Supply Chain Management is:
“… managing the flow of goods and information along the supply chain, from procurement at source to delivery and service to the end customer. ‘
Supply chain management is understood to be a distinct business management approach or philosophy. There are many definitions of what a supply chain is and what it involves. Cooper and Ellram (1993) describe it as an integrative philosophy to manage the total flow from the supplier to the ultimate user. However it has been recognised that supply chain management does not deal with the chain in its entirety.
Christopher (1998) regards supply chain management as the management of upstream and downstream relationships with the suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole. Cox (1999) has recognised that the currently dominant concept for the supply chain is based on operational effectiveness and efficency.
Porters Value Chain
In the physical world, intermediaries populate the value chain to provide key functions or services:
* Aggregating buyers and sellers (e.g., wholesalers and retailers)
* Reducing the transaction risks among them (e.g., payment methods)
* Providing information (e.g., advertising and marketing) on products
* Helping consumers select them (e.g., sales agents and clerks)
* Customising them (e.g., changes and alterations)
* Forwarding them (e.g., shipping and delivery).
Businesses are constantly trying to attract and retain customers and to achieve this, value must be created added and maintained throughout the course of the value chain from the point of order to the point of delivery and beyond, if necessary.
Competitive advantage comes from carrying out those activities in a more cost-effective way than ones competitors. M. Porter (1985) breaks the value chain into primary and support activities. (Bowman C., 1990) The model suggests, that no matter how many operational units that are involved in the process of generating customer value; these primary activities can be conceptualised into five generic stages. The five primary stages are inbound logistics, operations, outbound logistics, marketing and sales, and service. These primary stages are supported by the firms infrastructure, human resource management, technology development, and purchasing and procurement. The stages within the value chain should not be seen in isolation but looked at in a wider context and include the interactions between stages not just within the processes. The relationship between sales, operations and procurement for instance can determine how much stock is to be carried and therefore reflected in cost of inventory held.
“. . . Porter suggests the detailed assignment of operating costs and assets to each value activity” (Grant R.M., 1995).
Prahalad of the University of Michigan suggests that Porters model is still relevant although it is less significant due to changes in competition within industry.
* Prahalad says ‘…companies should cease to be preoccupied with their degree of vertical integration and their own ‘value chain’ – their various value-creating activities, such as production, marketing and service. Instead they should pay more attention to their ability to create ‘virtual integration’ by allying with, and purchasing from, competitors. Rather than analysing competitiveness purely on the basis of individual companies…” (LORENZ, 17 DEC 1993)
Taking the example of Federal Express, they have a system in place that spans all these functions to give them added value. They have put in place the required processes to enable the “Operations” to provide a quality Service to the customer. When an order is received via the WWW, this information is transformed by the “Operations”, allocating of transport, custom clearance etc. to enable the customers parcel to be delivered. The “Outbound Logistics” which requires the delivery of the service to the customer, is aided for example by the automated allocation of a van to collect/deliver the parcel. “Sales and Marketing” is aide by the customers ability to price and order the service via the WWW, thus encouraging the customer to buy their product. “Service” is provided by giving the customer the ability to track a parcels progress to its destination on-line 24hrs a day. Taking Porters Five Competitive Forces model, Federal Express can also be used to demonstrate some of the Strategic threats it faces and its Opportunities it exploited. Federal Express is threatened by “Substitute Products” to its market by the use of E-mail, thus reducing the amount of mail being sent. There is also the problem of its “Industry Competitors” placing ordering and information terminals in major customers premises. Federal Express responded to these threats by providing WWW access for “Customers/Buyers”. This gave Federal Express easy access to a world market and provides the customer with easy ordering of services and good after sales service.
For years the business community has successfully used Porters Value chain the define the business environment, but since business has gone virtual managers have found that Porters Value Chain cannot be easily manipulated to fit in the e-commerce setting. De- construction and re- construction of the value chain represents an integration of information processing.
