Supply Chains

Diagnosing_Greatness_Ten_Traits_of_the_Best_Supply..._----_Chapter_10_Trait_8_--_High_Customer_Integration_and_Satisfaction_.pdf

Home >Applied Sciences homework help >Supply Chains

187

TraiT 8 High Customer integration and Satisfaction

This chapter brings the focus to where it ultimately needs to be— the customer. In general, we find that most firms are not nearly as customer oriented as their marketing pronouncements would imply. The data from our Global Survey of Supply Chain Progress clearly demonstrate that the leaders adopt a far more customer-focused per- spective than do the followers and laggards. For example, only 40 percent of firms have changed from a push to a pull orientation in driving their supply chain initiatives. Most companies are still pushing production into inventory rather than responding to actual customer needs. The data also show inadequacies in matching supply with demand for specific customer segments. When we asked survey respondents if they periodically assessed the fit between customer segmentation strategy and supply chain channels, less than half responded positively (Figure 10.1). Again, the leaders were distinguished by their almost uniformly positive response to this question. For most of the other businesses, it’s a case of not practicing what is preached.

Leaders are using business intelligence and a stronger customer focus to outdis- tance rivals in terms of creating greater satisfaction and generating new revenues with lower inventories. Further, they are tracking progress in these areas with tar- geted metrics. Leaders diligently segment their customer base and then match deliv- erables in terms of what is expected and needed. They work to achieve the perfect order, create one version of the truth, and excel in on-time deliveries, high fill rates, low returns, and high satisfaction ratings. To find opportunities to improve their key customer interactions, the leaders investigate any complaints or problems. Many of the non-leaders, by contrast, tend to push their goods out into the supply chain in the hope the sales group can move them to customers (often at discounted prices). J. Ross Publishing; All Rights Reserved

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

188 Diagnosing Greatness: Ten Traits of the Best Supply Chains

MoST CoMpanieS aren’T STruCTured To deliver CuSToMer SaTiSfaCTion

In a May 2007 Harvard Business Review article, Professor Ranjay Gulati of Northwestern University’s Kellogg School of Management summarized the situa- tion well: “Companies claim to offer customer solutions, but most aren’t set up to deliver them without specific changes in organizational structure, incentives, and relationships. . . . It’s not just that the status quo doesn’t reward collaborative behavior— although the right incentives are also critical. It’s that the connections literally aren’t in place. . . . Many product-centric companies probably start out with a focus on customers. But after early successes, they institutionalize the notion that markets respond primarily to great products and services” (Gulati 2007).

Our data are consistent with the notion that companies lack the “organizational structure, incentives, and relationships” needed to create consistent customer satis- faction. Figure 10.2 shows responses to a question that asked if the respondents’ internal activities were synchronized with those of key customers. Nearly three- quarters answered in the affirmative. This was encouraging but left us wondering whether the responses were due to customers insisting on synchronization or to supply chain adjustments being made in response to specific customer needs. Probing further in Figure 10.3, we asked if the supply chain structure was different for high-margin products than for low-margin ones; only 35 percent responded highly positive to this query. An even lower 31 percent responded positively when we asked specifically if their supply and delivery policies varied according to the profit contribution of different products and market segmentations. We were left with the feeling that the dominant customer strategy was to have a supply chain where one size would fit all customers. The select leaders, on the other hand,

21%

26%

41%

We periodically assess the fit between customer segmentation strategy and supply chain channels.

Strongly disagree Disagree Neutral Agree Strongly agree

Figure 10.1 Customer segmentation and supply chain fit

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 189

seemed more willing to tailor their supply chains where appropriate based on the understanding gained through the customer segmentation process.

