and retain profitable relationships with its customers as a primary business goal.

Figure 5.15

Contact and Account Management

CRM software helps sales, marketing, and service professionals capture and track relevant data about every past and planned contact with prospects and customers, as well as other business and life cycle events of customers.CRM systems store the data in a common customer database that integrates all customer account information and makes it available throughout the company via internet, intranet or other network links for sales, marketing, service and other CRM applications.

Sales

CRM system provides sales reps with the software tools which helps in tracking customer contacts and other business and life cycle events of customers for cross-selling and up-selling. Examples include sales prospect and product information, product configuration and sales quote generation capabilities.

Marketing and Fulfilment

CRM systems can automate tasks such as qualifying leads, managing responses, scheduling sales contacts, and providing information to prospects and customers. CRM systems helps marketing professionals capture and manage prospect and customer response data in the CRM database, analyse the customer and business value of a company’s direct marketing campaigns.

Customer Service and Support

CRM helps customer service managers quickly create, assign, and manage service requests. Call center software routes calls to customer support agents based on their skills and authority to handle specific kinds of service requests. Help desk software assists customer service reps in helping customers who are having problems with a product or service, by providing relevant service data and suggestions for resolving problems.

Retention and Loyalty Programs

• It costs six times more to sell to a new customer than to sell to an existing one.

• A typical dissatisfied customer will tell eight to ten people about his or her experience.

• A company can boost its profits 85 percent by increasing its annual customer retention by only 5 percent.

• The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent.

• Seventy percent of complaining customers will do business with the company again if it quickly takes care of a service snafu.

• More than 90 percent of existing companies don’t have the necessary sales and service integration to support e-commerce.

Enhancing and optimising customer retention and loyalty is a major business strategy and primary objective of CRM.

The Three Phases of CRM

The three phases of CRM are

• Acquire – A business relies on CRM systems, which helps to acquire new customers by doing a superior job of contract management, sales prospecting, selling, direct marketing, and fulfilment. The goal of these CRM functions is to help customers perceive the value of a superior product offered by an outstanding company.

• Enhance – Web-enabled CRM account management and customer service and support tools helps to keep customers happy by supporting superior service from a responsive networked team of sales and service specialists and business partners. CRM sales force automation and direct marketing and fulfilment tools help company’s cross-sell and up- sell to their customers, thus increasing their profitability to the business. The value perceived by customers is the convenience of one-stop shopping at attractive prices.

• Retain – CRM analytical software and databases help a company proactively identify and reward its most loyal and profitable customers to retain and expend their business via targeted marketing and relationship marketing programs. The value perceived by customers is of a rewarding personalized business relationship with “their company”.

Business benefits of CRM

• CRM allows a business to identify and target their best customers; those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.

• CRM enables real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles.

• CRM can keep track of when a customer contacts the company, regardless of the contact point.

• CRM enables a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

CRM Failures

• Major reason for the failure of CRM systems is the lack of understanding and preparation.

• Rely on CRM to solve business problem without first developing the business process changes and change management programs that are required.

• CRM projects implemented without the participation of the business stakeholders.

Trends in CRM

Four types or categories of CRM that are being implemented by many companies today include:

• Operational CRM – Supports customer interaction with greater convenience through a variety of channels. Synchronizes customer interactions consistently across all channels. .

• Analytical CRM – Extracts in-depth customer history, preferences, and profitability information from data warehouse and other databases. Allows analyzing, predicting, and deriving customer value and behavior and forecasting demand. Customers are given offers that are tailored to their needs.

• Collaborative CRM – Enables easy collaboration with customers, suppliers, and partners.

Improves efficiency and integration throughout the supply chain. Allows greater responsiveness to customer needs through sourcing of products and services outside of your enterprise

• Portal-based CRM – Provides all users with the tools and information that fit their individual roles and preferences. Empowers all employees to respond to customer demands more quickly and become truly customer-focused. Provides the capability to instantly access, link, and use all internal and external customer information

5.2 Supply Chain Management(SCM)

Supply Chain is a network of organizations and business processes for procuring raw materials, transforming these materials into intermediate and finished products and distributing the finished products to customers. It links suppliers, manufacturing plants, distribution centers, retail outlets and customers to supply goods and services from source through consumption. Materials, information and payments flow through the chain in both directions. Supply chain management is a cross-functional inter-enterprise system that integrates and automates the network of business processes and relationships between a company and its suppliers, customers, distributors, and other business partners. The goal of SCM is to help a company achieve agility and responsiveness in meeting the demands of their customers and needs of their suppliers, by enabling it to design, build, and sell its products using a fast, efficient, and low cost network of business partners, processes, and relationships.