In an article entitled ‘Exploiting the Virtual Value Chain’ published in the Harvard Business Review, Jeffery Rayport and John Sviokla argue that the businesses who will gain the most internet environment are the ones who use the ‘virtual value chain’ to exploit digital assets and not only creating but extracting value from it. ‘ Each stage of the virtual value chain as mirror of the physical value chain – allows for many new extracts from the flow of information, and each extract could constitute a new product or service’ so where does the product create value in the virtual value chain? For customers to change their buying habits from the physical to the virtual, there must be value to be gained from the Internet.
E- Supply Chain
‘…is the part of an industry value chain that precedes a particular strategic business unit. It includes the network of suppliers, transportation firms, and brokers that combine to provide a material or service to a strategic business unit…’
(Schnieder & Perry).
Technology has a positive impact on business from marketing and sales, to export design and productivity. E- commerce is about buying and selling goods and services through an electronic medium, i.e. the Internet.
The following assignment shall deal with Customer Relationship Management (CRM) and its necessity in an increasingly technological and virtual world.
Customer Relationship management (CRM)
Excellent customer service is about being aware of customer needs and reacting to them effectively. CRM helps you to understand, anticipate and respond to your customers’ needs in a consistent way, right across your organisation.
Customer Relationship Management (CRM) is a business philosophy, not just a technology – understanding your customers’ needs enables you to build better relationships and increase sales.
Practising CRM requires an efficient and integrated internal business system. Many businesses benefit from the organisational discipline CRM imposes, as well as from the technology itself.
CRM helps businesses if it is viewed as a set of tools that do more for, and get more from, customers. It can:
* develop better communication channels
* collect vital data, like customer details and order histories
* create detailed profiles such as customer preferences
* deliver instant, company-wide access to customer histories
* identify new selling opportunities.
The technologies that will work best for you will depend on the supply chain you are in
If there’s no real delay between order and delivery, systems should looked at that streamline administration and use customer information efficiently.
Technology can be used to improve customer service process, by:
* Adding value
* Providing after sales care
* Improving relationships
* Building partnerships
Improving existing customer services means that staff always have the right information when they speak to customers, no one is kept on hold, and complaints are dealt with.
Support services must be linked to the rest of the business. Sales teams should work closely with customer feed back so they can spot opportunities or pin point weaknesses
Customer service spans all business processes and whatever supply chain you are in, keeping the customers happy will be the key to success.
* Computer Telephony Integration (CTI) A low-cost software package can transform your PC into a call centre that automatically forwards faxes and calls. With caller recognition services, your staff can have customer details at their desktops before they even answer the phone. Depending on the type of database you use, applications can cost from GBP 1,000.
* E-mail Microsoft Outlook and other packages offer template-based functions that can help you to automate e-mail replies and collect data. List subscription services such as that offered by Microsoft’s bCentral let you set up automated customer e-mails. Have a look at www.bcentral.co.uk for more details.
* Perform analytics Many CRM systems include data mining functionality to help you pinpoint market trends and customer preferences.
Systems to help your business interact with customers and partners and to acquire vital data are a core element of CRM, and there are several solutions.
* Build up detailed customer profiles CRM systems try to capture and present useful data, including account details, sales histories, service records, campaign responses, web activity, demographics.
* An interactive website or an extranet will allow customers to access relevant information quickly and to ‘serve themselves’. Websites can also collect and channel customer data. Use XML-based websites to tie into your internal systems and manage the content in real time.
* Outsource calls Specialist call centres with the latest technology can provide customer service for smaller companies. Virtual call centres, in which home workers supported by call centre technology handle calls, are becoming more popular.
* Set up a central database that can be accessed by sales and customer service staff to improve the efficiency of ordering, sales and marketing.