The following two graphs show some interesting differences. Figure 10.4 shows that even a majority of the laggards say they have pursued relationships and plans with individual customers. They are good marketers. However, significantly fewer of the lagging firms have defined roles and priorities for managing customer relationships. It is this level of customer analysis that is required in order to estab- lish clear supply chain policies and procedures relating to customer integration. Even more significant differences between leaders and laggards are illustrated in Figure 10.5. It shows that leaders have gone further in translating the needs of disparate customer groups into tailored supply chains. They have made the linkage

We synchronize our activities with those of key customers.

21%

50%

21%

Strongly disagree Disagree Neutral Agree Strongly agree

Figure 10.2 Strategic customer integration

Figure 10.3 Supply chain structure and profits

36%

21%

26%

Our supply chain structure is different for high margin products than it is for low margin products.

Strongly disagree Disagree Neutral Agree Strongly agree

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

190 Diagnosing Greatness: Ten Traits of the Best Supply Chains

between marketing segmentation and supply chain structure, whereas the laggards are still using a one-size-fits-all strategy.

Customer satisfaCtion is the supply Chain Differentiator

When we embarked on our survey, one of the first hypotheses offered was this: Customers will be the driving force behind many supply chain initiatives. As we have noted, the evidence shows that the majority of supply chains support this hypothesis in theory but not necessarily in practice.

To better gauge the importance of customer focus going forward, we then updated the hypothesis as follows: Future success will increase with the ability to combine differentiating operational excellence with a serious focus on segmented customer satisfaction. Our thinking here is that a firm can bring a stronger focus

Our plans address individual customer’s requirements

We synchronize our activities with those of key customers

We have clearly defined roles and responsibilities for managing customer

relationships

Functional teams have a common prioritization of customers in case of

supply shortages and how allocations will be made

Leaders Followers Laggards

0 10 20 30 40 50 60 70 80 90 100

Percent responding agree or strongly agree

Figure 10.4 Differences in management of customer relationships

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 191

to customer intimacy and customer satisfaction without sacrificing its efficiency or effectiveness. Indeed, we suggest that an unrelenting focus on the customer can bring the kind of supply chain enhancements that positively impact costs and profits.

As a firm continues its progress through Level 3 and higher on our supply chain maturity ladder, it more fully embraces the concept and techniques of cus- tomer relationship management (CRM). This approach extends the learning and experience gained from supply chain initiatives with the desire to keep growing the business. Now the firm begins focusing intently on using supply chain tech- niques for building top-line revenue while reducing costs that affect the bottom line. Put another way, CRM supports our eighth greatness trait by putting the customer at the center of supply chain improvement efforts.

0 10 20 30 40 50 60 70 80 90 100

My firm uses separate supply and delivery channels to serve different market segments

We periodically assess the fit between customer segmentation strategy and

supply chain channels

Our supply chain structure is different for high-margin products than it is for

low-margin products

Our supply/delivery policies vary according to the profit contribution of different product

and market segments

We have differentiated our capabilities to respond and deliver to accommodate

differences in local markets and customer needs

Leaders Followers Laggards

Figure 10.5 Linking segmentation and supply chain structure

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

192 Diagnosing Greatness: Ten Traits of the Best Supply Chains

Gathering information on key customers, identifying the means of satisfying those with the most value, and increasing long-term loyalty through customized products and services that meet actual needs are major objectives of CRM. Behind all of this is an understanding that the ability to deliver through an integrated sup- ply chain is essential to building a profitable customer relationship.

The true intent of CRM is to use strategy and process improvement to satisfy targeted customers and enhance sales. However, technology has clouded this original intent in all too many cases. In researching the subject, we found that most CRM efforts placed relatively more emphasis on applying software and reducing costs, particularly sales and service headcount, than on building revenues with key customers. In fact, cost cutting has become so pervasive that many com- panies simply do not believe that CRM can help generate revenue growth. So far, the highest reported returns on this practice seem to come from call centers, where cost cutting and better resource allocation have led to considerable savings (though not necessarily benefiting the customer). Another typical application finds CRM practices being foisted on sales personnel, without explaining or dem- onstrating the advantages for them. Thus, the sales force starts to view CRM pri- marily as a control mechanism. Consequently, they do not enter the necessary data, or they fail to use the information for the intended purposes. The result: The CRM effort withers on the vine.

