THE RIGHT TRACK TO SUPPLY CHAIN MANAGEMENT- CRM INTERGRATION

The Role of Technology and the Web on Global Supply Chains is the central theme of this week. The intention is to explore the application of information technology in a supply chain management system including how the information technology transforms traditional businesses, the complexity and problems caused by enterprise software. Additionally in this week, we walked around the cloud computing as the answer to chain woes and how beneficial it is to strengthen the network for online market. In relation to this week reading I decided to explore on the Customers Relationship Management Software as the right path to supply chain basing on the advancement of technology.

Introduction of Software Solutions to the World Market and Supply Chain

During early 1990s the world observed rapid increase of the number and varieties of software categories aimed at the business firms. This was due to advances and growing trends of information, process as well as communication technologies mostly related to internet. This transformed the way the businesses were operated toward their expansion. This development in technology could not leave behind the area of Supply Chain Management which is much cantered on a complex chain of processes including coordinating supply and demand.

On the supply side, Supply Chain Management (SCM) systems may employ enterprise resource planning (ERP) software to boost enterprise efficiency, improve decision-making by providing greater visibility into operations, and promote collaboration via information sharing. On the demand side, Customer Relationship Management (CRM) offers the opportunity to gain more information in real time about current and prospective customers, providing functionality for contact management, sales force automation, and customer service.

Early Hurdles

Earlier, most of the business firms’ anticipation was very highly placed on the investment on the Supply Chain Management and Customer Relationship Management software solutions. However, SCM and CRM software solutions delivered at least partially to some of the firms’ anticipation and to most of the business firms the results were far less than anticipated despite significant investments in these resources. The reason behind was that most companies were not prepared for the implementation difficulties.

During the first wave of their infusion into businesses, in which individual SCM and/or CRM software modules were generally treated as separate installations, the integration with existing legacy systems proved most troublesome. The Standish Group reported that the average cost overrun was 178 percent of budget; and the implementation schedules exceed 230 percent of plan^[i]. Estimates of implementation failures of CRM ranged from 55 – 75 percent according to the Meta Group^[ii]. From a survey of 162 senior managers conducted by Bain and Co.^[iii], researchers concluded that SCM which was long touted as an avenue to control costs, reduce risks, and increase service performance was mismanaged by most companies.

The Value of Supply Chain Management Solutions

Many companies discovered that the advancement of information, process and communication technologies and hence progress made on the CRM software solutions allowed them to concurrently reduce costs as well as enjoy the competitive advantages in different markets through better management of their supply chain networks.

          Source:http://annanagurney.blogspot.com.au/2012/01/how-us-can-compete-and-win-in-global.html

SCM is an approach to managing a complex range of business activities that are associated with the coordination of supply network entities, channels, and resources for the effective delivery of value-added products and services to customers. At the heart of SCM is the optimization of material, information, financial and service flows through a supply network to effectively coordinate business activities that are geographically dispersed.

It is well known that SCM focuses on the operational and strategic processes of the entire network of business entities that transform inputs (e.g., raw materials and information) into value-added, finished products and services for end customers, it enables firms to integrate, leverage, and monitor the continual flows throughout the chain. In addition SCM enables knowledge flows among business entities[iv]; and opportunities for global marketplaces, including emerging markets[v].

The Value of CRM Solutions

In today’s world the key assets to most of the business is customers, this new view of the firms require a right portfolio of the right customers. The portfolio of right customers enables the business to develop and maintain relationships with these customers as well as to manage the portfolio effectively and efficiently.

Thus the fundamental principle of CRM is to leverage customer data to build profitable relationships by optimizing the value delivered to and realized from each customer. CRM is not a technology, but it is made possible by technology that allows a business to integrate, analyze, and act upon large volumes of customer data. Successful CRM applications must start with a business strategy, which in turn drives changes in business processes that are made possible by information technology.

Businesses are increasingly realizing that a 360° view of the customer with all customer-related data in a single data warehouse is a key factor for enterprise-wide CRM success. This 360 view of the customer consolidates all bits of information about the customer, including purchases, channel preferences, demographic and psychographic data, payment history, marketing contacts, service records, complaints or inquiries, and other communications with the company as shown on the figure below.

         A single 360° view of the customer integrates all customer information[vi]

Where Does CRM Provide Value?

CRM is prevalent across many industries, but has been most aggressively adopted in the financial and services sectors, including banks, credit cards, airlines, hotels, and retailers. CRM solutions are typically split into two areas: operational CRM and analytical CRM. Operational CRM includes the customer-facing applications that focus on managing customer interactions. Analytical CRM supports and aids decision-making with a range of tools from simple spreadsheet analyses to sophisticated data mining. Operational CRM and analytical CRM support each other in a feedback loop[vii]. Operational CRM captures critical data for input into analytical analyses. Insights into customers' behaviors obtained from analytical CRM are then tied into operational CRM solutions. The most common CRM applications focus on sales, marketing, or customer service processes.

• Sales force automation (SFA):

Regarded as the foundation of CRM tools^[viii], sales force automation is designed to help salespeople acquire and retain customers, and manage their accounts. Key components of SFA solutions include lead distribution and tracking, contact management, sales process management, pipeline management, sales forecasting tools, and automated generation of quotes and orders.

• Customer interaction center applications:

The most prevalent of the applications focusing on customer service and support are call center applications, which aid call routing and assignment, queue management, call tracking, entitlement processing, problem resolution, and performance measurement.

• Marketing automation:

Marketing automation uses information technology to automate the marketing process and get the right message to the right person at the right time using the right media. Marketing automation encompasses analytics to segment customers and target campaigns, campaign management to execute marketing campaigns including personalization, and detailed response tracking.