The key to CRM is to build on the ‘relationship’ angle and to focus on both receiving and delivering value. Information about customers can be analysed to answer the question ‘why’ do customers buy, as well as ‘what’ do they buy. Companies should be able to understand what motivates customers, what they value, and how they want to interact with the business. With this information products and services can be customised. Product development should be driven by customer needs. Interactation with customers may take place online, in person or over the ‘phone. It may be selling, delivering or providing customer service. Customer service initiatives must be easy to use and offer real benefits such as self care or customised pricing.
CRM applications can integrate communication channels, making the same information available whether you are dealing with customers online, over the phone, via e-mail or face-to-face.
Processing orders should be as painless as possible for the customers. The key is to gain as much relevant marketing information from the customer as possible without discouraging them with long drawn out order processes.
Customers are key to all businesses, regardless of size or industry. Successful businesses build their reputation based on long term relationships with satisfied customers.
A recent study by Deloitte Research found that companies that have efficiently linked their CRM and supply chain applications are 81 per cent more profitable than those that don’t.
Over the past decade companies have spent millions on CRM- that a single shared view of the customer offers value to the organisation.
Customer services means maintaining good relationships with customers. Accurate customer information lets you improve services and sales.
There are four general approaches to integrating a CRM solution
1. Outsource CRM to a third party specialist. Application Service Providers (ASPs), for example www.salesforce.com offer web-based CRM solutions, starting at around GBP 45 per user per month, plus an initial set-up fee of around GBP 5000. Choose a product that allows some customisation, as several ‘one to many’ ASP CRM models have been unsuccessful due to inflexibility. The spread of broadband will see new, improved services being offered
2. Buy off-the-shelf software. Software companies like Oracle, Navision, SAP, Peoplesoft and Microsoft’s Greatplains offer module-based CRM applications that integrate with existing accounts and transaction processing packages. Cut-down versions of off-the-shelf software, offered by most of the major application providers, may be more suitable for smaller businesses.
3. Commission bespoke software. Consultants and software specialists will customise or design a software solution and integrate it with existing software and/or your web site.
4. Managed CRM solutions. A half-way house between a fully-integrated package and a basic ASP package, managed CRM involves renting you a customised range of CRM applications from all major vendors as a bespoke package. Some suppliers also service specific CRM campaigns such as data mining, as and when needed.
‘We will see companies going far beyond self-service, into customer managed relationships. Companies need to put tools out there, online and otherwise, for the customers to do it for themselves’.
(CRM, Insight column, February 2001)
Effective CRM is achieved by:
* Networking computers
* Managing customer information
* Responding to enquiries
* Giving customer support
To create a customer database, a computer network is required. A simple peer-to-peer network can be used for a few pounds per machine. If customer-orientated software is being used, you’ll probably want to invest in a dedicated computer (a server). An ‘always-on’ internet connection is also necessary. A fast broadband connection is necessary if you want to communicate frequently and in-depth with customers online.
Accounting software can provide a lot of the data needed to supply customer service electronically.
* Order-based accounting systems can be modified to provide extended customer information. Remember though, that if you carry personal data you need to register under the Data Protection Act –
* Systems based on time sheets are better suited for businesses supplying services rather than physical products.
Manage customer information
The quality of service being offered to customers depends on having quick, flexible access to the right information.
Basic customer databases can be found quite cheaply. An off-the-shelf database package can be used to develop your own contact management system. Start simply with basic contact details and let it grow from there.
Contact management systems can be tailored to particular ways of working. They also help you respond more quickly and accurately to specific requests.
CRM (Customer Relationship Management) systems are more expensive, but can provide comprehensive solutions.
The best way to keep customer details up-to-date is to encourage customers to do it themselves. A content-managed web site will be needed – one that is linked to the internal database.
Respond to enquiries
If a lot of queries are received of a similar nature, these can probably be automated. These may be filtered with touch-tone dialling. But bear in mind that automated processes can sometimes be counter-productive. In some areas, customers prefer human contact.
For some businesses, customer service is a money-making activity. If the business already has a technical support facility in place, advanced support could be offered for a fee. Telephone support can be financed very simply using a premium rate telephone line.