defining purpoSeS Have Been MiSSing

Analyzing the reasons behind CRM’s spotty record and poor success rate, we found that much of the problem relates to the absence of a defining purpose. Specifically, there is no central imperative that would overcome the usual obstacles encountered in adopting the technique, which effectively amounts to a major busi- ness transformation. That problem starts with a definition or the lack thereof. For our purposes, CRM is the practical implementation of business strategy for iden- tifying, acquiring, and retaining profitable customers through a focus on:

• Applying portfolio management techniques to customer segmentation so that knowledge can be used to increase the share of business with selected customers

• Linking customer-related processes throughout an extended enter- prise network so that valued and trusted partners can help in the pursuit of profitable revenues

• Enabling fundamental productivity improvements for customers, key business partners, and employees that enhance the desired relation- ships

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 193

• Creating a customer/seller environment that is substantially more beneficial to both buyer and seller

• Integrating critical information throughout all customer channels and back office functions— from customers through suppliers— to estab- lish the most effective system of response to actual customer needs

In short, CRM is something a business organization and its business allies do, not something they purchase— as in technology. CRM is not an off-the-shelf software tool that will effortlessly manage relationships and deliver higher sales and profits. Technology and software will support the effort, but they are not the drivers. The correct CRM strategy centers on supporting the sales and service people, making their jobs easier and more effective, and then enabling them to acquire, grow, satisfy, and sustain the right customers— that is, those with the greatest long-term benefit for themselves, the firm, and its business partners. The underlying concept is to grow the business with long-term annuities through greater customer intimacy.

A generally accepted business tenet applies here: Firms that become adept at garnering greater customer loyalty by focusing intently on their needs and satis- faction grow much faster than others. These leaders tend to track customer satisfaction metrics as intently— or more so— than they do other traditional busi- ness indices. Adhering to this core tenet, industry leaders such as Cisco, eBay, Hewlett-Packard, Land’s End, and The Vanguard Group link a significant portion of employee compensation to customer satisfaction. On the other hand, our research indicates that more companies profess a customer-centric orientation while actually focusing all their efforts on operational excellence or product/ service innovation.

At the heart of customer centricity is a strategic intent to create profitable new revenues with targeted customers and consumer groups as well as important dis- tributors, retailers, and intermediaries influential in the buying decision. In that sense, a short list of perhaps 10 to 20 percent of potential customers should become targets. With this list in mind, the firm then needs to develop a set of nar- rowly focused analytical tools, which become the primary ingredients in imple- menting CRM. A leader firm driving CRM will mine and use the collective databases within both its own organization and with its cooperating business part- ners to build specific tools and methodologies that will differentiate the enterprise in the eyes of the most desirable customers. The firm and its closest allies effec- tively use customer and partner information and apply customer behavior models to create winning marketing and sales efforts that lead to superior results. Notably, this effort involves the tactful elimination of the least profitable and often most costly customers. It also means creating a new system that has strong intrinsic value for the sales and service personnel involved.

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

194 Diagnosing Greatness: Ten Traits of the Best Supply Chains

CrM BeginS wiTH a CoMpelling BuSineSS CaSe

Despite CRM’s intuitive appeal, management will not support this technique with- out a clear delineation of its anticipated benefits. That’s truer now than ever before. Customers today expect (and generally receive) excellent service that, in effect, has become the table stakes in the modern business game. Distinguishing yourself and your business allies from the competition takes something extra.

From the vantage point of the customers, there are critical links between the supply chain and customer touch points. Essentially, these are the incidences of contact and service that distinguish the supplier’s value. If we can define these points of impact and articulate the value of supply chain improvements to strategic customers, many of the supply chain benefits become substantiated. And when this happens, the firm is able to create and validate substantive cost savings. When this validation is presented to a key customer, the opportunity arises to use a por- tion of the savings to fund other CRM improvement efforts and perhaps even to nudge prices because of the savings. What’s needed is an ROI-based road map, with bite-size release strategies that define functionality to be attained and the actual business benefits to be achieved.

