Lend Me Your Ear

Economics 101 preaches that demand drives supply, and demand translates into what the customer wants. The real survival of competitive supply chains comes down to organizations that are driven by the customer  not just a business plan. Customer relationship management, and its accompanying software, is not just about technology. It's about people, strategy, tactic and processes.

[From iSource Business, May 2001] Let's play what if. What if you knew your final customer so well that every contact with him or her resulted in an order? What if you served him so well that you never had anything returned? What if one, simple event  an order  did all this: generated a warehouse packing slip, a shipping label, an invoice and the start date for the warranty. It would also create an alert to the sales department to follow up with and thank the customer for the order, and it would tell the service department to schedule an appointment for installation. It would send an e-mail to the customer confirming the specifics of the order and asking if the scheduled delivery date is acceptable. Then, three months later, about the time a reorder would be expected, another e-mail goes out thanking the very valued customer for his past business and offering a discount for a new order.

And, even better, what if your call center agents could see all that information, along with the very valued customer's credit standing, any discounts he's entitled to and the status of his orders? What if that very first online order meant that no one else in your company had to type in the customer's name, address and phone number ever again? And, wonder of wonders, what if customers could check all of this information for themselves?

Such a real-life example of this happened at State Street Corp., a Boston-based financial services company managing more than $6 trillion in assets. Customers can access their account information, which allowed the company to reduce the number of employees in its call centers and eliminate its reputation on Wall Street as being meeting central.

Now, just a few more what ifs. What if decisions relating to new product development, marketing campaigns and supplier contracts started by asking, How will this help our customers? What if everyone who works for your company had the authority to solve a customer complaint on the spot? The luxury car manufacturer, Lexus, tried this and moved from a question mark to an industry benchmark in 10 years, making them the best-selling luxury car manufacturer in the country.

What would transforming your customer management process mean to your company and your supply chain? 

Their Interest Just Keeps Growing

These are the kinds of questions refocused customer-centric organizations are beginning to raise as they evaluate the ramped-up efficiencies of today's customer relationship management (CRM) technology. A $19 billion industry, CRM technology wags a judgmental finger at the efficiency buzz of the 1990s that cut off contact between the supplier and the customer, the most critical stakeholder in the supply chain. A recent study from business analysts Gartner Dataquest revealed that companies individually budgeted more than $1 million for CRM initiatives in 2000, a figure that is expected to double by the end of this year.

As a strategy to attract and retain customers, the CRM technology pay-off can potentially offer enormous benefits in increased sales, lower marketing and advertising costs, higher customer retention, better use of staff, and more efficiency in processes as employees share information. Still, one Gartner study reveals that only 3 percent of companies have implemented CRM, calling it a fantasy in most organizations.

Most companies don't get the full benefits of CRM primarily because they don't understand  or won't accept  that it's not a piece of technology that you unpack, plug in and run. And it's not something that comes from sales, marketing or even the information technology (IT) department. To work, acceptance of CRM has to start at the executive level and then drive down to every business unit of the company. Firms fail [at CRM] because they think it's something they buy and simply plug in, says Gartner Group vice president and research director Scott Nelson. At its core, CRM is about people. It's strategy, tactic, processes, people and technology.

That usually means change, and lots of it.

Historically, corporations rewarded employees who had information, says Anthony Perkins, senior vice president and director of Internet technology services at State Street Corp. There would be Bill or Sally in the corner offices. They had the information; they were the masters. We wanted to reward people for sharing information. Instead of saying, There's an issue with Customer A, I have to track down Sally.' Sally would have recorded it in a central place ... [but with no central access]. With CRM, everyone has access to the information.

The end result of CRM, then, should be easier, faster and more accurate ways to identify customers, understand what's important, and give customers valuable information and a level of service so outstanding that they wouldn't even think of doing business with anyone else.

However, linking with an Application Service Provider (ASP) is the first step, and with more than 50 supplier segments in CRM solutions, identifying the major players can be a tricky business. In fact, AMR Research cautions those in the market for CRM applications to be wary of firms that maintain one CRM supplier can transform your organization with a holistic strategy. Devising a CRM strategy, they report, is far too complicated to be completely implemented by one CRM application supplier.

The major players in the marketplace can be separated into two camps: the CRM service provider, which designs the strategy; and the suppliers that provide the technology for implementation. On the service provider side, Accenture (formerly Andersen) Consulting leads the market by sheer number of CRM consultants  more than 1,800 in 2000, AMR reports. Other significant players in the field include Arthur Andersen, Deloitte Consulting, IBM Global Services, KPMG, PricewaterhouseCoopers, and Ernst & Young. On the supplier side, AMR recognizes Siebel Systems as the supplier of choice. Other leaders in the field include Nortel Networks, Onyx, Oracle and Pivotal.

What Does It Mean to the Supply Chain?