Benefits of CRM

New classes of customer-centric metrics are used to measure and monitor CRM initiatives. These include customer profitability and lifetime value, share of customer or share of wallet, retention or attrition rates, customer satisfaction, loyalty, up-sell and cross-sell rates, and cost to serve. Common benefits of successful customer relationship management initiatives include the following:

• Increased revenues:

A larger share of customer wallet and increased revenues can result from increased usage or purchases of the products and services customers already use or increased revenues from sales of additional or higher-margin products and services. Additionally, satisfied loyal customers may be less-price sensitive, so fewer price promotions are needed to drive sales.

• Improved customer loyalty and retention:

Satisfied customers often stay longer, are less likely to churn, are less likely to consider taking their business elsewhere, and more likely to generate referrals of desirable new prospects. These result in a reduced need to solicit new customers and lower new customer recruiting costs.

• Reduced costs of serving customers: 

Predictive modeling to better target marketing communications can produce significant reductions in unproductive advertising and marketing campaign costs. Initiatives to move customers from higher cost (e.g., phone) to lower cost (e.g., Internet) channels can realize significant cost savings.

• Improved resource allocation: 

Knowing which customers are highly profitable, which are marginally profitable, which are unprofitable, and which have upside profit potential allows firms to better to allocate marketing and customer service resources.

• Improved product portfolio: 

Through capture and analysis of interactive customer feedback, the portfolio of products can be better tailored to customers' needs and desires.

Bottom line results achieved from CRM initiatives vary widely depending, in large part, on how well the people-process-technology triangle is implemented.

Challenges of Implementing and Integrating CRM and SCM Solutions[ix]

Choosing the right path for any organization requires making short-term and long-term trade-offs. As companies move toward higher levels of integration, most will be hard pressed to keep their home grown or bolt-on solutions current. The pace of technological change is dizzying.

Though the potential benefits of fully integrated CRM and SCM solutions are great, the challenges can be formidable and success is not automatic. Despite the promise, statistics show that many CRM - SCM implementations failed to achieve their business goals. Beyond the matching of maturity elements, the common pitfalls among the failures includes but not limited to non-integrated business and technology strategy, inconsistent top management support, lack of trust, and inadequate understanding of technology. In order to overcome these bottlenecks the firms should embark the pitfalls into promise by:

• Building a strong business case:

The system is only as good as the business strategy that it supports. Successful SCM and CRM solutions require a sound underlying business case coupled with metrics to measure and monitor the results. This business strategy must be clearly articulated and communicated to all stakeholders.

• Securing management support and commitment:

SCM and CRM solutions reflect a business approach that extends far beyond mere technology tools. Successful implementation requires the involvement of and commitment from personnel spanning sales and marketing, operations, and information technology. Support and commitment from the top help ensure that all are aligned and working towards the same objectives. The CEO and the team should 'own' the implementation. Once implemented, the integration is a key strategic tool around which critical business decisions are to be made - and this should not be relegated to technical experts.

• Building communication and trust:

In corporate politics, information is power and this can result in an environment in which information is not shared. Successful integration of SCM and CRM solutions requires the sharing of information across the organization, and potentially with partner organizations as well. Build teams and constantly share expectations and lessons learned.

• Developing an understanding of the technologies:

Although technology is just one component of the solution, it is vital to its overall success. Factors such as scalability, integration, and functionality need to be considered up-front. Inherent capabilities of the technologies should be understood in advance.

Conclusion

In today’s world it is inevitable for the business firms to successful concur the market without investing massively and prudently in the Technology and Web based solutions to ensure that these business firms operate effectively and efficiently the Global Supply Chains. However, a careful consideration should be in place so as to understand the right time for implementing the right technology with the right investment strategies. Once these are taken into consideration there is likely chance for the firms to emerge on top of the market competition when fully utilize the benefit and competitive advantage of Right Technology for Global Supply Chains.

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^[i] Standish Group.(1995). Chaos Report, Standish Research Paper. Retrieved July 5, 2007, from http://www.projectsmart.co.uk/docs/chaos-report.pdf.

^[ii] J. Johnson,(2004). Making CRM Technology Work. British Journal of Administrative Management, 39, 22–23.

^[iii] M., & Cook,R. Hagey,(2003). Why Companies flunk supply supply-chain 101: Only 33 percent correctly measure supply-chain performance; few use the right incentives. Journal of Business Strategy, 24(4), 35–42.

^[iv] D., & E. Rosenzweig,A.V. Roth,(2007). B2B Seller Competence: Construct Development and Measurement Using an Operations Strategy Lens.Journal of Operations Management, 25(6), 1311–1331.

^[v] X., Zhao,B., & Flynn,A.V. Roth,(2007). Decision Science Research in China: Current Status, Opportunities and Propositions for Research in Supply Chain Management, Logistics, and Quality Management. Decision Sciences, 38(1), 39–80.

^[vi] D. Gupta, Jatinder N., Sushil K. Sharma, and Mohammad A. Rashid (eds). Handbook of Research on Enterprise Systems.IGI Global. © 2009.

^[vii] O. J. Chan,(2005). Towards a Unified View of Customer Relationship Management. The Journal of American Academy of Business, 6(1), 32–38.

[viii] F. D. Ross,(2005). E-CRM from a Supply Chain Management Perspective. Information Systems Management, 22(1), 37–44.

^[ix] D. Gupta, Jatinder N., Sushil K. Sharma, and Mohammad A. Rashid (eds). Handbook of Research on Enterprise Systems.IGI Global. © 2009.