The second area to address is the relationship between CRM and the sales and marketing strategy. The CRM business case is most compelling when it is viewed as an enabler of a holistic sales and marketing strategy. The business case must also clearly spell out the values for those doing the selling and servicing. It must be a dynamic document that shows what results will be derived from the efforts of the sales representatives, agents, brokers, dealers, or other persons making the calls and doing the selling. When completed, this business case will provide the organi- zational alignment required for success. In reality, it will be the key to unlocking the potential benefits derived from CRM.

CrM ConTinueS wiTH CuSToMer SegMenTaTion

A successful CRM effort begins with something that has become a business essen- tial— the segmentation of customers in terms of actual value to the firm. Segmentation entails a two-sided perspective: what is needed and what is supplied. Larry Lapide of MIT’s Center for Transportation & Logistics offers useful advice in this regard: “The basic concept around optimal segmentation is the understand- ing that services should be matched to customers to achieve long-term strategic goals, such as sustained profitability growth. Optimality will depend on the crite- ria used to segment the customer base as well as the services offered to each seg- ment, so that customers (demand) are most profitably matched with services (supply)” (Lapide 2008).

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 195

Using the knowledge from the network databases and relying on the intuition of those professionals responsible for building revenues, the firm must deeply analyze existing and prospective customers and fit them into a decision matrix. Customer profiles, past histories, lifetime value analyses, calculated risk analysis, special demands, historic relationships, and other pertinent data are reviewed, often with the help of trusted advisors, to complete the matrix and to guide the overall CRM effort. In the best cases we have reviewed, activity-based costing is used to make sure the firm and its partners know the true costs of serving various customer segments.

The next step is to expand the effort to better understand behavior and predict which customers will respond appropriately to special attention and service. Essentially, this becomes an art of turning a mountain of available data into a usable knowledge base to better satisfy the chosen customers, generate new reve- nues with higher profits, and develop happier sales and service personnel.

Figure 10.6 presents a useful matrix for customer segmentation analysis. On the vertical axis, the ranking moves from low to high profit. This part of the seg-

For -the -moment buyers • Returns diminish as service

costs escalate • Sport buys can be lucrative, but

spread over many suppliers • Firms show some willingness to

pay for added values • Limited advancement

possibilities • High cost to retain loyalty

Winners – to die for • Returns high relative to cost-to-

serve • Focus is on total value;

Balanced Scorecard analyses to prove benefits

• Firms provide resources to seek joint savings; offer help with joint selling efforts

• History of mutual partnering, sharing in risk

• Low cost to retain loyalty

Usual suspects • Spot buyers; pricing is crucial to

decisions • Will switch for any perceived,

momentary lower cost • Will leverage volume frequently;

apply auction techniques • Very limited advancement

possibilities •

Wannabes • Lengthy relationships; have

shown signs of loyalty while insisting on special servicing for which they are reluctant to pay

• Low probability for increasing profits without innovative selling approach

• Show some elements of partnership for joint profits

• Have fit with firm’s capabilities, value offerings but tend to have high cost-to-serve

High

Low

Low High

Strategic value

Profit

Potential for third party fulfillment, sales automation

Figure 10.6 Customer product/service segmentation

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

196 Diagnosing Greatness: Ten Traits of the Best Supply Chains

mentation requires a solid knowledge of both actual cost to serve and the actual profits derived from each customer. On the horizontal axis, the variation is from low to high strategic value to the firm. The actual criteria used must be specific to the company’s capabilities and needs. Further, they should reflect consensus across the firm’s major business sectors.