The networked office is better at handling customer queries effectively. Share telephone, fax and internet capabilities so that staff can get information and receive requests directly.
* Set up a customer support telephone facility, using a local rate or free phone number.
* Asking customers to use their keypads to locate the service they need can save them time.
* Beware of ‘voice jail’ – people don’t like to be kept waiting before they speak to a real person.
* Use internal e-mail or conference calls to solve customer problems collaboratively.
Make it easier to sell on the Internet by taking steps to build customer confidence.
* Security – build in industry-standard encryption procedures and publish your policy.
* Privacy – many customers don’t want their details passed onto third parties. Publish your policy. Even if you don’t plan to create mailing lists, provide an option so that customers can exclude themselves.
* Returns policy – customers will be reassured to know that faulty or unwanted goods can be returned in exchange for a full refund. Make this clear at the point of sale.
* Transparency – give your customers plenty of opportunity to back out of a purchase and make it very clear when a transaction is being confirmed.
Even if you don’t sell online you can improve customer service by providing information on your web site. A well signposted FAQ section allows customers to solve common problems quickly.
If you sell technically complex products, Q&A formats can help in diagnosing problems and providing solutions. Electronic manuals and technical reports, which are downloadable or can be sent via e-mail, can also be useful.
Once the web site is up and running, it’s relatively simple to introduce a password-protected area for customers. This gives customers access to an extranet, which can provide information and services online.
Order tracking should be offered. Clients can view the progress of their orders online.
The efficency of CRM is dependant on:
* Integrating systems
* Automating customer information
* Understanding the customers
* Enhancing the customers exoerience
Having an integrated customer service process will reduce costs, save time and improve profitability.
Linking customer service information with sales data improves business schedule and helps target potential customers. Allowing:
* duplication of effort to be avoided
* a unified, informed image to be presented
* a proactive approach.
Information gathered by customer support teams is valuable for sales campaigns. Knowing when a guarantee is about to run out or when a client is running low on stocks can spell the difference between a well-timed call and an unwelcome interruption.
Automate customer information
XML (Extensible Mark-up Language) based web sites are becoming more popular. XML is an extended form of HTML (Hypertext Mark-up Language), the standard for web site pages. XML lets you link your web site with your internal systems. Some of the customer service benefits are:
* it lets you manage your site more easily
* you can ensure that updates happen automatically
* you can alter FAQs in response to changing customer needs
* your online catalogue is updated in real-time
* you can e-mail customers automatically about new products or with updates
* customers can update their own details on your internal databases
* you can set up an integrated order management system to initiate orders automatically.
Understand your customers
CRM (Customer Relationship Management) systems allow different parts of the business to share customer information, and every part of your company to be aware of customer needs.
If customer service data is linked to a range of business processes, you can:
* use customer data to analyse product strengths and weaknesses
* modify products and service accordingly
* return to these customers having met their needs
* generate more sales and extra goodwill
* gather more customer data
* schedule and target your sales campaigns.
If technical package is not needed, an in-house system can be built using existing databases and accounting system. Or you can invest in a dedicated CRM solution.
Enhance the customer experience
An extranet can be used to provide a standard form with client-specific details. They can also be tailored precisely to customer requirements. Having an extranet facility allows you to design dedicated sites for customers. This can help strengthen your supply chain position.
You may have customers who want to visually check the goods before they are delivered. You can provide video or digital images on their extranet site. Sometimes a project requires close collaboration between customer and supplier. You might look at video and data conferencing and provide shared sites online.
If you have an intranet, it’s easier for your staff to share information and solve problems collaboratively – which means a better service for your customers.
The Web can act as your virtual office. You can use it to meet face-to-face with your colleagues and customers via videoconferencing. And you can share project data and brainstorm using electronic whiteboards.
The service you offer your customers depends on how well you’re able to integrate your own business processes. The best service you can offer your customer is to deliver real value and to do it as quickly and efficiently as possible.