To the supply chain it means lots of things, including attraction, retention and servicing of a stakeholder that's literally fueling the existence of a particular supply chain. What CRM creates, according to the experts and practitioners, is a reciprocal environment where loyalty and commitment are foremost.

The more you know about your customer, State Street's Perkins says, the more you can do for your customer, and the more loyal and profitable the customer becomes. The old adage Everyone sells and everyone services' applies here. Everyone [in the supply chain] is involved in that process.

Jim Brown, vice president of solution strategy and marketing at the software firm SCT, sees a growing role for CRM in the supply chain because the commodity price has been replaced by service as the only true competitive differentiator. That's created a shift in the basic standards of excellence for the industry.

It used to be that the measure of the perfect order was, Did you ship on time?' says Brown, whose company provides e-business solutions to process manufacturers and distributors. It didn't differentiate what the customer valued most for an order. Did I receive it just in time?' Were all the items filled?' Now, the perfect order is delivering to what the customer values. It doesn't do you any good to ship on time if the only thing they value is inventory accuracy. If you've got the lowest price, it doesn't matter if you deliver a day early to a just-in-time shop. It requires all the different departments or business units to work together to fill customer demand.

Beyond marketing cost savings of selling to repeat customers, the CRM pay-off to the supply chain comes when they use customer data to streamline processes, reduce inventory levels and cut carrying charges.

Those are the kinds of goals Ray Lewis had in mind when he decided to institute CRM into the internal supply chain at telecom giant Sprint. As the supply chain business strategist, Lewis is charged with meeting the needs of 5,000 to 10,000 daily direct customers from more than 77,000 Sprint employees.

In the long-term, I should be able to compress my pipeline, he says. The whole reason you stock inventory and incur huge charges is to ensure you have adequate delivery. If it allows me to be predictive, I can decrease my [inventory] pipeline significantly. If you have perfect visibility of your customers' needs, the pipeline should literally disappear. Imagine a world where companies like Sprint have no inventory because they don't need it. What would be the implication of not having logistics or carrying costs? That's kind of a radical view, but there's probably great strides that can be made in that direction.

For now, Lewis is pleased with much smaller steps forward. He's completed segmentation surveys to identify his customers and touch-point maps of every process with customer interaction. Before any investment in technology, the concept yielded savings because Lewis' team was focused on helping customers by reducing duplicate efforts.

In just doing the analysis, we found where we had an overlap of touch points, he says. We went around and turned off a whole series of [unnecessary] activities. We just asked ourselves, Why are we doing this?'

Life with Radar  What's Ahead

Melinda Nykamp, president and CEO of the Nykamp Consulting Group, the firm that is helping Sprint optimize its internal supply chain, says the role of CRM in supply chain management will center on the right product to the right place at the right time, with what's right being driven by the customer.

That's an enormous future trend, she says. The divergence between organizations is in the degree to which they will have operationalized around their customers. Have they developed the right products for the right customers? Have they determined the best means of truly fulfilling customers' needs?

SCT's Brown says companies will see tools that add value to the customer relationship, such as giving customers access to product and account details through Web sites and wireless devices. New technology also allows supply chain leaders to look at the total value of a relationship in terms of optimization.

If you've been late on the last two shipments, you better not be late on this one, he explains. Or, if there's a sales cycle with a customer, you can make sure there's more service based on that cycle. Being customer-focused has to go from access to the customer all the way through designing and delivering products to the accounting department to make sure the invoice is right. That, to us, is what a CRM initiative is about.

Perhaps the most intriguing concept for the future is something called prescient delivery, coined by James Gilmore, co-author of Markets of One: Creating Customer-Unique Value Through Mass Customization reported on in Harvard Business School Press last year.

The concept resembles the ability of the M*A*S*H character, Radar O'Reilly, who psychically appeared with a needed item before it was requested.

The emphasis is not on the product getting there, but always being there, Gilmore says. At a few companies, the customer is not even involved in the placing of orders; they use real-time remote monitoring, such as that enabled through telemetry technologies, to continuously track inventory levels. I was in one such company's call center and asked, How do you take orders?' They told me, We don't take orders. We just make sure each customer never runs out.' So they don't even measure order fulfillment. It makes you wonder what other measurements CRM can and should make obsolete.

As companies listen to customers and build their operations  and especially their products  around what the customer wants, they become less dependent on predictive forecasting and more dependent on what the market truly wants.

Customer Relationship Management

The definitions of customer relationship management (CRM) vary, depending on who you ask. The worst ones focus solely on the technology, the mediocre ones oversimplify it as a way to win and retain customers.

The simplest definition says that CRM means running a business from the customer's point of view. But the best definition we've found is this one from AMR Research:

Customer Relationship Management is a strategy, not an application, technology or suite of products. CRM is a strategy used in competitive environments that combines the information, systems, policies, processes and employees of an enterprise in an effort to attract and retain profitable customers. CRM applications and technologies are tools used to implement such a strategy and must be woven into the fabric of a company's business strategy, not bolted on to it.