Starting in the lower left corner of the matrix— the low-strategic and low- profit value quadrant— we find the customer grouping that every firm possesses and is reluctant to face. These usual suspects are generally a drain on time and resources, and offer virtually no possibility of becoming more financially or stra- tegically significant to the firm. They tend to survive as customers because no one takes the time to question their value and potentially purge them from the cus- tomer list. Decision rules for this category are relatively straightforward:

• Consider polite withdrawal by notifying the customer of a significant price increase, providing a reason for discontinuing service, or simply sending a notice of service termination. Abandon solicitations and do not include these customers in any CRM effort

• Institute selective price increases for categories/stock-keeping units (SKUs) for longer terms; maintain relationship only for categories with profit

• Strictly limit any new investments or special sales attention • Establish minimum volumes and pricing; pass ownership to third-

party organizations • Automate processing with self-service features or abandon solicitation

Moving up to the high-profit and low-strategic value quadrant, we find the for- the-moment buyers. This is a fickle constituency, but their profits are worth pursu- ing. CRM efforts should be avoided or carefully applied in this segment. The following decision rules should apply:

• Carefully cultivate a few potential winners that will react positively to demonstration of value rendered

• Match features and services with actual needs; emphasize self-service features

• Manage contracts limited to low-cost and core-competency categories and SKUs

• Orient sales effort around demonstration of full cost and value added • Limit CRM involvement to only those with highest long-term potential

As we move down to the lower right hand quadrant, we encounter the wannabes. These are customers that have strategic value but never seem to pay enough for

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 197

products and services to attain a winner status. They are generally long-term cus- tomers whose needs closely match the firm’s capabilities; however, they insist on shopping the market to verify that they are not overpaying for the product or ser- vice. Moreover, they always want the lion’s share of special attention. The objec- tives in this sector become:

• Sort through the list to find a few candidates that can be moved up to the higher winner status by virtue of reducing any unnecessary special attention or selectively charging for services rendered. The intention is to get paid for any and all of the special care so the customer relation- ship returns above-average profits

• Try selective special introductions or promotions to test willingness to pay for actions that result in added value

• Find hidden opportunities to match value with selective pricing • Match limited future investments with actual potential returns • Establish cost controls on service costs • Apply CRM carefully to the highest potential firms in this quadrant

Finally, in the upper right quadrant, we find the customers that deliver the highest profit and provide the greatest strategic value. These are the winners (the custom- ers to die for) and they must be in the forefront of any CRM effort. The goals with this preferred group revolve around retention and growing revenues. The decision rules become:

• Allow highest access to connectivity features and use of extranet • Provide advance information on major developments, new features,

and product promotions • Invite them to join an advisory council; encourage joint development/

investment projects • Provide frequent communication on first offerings of products or

services • Do not let cost-to-serve distract from emphasis on overall value • Begin and enlarge CRM effort with this group • Delight, nurture, defend, and sustain

This suggested matrix and the decision rules can be customized for a particular industry or individual company. The point is that unless there is a solid mecha- nism for selecting and segmenting customer candidates, the CRM effort becomes a fruitless exercise of trying to please all customers— something that will quickly run out of steam. Focusing on the areas of greatest opportunity is the simple man- date for CRM success.

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

198 Diagnosing Greatness: Ten Traits of the Best Supply Chains

daTaBaSe analySiS leadS To relevanT CrM Knowledge

Many companies have implemented a CRM initiative but have not realized the associated value due to a lack of integrated customer data. To help in this area, we offer a data acquisition and analysis procedure described in Figure 10.7. The tech- nique relies on accessing knowledge typically found in existing databases and then using this knowledge in a way that distinguishes the firm in the eyes of the most valued customers. Moving from bottom to top, the process begins with assembly of the appropriate CRM data from the many sources available. It then proceeds to cross-functional analysis that mines the data to establish profiling and modeling techniques used in the segmentation and decision rules efforts.