Link with customers
Strengthen your supply chain position by being able to accept electronic transaction. Encourage customers to order online and create links that update your databases instantly.
Set up external order tracking. It’s reasonably easy to publish delivery status reports on your web site. Customers can then monitor the progress of their goods. A password protected section of the web site could be set up to tell them when an order has been processed, when it has been dispatched, and by whom.
Set up an extranet. An extranet gives trusted outside access to parts of your network. It allows you to integrate your order handling and stock control systems with those of your customer. They can view extended information and reorder at the touch of a button.
Using technology in your ordering process allows you to build closer links throughout the supply chain. Once an order is accepted in data form it can be instantly translated into parts required, production plans etc. For example, you can organise your system so that when an order is placed the materials needed to complete the order are automatically ordered from your suppliers. If your suppliers are also electronically enabled, you may be able to link into their extranet and adopt a just-in-time system.
It all helps to strengthen the supply chain. You will be able to reduce lead times, cut administrative costs and extend sales. But there are also advantages that are more difficult to quantify. Improved information flows make businesses more resilient and flexible, and closer external relationships allow supply chain participants to share strengths and build on mutual interests.
Design-to-order can be as simple as tweaking an existing product for a customer. On a larger scale it can mean letting customers order one-off products that are specifically designed for them.
Direct feedback from customers often drives new product ideas. To make better use of this feedback you need to integrate CRM (Customer Relationship Management) systems and data with engineering, research and development.
The two key factors that drive product or service development should be customers and the market. The current and future needs of customers, potential customers and the environment should all be reflected in development. The process of review, update and modification are essential to stay competitive.
Attract and retain new customers
Once customers have been attracted the key is to retain them this may be done by: Providing up-to-date lists, special offers and details of new products in small, accessible, structured pages. Ask site users to register for further information – this will provide valuable marketing leads, and encourage users to email enquires and comments.
The benefits will be:
* getting email addresses for target market
* gathering invaluable pre-launch market research from the feedback
* drawing attention to the company website, creating further opportunities for selling other associated products
Market to existing customers
Keep in regular and cheap contact with customers by sending direct mail shots automatically by email. Email marketing is relatively cheap and can achieve some excellent results if you plan your campaign properly.
The advantage of email marketing is that recipients can respond swiftly and easily. Because customers have already requested to receive company’s information, loyalty and response levels should be high.
Information is the life-blood of business – from traditional paper based documents like financial records to catalogues.
All this different data can be stored electronically, then managed, handled, accessed and shared with a speed and flexibility undreamt of by the traditional archivist.
Companies must become more responsive to customers’ requirements.This will ensure their needs are better met, which means happier customers and greater loyalty. This may be done by:
* Upgrade website so that it can take orders, track deliveries and log customer requests. With broadband links companys can be connected 24 hours a day and the website will be able to handle much greater volumes of data.
* Move low-margin order taking onto the website and free sales forces to concentrate on higher-margin business.
* Customer Relationship Management software enables you to pool all available customer data.
Rapid customer contact
E-mail has made the world a smaller place. At the cost of a local phone call, it’s as quick and easy to e-mail a customer abroad as it is to the next town. If you deal in services or products that can themselves be stored electronically – anything from architectural plans to photos – e-mail can be used as the actual export mechanism to send the item overseas.
In addition, videoconferencing allows you to meet distributors or buyers face-to-face and lets you demonstrate your product and build up a rapport with potential customers.
Benefits of CRM
CRM benefits can be measured and quantified. Using CRM applications can lead to increases in revenue from:
* reductions in operating costs – it costs around GBP 25 to handle a customer call via a call centre but only about GBP 2 via a website;
* a higher percentage of cross-selling due to offering a single point of contact with your company;
* more success in attracting new customers and closing deals faster, through quicker and more efficient responses to customer leads and customer information;
* more efficient product development due to greater collaboration with the customer;
* simplification of marketing and sales processes by understanding customer needs;
* better customer service – through improved responsiveness and understanding that builds customer loyalty and decrease customer “churn”.