Figure 5.17

SCM systems help businesses manage relationships with their suppliers. These systems help suppliers, purchasing firms, distributors and logistics companies share information about orders, production, inventory levels and delivery of products and services so that they can make better decisions about how to organize and schedule sourcing ,production and distribution. The ultimate objective is to get the right amount of their products from their source to their point of consumption with least amount of time and with the lowest cost.

SCM is frequently subdivided into supply chain planning applications, such as demand and supply forecasting, and supply chain execution, such as inventory management, logistics management, and warehouse management. Developing effective supply chain systems and achieving the business goals of SCM has proven to be a complex and difficult challenge for many firms. But SCM continues to be a major concern and top e-business initiative as companies increase their use of Internet technologies to enhance integration and collaboration with their business partners, and improve the operational efficiency and business effectiveness of their supply chains.

Fundamentally, supply chain management helps a company get the right products to the right place at the right time, in the proper quantity and at an acceptable cost. The goal of SCM is to efficiently manage this process by forecasting demand; controlling inventory; enhancing the network of business relationships a company has with customers, suppliers, distributors, and others; and receiving feedback on the status of every link in the supply chain. To achieve this goal, many companies today are turning to Internet technologies to Web-enable their supply chain processes, decision-making, and information flows. The goal of SCM is to create a fast, efficient, and low-cost network of business relationships, or supply chain, to get company’s products from concept to market.

According to the Advanced Management Council, supply chain management has three business objectives:

• Get the right product to the right place at the least cost.

• Keep inventory as low as possible and still offers superior customer service.

• Reduce cycle times.

Electronic Data Interchange

It involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners (organizations and their customers and suppliers). Data representing a variety of business transaction documents are electronically exchanged between computers using standard document message formats. Characteristics of EDI software include:

• EDI software is used to convert a company’s own document formats into standardized EDI formats as specified by various industry and international protocols.

• Formatted transaction data are transmitted over network links directly between computers, without paper documents or human intervention.

• EDI eliminates the printing, mailing, checking, and handling by employees of numerous multiple-copy forms of business documents.

Benefits of the business use of EDI include:

• Reduction in paper, postage, and labour costs

• Reductions in errors

• Increases in productivity

• Support of just-in-time (JIT) inventory policies

• Reductions in inventory levels

• Value-added network companies offer a variety of EDI services. They can offer secure, lower cost EDI services over the Internet.

• Smaller businesses can now afford the costs of EDI services.

Supply Chain Processes / Supply chain Life cycle

SCOR (Supply Chain Operations Reference Model) identifies five major supply chain processes:

• Plan: Balancing demand and supply to meet sourcing, production, and delivery requirements

• Source: Procurement of goods and services needed to create a product or service

• Make: Processes that transform a product into a finished state

• Deliver: Processes to manage order transportation and distribution

• Return: Processes associated with product returns and post delivery customer support

Figure 5.18

Figure 5.19

Bullwhip effect

Distortion of information about the demand for a product as it passes from one entity to the next across the supply chain.

Figure 5.20

Supply Chain Management Applications

Supply chain planning systems: Generate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that product.

Supply chain execution systems: Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner.

Supply Chain Performance Measurement

Metrics for measuring supply chain performance are,

• Fill rate (the ability to fill orders by the due date)

• Average time from order to delivery

• The number of days of supply in inventory

• Forecast accuracy

• The cycle time for sourcing and making a product

Push- versus Pull-Based Supply Chain Models

Push-based model: Production master schedules based on forecasts of demand for products and products are “pushed” to customers.

Pull-based model: Supply chain driven by actual customer orders or purchases

Figure 5.21 T

he Role of SCM

SCM supports the objectives of the three management levels of an organization (strategic, tactical, and operational). The role of information technology in SCM is to support these objectives with interenterprise information systems to manage its supply chain effectively.

Figure 5.22

Benefits of SCM

• Improved customer service and responsiveness

• Cost reduction

• Cash utilization

• Faster, more accurate order processing

• Reductions in inventory levels

• Quicker times to market

• Lower transaction and material costs

• Strategic relationship with suppliers

Causes of SCM Failures

• Lack of proper demand planning knowledge, tools and guidelines

• Inaccurate or overoptimistic demand forecasts

• Inaccurate production, inventory and other business data provided by a company’s other information systems

• Lack of adequate collaboration among marketing, production, and inventory management departments within a company

• Immature, incomplete or hard to implement SCM software tools

Trends in SCM

• First stage – a company concentrates on making improvements to its internal supply chain process and its external processes and relationships with suppliers and customers.

• Second stage – a company accomplishes substantial supply chain management applications by using selected SCM software programs internally, as well as externally via intranet and extranet links among suppliers, distributors, customers, and other trading partners.

• Third stage – company begins to develop and implement cutting-edge collaborative supply chain management applications using advance SCM software, full-service extranets links, and private and public e-commerce exchanges.

Figure 5.23