Customers • Consumers • Retailers • Distributors • Corporate buyers

• Known customer value for each customer • Known characteristics for each customer • Known contact preferences for each customer • Known propensities to respond, purchase, etc. • Treatments to match customer needs/patterns

Channels

• SFA/PRMI • Contact center • Personalization • e-mail management

Face–to–facePager/PDA/cell Phone Web Retail

Treatments

Inbound • Event-based rules outbound • Campaign management

Products Offers Messages Recognition Content

Analytics

• Data mining • OLAP reporting • Ad hoc query

Strategic profiling and analysis Modeling/mining

Loyalty Churn Risk

Prospecting Cross–sell

Channel mix

Product mix

Value and segments

CRM Data

• Data warehouse • Data marts • Repositories

Campaign history

Purchase history

Service history

Web clickstream

External demo data

Mail/e-mail/fax

Figure 10.7 Data acquisition and analysis critical to CRM

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 199

At the treatments stage of the procedure, the firm matches the profiles and models with the products, offers, messages, content, and recognition that is at the heart of the CRM methodology. Input from a few key customers can have great value here. Channels must be evaluated to make certain these customers are receiving their products and services exactly the way they want them. The process culminates with value propositions that make the most sense for the most impor- tant customers.

Discovering why good customers leave you, anticipating changes in buying patterns based on trend analysis, knowing how to take advantage of environmental factors, and being able to react properly to shifts in category preferences by age, gender, and ethnicity are part of CRM’s art. The whole effort yields the most ben- efit when several groups within the firm jointly analyze the data to make certain that all parts of the organization benefit. The analysis will confirm that the highest customer segment does indeed have the greatest positive impact on the company’s future. Conversely, it will also reveal the debilitating effect of high-maintenance, low-profit customers. In doing so, the analysis will convincingly demonstrate to everyone in the organization that the most valued customers deserve the most attention.

To identify the precise nature of that attention, the firm should begin by ask- ing selected customers what value they would like to derive from the investment in CRM. Our research shows the answers to that query are often unexpected. Sometimes the customer’s perception of which products have the most value, for example, differs from the supply firm’s perspective. There may be differences, too, around how the products are or should be distributed, through which channels, which partners are being used, the right delivery cycles, and so forth. As these responses are addressed, new decision rules emerge.

The firm also should identify how technology could become an enabler for this coveted group of winning customers. As an example of how this might play out, the firm should target direct marketing efforts that are matched to the cus- tomer’s identified needs. The CRM process starts to capture related information on product and service behavior and feeds back data to the desired customers. This, in turn, will encourage them to increase buying activity, become engaged in joint development of new business promotions, and participate in shared risk investments. Where appropriate, process transactions can be improved and auto- mated. Access to important supply chain information can be afforded to those customers needing real-time knowledge of their product flows. In the most effec- tive systems, this knowledge sharing extends end to end across the supply chain network.

Figure 10.8 provides a broad methodology that can be used to guide a CRM implementation while gaining total organizational consensus. The methodology

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

200 Diagnosing Greatness: Ten Traits of the Best Supply Chains

progresses across three phases: assess, design, and implement (which has three subphases of design, develop, and deploy):

1. Assess. In this initial stage, the firm evaluates its current situation in specific functional areas such as marketing, sales effectiveness, sales force automation, and customer service. The intent of this activity is to define a functional strategy for improving CRM operations and results, internally and externally, while identifying options that can be pursued for additional benefits. The assess phase concludes with the creation of an in-depth business case for implementing the CRM strategy.

2. Design. Here the firm refines the value proposition and purposes supporting the CRM effort. It identifies high-level business processes critical to execution. This activity is facilitated with input from the blueprint or action plan emanating from the core business processes identified as being critical for CRM success. A second or supporting blueprint is created to define the core system components that the architecture needs to implement the solutions. These blueprints are generally developed by a core team of CRM experts, with input from a few carefully selected customers. Business and technical require- ments are mapped to select the most appropriate enabling software for specific situations. At the conclusion of this phase, the firm cre- ates a release plan that outlines follow-on implementation activities.

