OUTLINE

1. Supply Chain Management

The Bullwhip Effect What Is SCM? Why Is SCM Important? What Is CRM? Why Is CRM Important? CRM Components and Technologies

2. Customer Relationship Management

@ KAMLESH JAIN

THE BULLWHIP EFFECT & AN ILLUSTRATION OF THE BULLWHIP EFFECT Stakeholders along the supply chain have different and frequently conflicting objectives. Accordingly, they often operated independently, resulting in a phenomenon called the bullwhip effect on demand and supply.

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MITIGATING THE BULLWHIP EFFECT

EDI AND THE INTERNET EVERYDAY LOW PRICING ELIMINATE FORWARD BUYING OF BULK ORDERS

Vendor Managed Inventory Eg. Wal-Mart and Procter & Gamble, The VMI Partnership

@ KAMLESH JAIN

Supply Chain Management Primer, www.clarkstongroup.com

MATERIAL FLOW
Source: Johnson & Pike, 1999

Raw materials enter into a manuafacturing organization via a supply system and are transformed into finished goods. Finished goods are then supplied to the consumers through a distribution system. Several companies linked together in the process, each adding value to the product as it moves through the supply chain.

SCM, CRM, & ERP

(HENRY C. CO)

Information Flow
Products or services usually flow from supplier to to customer. Design and demand information usually flow from customer to supplier.

SCM, CRM, & ERP

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BIG DOLLARS
U.S. inventory investment: 20% - 25% of GDP
U.S. grocery pipeline $75 - $100 billion

U.S. transportation & warehousing expense: 10% of GDP U.S. companies: 25% of corporate budgets on SCM

Inventory carrying, transportation, warehousing, order management, supply chain financing, related IT expenses Benchmarking Partners, June 1999

SCM, CRM, & ERP

(HENRY C. CO)

HIGH LEVERAGE
Impact on profit increase sales by $12 = $1 savings in the supply chain Impact on sales trend towards competing on service surrounding the product (high quality, low cost assumed) High availability Delivery speed Order status (eg, Internet order tracking) Impact on stock price profit + assets ROA

SCM, CRM, & ERP

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INCREASING CHALLENGES
Shrinking product life-cycles Increasing product variety Food product introductions: 1980: 2,000 1991: 18,000 1997: 25,000

SCM, CRM, & ERP

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OPPORTUNITIES
Average on-time delivery performance in the United States is probably in the 50 to 60 percent range, at a time when competition & consumer pressure are driving requirements up to the 99 percent range. (Conway, R.W. 1996, Linking MRP II and FCS, APICS The Performance Advantage, June, 40-44) Material idle 80%+ of factory throughput time (Vollmann, Berry, & Whybark 1997)

SCM, CRM, & ERP

(HENRY C. CO)

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Idle time in supply chain - quick analysis...

inventory at 25% of GDP, 50% to100% of GDP due to product 3 to 6 month flowtime & production/transport at 1.2 weeks idle 90% to 95% in supply chain

Best-in-class (e.g., Dell, Wal-Mart) SCM expense about 12% of corporate budget (versus overall average of 25%) (World Research Advisory Fax Newsletter 1/22/99)

SCM, CRM, & ERP

(HENRY C. CO)

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OPPORTUNITIES
Improving supply chains globally judged a major trend by 78% of 2,500 CEOs of companies with revenues > $100 million (Business Week, 12/12/98) Deloitte Consulting survey - SCM ranked as critical to very important to companys success by 91% of senior managers at 240 North American manufacturers (CIO, 7/1/99)
Only 2% ranked their supply chain as world-class

SCM, CRM, & ERP

(HENRY C. CO)

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A way to identify, acquire, and retain customers. A way of automating the front office functions of sales, marketing, and customer service. A technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers. For some vendors, whatever their current product may be, that is CRM.

Why is CRM important?

Globalization and the Internet Competition can now come as easily from around the world as from around the corner. Commoditization of products and services Power and choice are moving to the customer as never before. A world of undifferentiated industies In a world of undifferentiated industies, you must choose whether to compete on the basis of price in a cutthroat commodity market, or on the basis of customer relationships created through a superior value proposition. It costs six times more to sell to a new customer than to an existing one The odds of selling to a new (existing) customer are 15% (50%). The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.

SCM, CRM, & ERP

(HENRY C. CO)

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CRM ARCHITECTURE
Customer Life Cycle CRM Key Focus

(Modified from Kalakota & Robinson 2001)

Acquire
(new customers) Differentiation Innovation Convenience

Enhance
(purchase value) Bundling Reduce cost Customer service Repeatable process

Retain
(existing customers) Adaptability Listening New product Loyalty program

Core Process

Direct Marketing
Sales Force Automation

Cross-/Up-Selling

Proactive Service

Customer Support, Call Center

Enabling Technology Integrated Solution

Telephone, Fax, E-mail, Web, VRU (Voice Response Unit) Legacy Systems + Computer/Internet Telephony Integration (CTI/ITI) + Data Warehousing + Decision Support Technology (data model analysis)

Integrated CRM Applications

Connectivity Web Application sharing Interactive TV Videoconferencing Interactive chat Mobile Smart phones Wireless modem Handheld devices Network Center Access to legacy data Wireless IP Natural language recognition Speech recognition

Applications Internet and Web Content management Personalization Management Operations Benchmarking Metrics/TCO measurement Customer Intelligence Customer satisfaction survey Data mining Enterprise access

Technologies Future Technology Intelligent agents Smart cards Speech Middleware Corba, COM/DCOM, EAI Application Development C++, Visual C++, HTML, DHTML, XML Industry Verticals Banks, retail, wholesale, private Software, Telecomm, Government

Business Intelligence Advanced BI development tools Query, reporting, OLAP (Source: Maoz, Gartner Symposium ITxpo 2000) viewers