Week One Discussion 1
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Week1c-CustomerRelationships-SCM610.pptx
SCM 610
Supply Chain Collaboration
Week 1 – Supply Chain Management
Customer Relationship Management
Supplier Relationship Management
Assessments
Supply Chain Mapping
Department of Management and Marketing
SCM 610 – Supply Chain Collaboration
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Overview
Supply Chain Management
Customer Relationship Management
Supplier Relationship Management
Assessments
Supply Chain Mapping
SCM 610 – Supply Chain Collaboration
Chapter 2 The Customer Relationship Management Process
Supply Chain Management: Processes, Partnerships, Performance
4th Edition
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Supply Chain Management Integrating and Managing Business Processes Across the Supply Chain
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach , FL: Supply Chain Management Institute, 2014, p. 24.
CRM and SRM Form the Links in the Supply Chain
Customer Service Management
Demand Management
Order Fulfillment
Manufacturing Flow Management
Product Development and Commercialization
Returns Management
Customer
SRM
Supplier
CRM
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach , FL: Supply Chain Management Institute, 2014, p. 25.
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What is Customer Relationship Management?
It is not just a software solution (CRM software has become very popular)!
Customer relationship management provides the structure for how relationships with customers will be developed and maintained.
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance.
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Why Is It Important?
Customer retention
Competitive intensity
Cost efficiency
Customer selectivity
© Supply Chain Management Institute.
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Customer Selectivity vs. Customer Retention
Retention
Zone
Selectivity
Zone
Key
Customers
Often Biggest
Often Smallest
Customers
Profit Contribution
$
0
Profit
© Supply Chain Management Institute. Adapted from presentation by Jag Sheth
Subsidized Customers
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Is cost
dependent on
unit volume?
Is
resource
dedicated to a
specific
product
line?
Place in
contribution
pool
Charge
Applicable
Segment
Charge
Applicable
Segment
Variable
Non-Variable
Indirect
NO
NO
YES
YES
Assign Costs to Customers and Products
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach , FL: Supply Chain Management Institute, 2014, p. 41.
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Source: Douglas M. Lambert and Jay U. Sterling, “Educators Are Contributing to Major Deficiencies in Marketing Profitability Reports,” Journal of Marketing Education ,
Vol. 12, No 3 (1990), pp. 43-44.
Sales
Less discounts, returns and allowances
Net Sales
Cost of goods sold (variable manufacturing costs)
Manufacturing contribution
Variable selling and distribution costs:
Sales commissions
Transportation costs
Warehouse handling
Order-processing costs
Charge for investment in accounts receivable
Contribution margin
Assignable nonvariable costs
(costs incurred specifically for the segment
during the period):
Sales promotion and slotting allowances
Advertising
Bad debts
Display racks
Inventory carrying costs
Segment controllable margin
Segment controllable margin-to-sales ratio
$42,500
2,500
40,000
20,000
20,000
800
2,500
600
400
700
15,000
1,250
500
300
200
1,250
$11,500
27.1%
$6,250
250
6,000
2,500
3,500
120
310
150
60
20
2,840
60
---
---
---
150
$2,630
42.1%
$10,500
500
10,000
4,800
5,200
200
225
---
35
50
4,690
620
---
---
---
200
$3,870
36.9%
$19,750
1,750
18,000
9,200
8,800
360
1,795
450
280
615
5,300
400
500
300
200
800
$3,100
15.7%
$6,000
---------
6,000
3,500
2,500
120
170
---
25
15
2,170
170
---
---
---
100
$1,900
31.7%
Total
Company
Department
Stores
Grocery
Chains
Drug
Stores
Discount
Stores
Type of Account
Profitability by Type of Account: A Contribution Approach ($000)
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Low Profitability High
Low Potential for Growth High
Segmenting Customers
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance.
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Selectively manage
Provide as service to high-profit customers
Focus efforts
Cash generators
Challenge
Consider dropping customer or increasing prices
Selectively manage
Increase sales of
high-profit products
Customer Profitability vs. Product Profitability
.
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach, FL: Supply Chain Management Institute, 2014, p. 46.
Low Potential for Growth High
Low Current Profitability High
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Customer Service Management
Strategic Sub-Processes
Process Interfaces
Activities
Demand Management
Order Fulfillment
Manufacturing Flow Management
Supplier Relationship Management
Product Development & Commercialization
Returns Management
Review Corporate
and Marketing Strategy
Develop Framework of Metrics
Develop Guidelines for Sharing Process Improvement Benefits with Customers
Provide Guidelines for the Degree of Differentiation in the Product/Service Agreement
Identify Criteria
for Categorizing Customers
Outline metrics of interest
Relate metrics to the customer’s impact on profitability and profitability for the customer
Identify customer segments that are key to the organization’s success now and in the future
Choose appropriate criteria:
Profitability
Growth
Volume
Competitive positioning
Market knowledge
Market share goals/ penetration
Consider revenue/cost implications of the various differentiation alternatives
Select boundaries for degree of differentiation
Outline options for sharing the benefits of process improvement
Margin
Technology
Resources
Compatibility
Trade channel
Buying Behavior
The Strategic Customer Relationship Management Process
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach , FL: Supply Chain Management Institute, 2014, p. 29
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The Operational Customer Relationship Management Process
Customer Service Management
Operational Sub-Processes
Process Interfaces
Activities
Demand Management
Order Fulfillment
Manufacturing Flow Management
Supplier Relationship Management
Product Development & Commercialization
Returns Management
Segment Customers
Internally Review the Accounts
Develop the Product/Service Agreement
Measure Performance and Generate Profitability Reports
Prepare the Account/Segment Management Team
Identify Opportunities
with the Accounts
Implement the Product/Service Agreement
Analyze customer profitability
Evaluate potential growth
Document segments
Identify sales person to be account/ segment manager
Select team members
Review product purchased
Review sales growth
Review positioning in industry
Identify sales opportunities
Identify cost reduction opportunities
Identify service improvement opportunities
Develop and follow implementation plan
Meet regularly with key customers
Measure by customer and for the customer
Revenue
Profitability
Report performance
Outline and draft the PSA
Gain commitment of the company’s functions
Present PSA to account for acceptance
For key customers, repeat until they agree
Agree on a communication and continuous improvement plan
Costs
Other
Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach , FL: Supply Chain Management Institute, 2014, p. 35.
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Next up!
Supply Chain Management
Customer Relationship Management
Supplier Relationship Management
Assessments
Supply Chain Mapping
SCM 610 – Supply Chain Collaboration