Figure 10.8 CRM methodology

Core business processes

Phase 1Phase 1

AssessAssess

Phase 2Phase 2

DesignDesign

Phase 3Phase 3

DesignDesign DevelopDevelop DeployDeploy

Business ArchitectureBusiness architecture

Organizational ChangeOrganizational change

Knowledge TransferKnowledge transfer

Data Architecture and DevelopmentData architecture and development

Application Architecture and DevelopmentApplication architecture and development

Design blueprint

Technical Architecture and DevelopmentTechnical architecture and development

Project ManagementProject management

Quality management

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 201

3. Implement. This phase has three components— design, develop, and deploy. Drawing on current best practices and applications and knowledge of proven techniques, the firm establishes business processes and maps them in detail to software package capabilities. It writes business scenarios that can be used during development to configure and customize software based on actual needs. This exer- cise pays special attention to what key customers say are the most beneficial CRM features from their perspectives.

Initially, activities are grouped according to functional areas that incorporate the joint skill sets needed to achieve mutual objectives. Bands spanning the method- ology’s three phases represent the activity blocks that aggregate similar activities. These activities include: business architecture, organizational change, knowledge transfer, data architecture and development, application architecture and develop- ment, technical architecture and development, project management, and quality management.

The implementation steps are fairly straightforward and include creating a release plan and performing ongoing project management. They also include pre- sentation of any prioritized gaps discovered between current and desired future state performance. The deployment phase includes delivering the CRM process across the firm, obtaining executive acceptance and alignment, and gathering les- sons learned for enhancing the CRM effort as it goes forward.

don’T overlooK THe required linKage To Supply CHain ManageMenT

With CRM in place and ready for activation, you’re ready to go, right? The answer is yes only if you have a supply chain system ready to meet the specific increased demands from key, targeted customers and consumer groups. It is axiomatic that if a CRM initiative is rolled out with appropriate support, a spike in demand will be one of the beneficial results. At the same time, if CRM is only marketing and sales effort and linkages to supply chain management (SCM) are lacking or inad- equate, the business benefits of any spike will be lost or diluted through poor delivery performance. Many companies fail to make the necessary connection between CRM and SCM and suffer the consequences. Firms typically launch CRM and then rely mainly on manual processing (e.g., telephones and faxes) to satisfy the surge in business. More often than not, they end up resorting to costly heroic responses to keep the big customers satisfied.

Another sad and all too frequent outcome is that CRM leads to promises and heightened customer expectations that the supply chain is unable to meet.

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

202 Diagnosing Greatness: Ten Traits of the Best Supply Chains

The one-size-fits-all supply chain cannot deliver all the different value proposi- tions inherent in the CRM effort to the different customer segments. The overall plan needs to account for the time and resources necessary to restructure supply and fulfillment channels so they are matched to the needs of various customer segments.

When the supply chain is particularly long and extends through many partners, the CRM-SCM disconnect results in a predictable ending: A CRM rollout that should have been a smash hit falls flat on its face. CRM demands a successful and dynamic relationship between those responsible for generating the new revenues and those responsible for fulfilling the raised expectations generated. Simply put, that means optimizing plant and labor efficiency (maximum quality and minimum cost) with sales and marketing effectiveness (flexibility and satisfaction).

Intuit of Mountain View, California, provides an instructive example of a solid CRM deployment that made the needed supply chain links. When Intuit decided to use CRM to enhance the sales of its products such as Quicken and Quick Books, it engaged Modus Media International to reproduce the related CDs, boxes, and manuals. Modus Media has long experience helping firms such as Intuit stick to their core strengths while it handles details like packaging and delivery. Intuit also engaged Ingram Micro, a Santa Ana, California-based technology distributor, to streamline the fulfillment process for Intuit’s retail customers. The three organiza- tions continue today working as one. This type of coordinated effort among mar- keting, product development, and supply chain helps to establish and maintain the common goal of responding effectively to steady sales growth.