Historically, companies looking to improve customer relationship management have purchased software from several niche application vendors and then hired labor to integrate those packages-often without total success. ERP vendors promise to make that headache go away by providing plug-in CRM modules that are already integrated with the vendors’ other software.
Disadvantages of CRM
There seems to be wide agreement that CRM is not living up to the hype and volume of discussions about it. Customers will not be “managed”; it is becoming more and more difficult even to manage employees! And relationships, by definition, are two-sided affairs, and all that companies can do is try to manage their side of each, never both sides.
CRM ignores the universal reality that has ruled the successful management of transactions since the beginning: the necessity for both parties to gain justifiably from any relationships that are to succeed. CRM software and technology packages succeed in making the firm’s sales, marketing, and customer service functions more effective and efficient, but in the process, often harm relationships through automated service systems and annoying communications. CRM obsession with retaining and “developing” most valued customers often annoy and occasionally deliberately “fire” those who are not as valued.
What is missing from virtually all the CRM strategies and initiatives being hawked and employed in commercial enterprises is any effort aimed at making the relationship itself valuable to customers. There is some lip service to the built-in advantages of loyalty to customers, namely the convenience of not having to investigate and select other options, perhaps the security of buying familiar brands and services in which they have confidence. But these are not benefits that the seller adds via its CRM efforts; they are simply the natural causes and consequences of sticking with the same seller.
Most firms only “manage” a series of transactions and encounters with their customers, not a relationship at all. Some offer subscription services-such as phone, cable, gas and electric, -that deliver ongoing value as long as their customers continue to pay their bills, but hardly a relationship. At least a few offer their customers mutually beneficial relationships that add to business customers’ balanced scorecard performance and consumers’ quality of life. These latter firms come closest to offering and delivering true relationship value that supplements the transaction value to which other firms are limited.
To deliver true relationship value requires learning enough about customers as individuals-or at least segments-to identify the kinds of success they are looking for and the problems and aspirations that the firm can offer a best-of-breed approach to solving and realizing. In many cases, relationship value is enabled or augmented by “open success management” that organizes the contributions of complementary and even competitive firms.
A better approach to, and perhaps name for, CRM would be “Customers’ Success Management” or CSM. While only in the case of fully outsourced functions and result responsibility will customers’ success be truly “managed,” at least such a term would remind firms of the need for and advantages of balancing their attention on their customers’ success with their current CRM obsession with their own.
The importance of maintaining CRM after the initial sale is very important, as it costs roughly ten time more to acquir a customer than to retain an existing one.
Companies are beginning to realise the importance of CRM, as it is now apparent that product focus does not sustain growth but the customer relationship (Imhoff, C. 1998). The customers must be influenced in ways that create a mutually beneficial relationship.
In conclusion it can be seen that as businesses are growing more complex so too do their supply chains, and now more than ever, managers need tools that generate the insight that leads to smarter decision making and results in a more efficient supply chain (www.bettermanagement.com).
The new business logic has resulted in distinct IT tools for parts of the value chain, for example purchase (e- procurement), production (industrial IT), sales (e- commerce). Resources and competences are communicated and distributed between organisations. Development of new products or modification of old ones can easily happen
Customer Relationship Management (CRM) is very popular today in companies of all sizes. These companies are realizing that a product focus will not enable them to sustain growth and they are shifting their focus to the customer. As part of this shift, they are emphasizing the value of managing mutually beneficial relationships with customers.
Moving into the future, companies need to recognize that it will be the customer — not the company — that will be managing these relationships. The companies of the future must take actions to influence customers in ways that remain mutually beneficial. The Corporate Information Factory architecture, including the data warehouse and operational data store, provides the consistent information needed to understand each customer’s needs and their value to the company. Armed with this information, the company is able to adapt its behaviour to suit each customer or customer group.
It is for these reasons and many more that effective CRM is essential.
The Bottom Line for Customers: Easy Integration, Fast Implementation