aCTion STudy: TeCHnology BeCoMeS an enaBler

With the CRM methodology in place and the rollout underway, attention can turn to making sure the technology being used will be an effective enabler. Alliant Energy provides a good illustration of how to do that effectively. When the Madison, Wisconsin-based company decided to apply CRM as a means of improving its rela- tionships with its most important commercial customers, management decided to center its CRM strategy on face-to-face contact. According to Mike Nutt, Alliant’s manager of sales systems support, “Account managers and support personnel on the road have remote access to Alliant’s Saratoga Systems CRM software with all relevant customer data and billing information” (Maselli 2002).

As the effort progressed, the firm discovered that not all customer support was reaching its intended standards. Notification of customers that a power inter- ruption would occur, for example, was not being executed in a timely manner. Because Alliant has tariff agreements with most of its largest customers, which include incentives to curtail energy usage during peak periods of demand, service

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

Trait 8: High Customer Integration and Satisfaction 203

agents were required to contact customers and alert them to power interruptions. The volume of such calls, coupled with the difficulty of reaching the responsible person on the first attempt, meant that an hour or more could pass before that information was in the right hands at the customer company. This was a signifi- cant problem both for Alliant and its customers.

Resolving this issue through its core CRM software, Alliant Energy uses a real-time message alert and delivery system it implemented from EnvoyWorldWide. Through this system, Alliant sends messages about impending power shutdowns to key business customers via wired and wireless devices. The system is able to notify multiple people at the customer site by fax, pager, or PDA. Mike Nutt reports on the positive results: “Now we can alert 20 people or more from each company at once. To ensure that businesses receive the notification, business con- tacts call a number that’s hooked into the Envoy system. Alliant can monitor the responses online and in real time to ensure all customers acknowledge receipt of the notification” (Maselli 2002).

In this case example, the firm followed the correct path to success. It began with a small group of core customers and developed a business case that would assure greater satisfaction for these key accounts. Alliant then proceeded to design the improved system and install the enabling software to facilitate the intended results. Customers and suppliers are both happier, and the interactions are faster and more reliable.

ConCluSionS

Exceptional customer satisfaction is one of those ideals that every company aspires to but relatively few seem to be able to reach. That’s confirmed in the results of our annual global survey as well as in observations of companies across a range of industries. Part of the problem is that firms tend to waver in their customer focus in the face of cost-cutting and competitive pressures. It’s far easier to hack away at your transportation rates or beat suppliers down for another few dollars than it is to build the kind of meaningful relationships that will actually grow the business.

For companies that have wavered in their customer commitment but sincerely want to work on this trait of supply chain excellence, we advocate the enthusiastic adoption of CRM. It’s not a magic tool that will transform you overnight into a customer-centric organization. Rather, CRM is a comprehensive business approach that brings all of the firm’s functional areas— sales and marketing prominent among them— together in the pursuit of one overarching goal: serving customers in a way that keeps them highly satisfied while producing maximum revenues.

Technology is part of the CRM effort, of course— a big part. But as we’ve related in this chapter, technology’s role is essentially that of an enabler. CRM

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .

204 Diagnosing Greatness: Ten Traits of the Best Supply Chains

begins with a compelling business case, proceeds through the collection and analysis of critical data, then on to channel management, and ultimately to a smart service strategy for each customer segment. At each step, technology becomes the essential facilitator.

Are high customer integration and satisfaction easy traits to develop? No, mainly because they run counter to traditional ways of viewing the marketplace. Cultivating these qualities truly represents a change management effort. The lead- ers, though, have persevered though this sometimes painful process and in the end have benefited greatly— as have their customers and other network partners.

Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness : Ten traits of the best supply chains. J. Ross Publishing. Created from apus on 2023-07-04 21:24:14.

C op

yr ig

ht ©

2 00

9. J

. R os

s P

ub lis

hi ng

. A ll

rig ht

s re

se rv

ed .