Chapter-8

Customer Relationship Management

Customer relationship management is a cross-functional enterprise system that integrates and automates many of
the customer-serving processes in sales, marketing, and customer services that interact with a company’s
customers.

Major application components of a CRM system are as follows:

i. Contact and Account Management: CRM software helps sales, marketing and service professional capture
relevant data from customer touch points such as telephone, fax, e-mail, kiosks, etc. CRM system stores the data
in a common customer database.
ii. Sales: To support and manage their sales activities and optimize cross-selling, sales representatives are provided
with software tools. Cross-selling is an approach in which a customer of one product or service, say, auto
insurance, might also be interested in purchasing a related product or service, say, homeowner’s insurance. Up-
selling refers to the process of finding ways to sell a new or existing customer a better product than they are
currently seeking.
iii. Marketing and Fulfillment: CRM systems help marketing professionals accomplish direct marketing
campaigns by automating such tasks. CRM software helps marketing professionals capture and manage prospect,
and analyze the customer and business value of a company’s direct marketing campaigns.
iv. Customer Service and Support: CRM helps customer service managers create, assign, and manage requests
for service by customers. Call center software and Help Desk software are two common applications.
v. Retention and Loyalty Programs: CRM systems try to help a company identify, reward, and market to their
most loyal and profitable customers.

Three phases of CRM

CRM can be viewed as an integrated system of Web-enabled software tools and databases accomplishing a variety
of customer-focused business processes that support the three phases of the relationship between a business and its
customers.
i) Acquire: CRM software tools and databases help acquire new customers.
ii) Enhance: Web-enabled CRM account management and customer service and tools help enhance the
relationship with the customers by making them satisfied with the services.
iii) Retain: CRM analytical software and databases help a company proactively identify and reward its
most loyal and profitable customers to retain and expand their business via targeted marketing and
relationship marketing programs
Benefits of CRM:
 CRM allows a business to identify and target its best customers—those who are the most profitable to the
business—so they can be retained as lifelong customers for greater and more profitable services.
 It makes possible real-time customization and personalization of products and services based on customer
wants, needs, buying habits, and life cycles.
 CRM can also keep track of when a customer contacts the company, regardless of the contact point.
 CRM systems can enable a company to provide a consistent customer experience and superior service and
support across all the contact points a customer chooses.
 All of these benefits would provide strategic business value to a company and major customer value to its
customers.

Reasons of CRM Failure:

 Lack of senior management sponsorship;
 Improper change management;
 Elongated projects that take on too much, too fast;
 Lack of or poor integration between CRM and core business systems;
 Lack of end-user incentives leading to poor user adoption rates;
 Lack of understanding and preparation;

Trends in CRM:
Four (04) types or categories of CRM that are being implemented by many companies. These categories may also
be viewed as stages or trends in how many companies implement CRM applications.

Types Business Value

 Supports customer interaction with greater convenience through a variety of channels,
Operational such
including phone, fax, e-mail, chat, and mobile devices;
as sales for
 Synchronizes customer interactions consistently across all channels;
automation
 Makes the company easier to do business with;
 Extracts in-depth customer history, preferences, and profitability information from your
data warehouse and other databases;
Analytical such as  Allows to analyze, predict, and derive customer value and behavior and forecast
data mining demand;
 Lets approach customers with relevant information and offers that are tailored to their
needs;
Collaborative to  Enables easy collaboration with customers, suppliers, and partners;
involve the  Improves efficiency and integration throughout the supply chain;
partners, suppliers  Allows greater responsiveness to customer needs through sourcing of products and
in customer service services outside of business;
 Provides all users with the tools and information that fit their individual roles and
Portal-Based such preferences
as internet, intranet,  Empowers all employees to respond to customer demands more quickly and become
and extranet web truly customer-focused
based portals  Provides the capability to instantly access, link, and use all internal and external
customer information

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 Enterprise Resource Planning

ERP is a cross-functional enterprise system driven by an integrated suite of software modules that supports the
basic internal business processes of a company.

Major application components of an ERP system

The major application components of enterprise resource planning demonstrate the cross-functional approach of
ERP systems.
 Production planning: Material requirements planning, production planning, and capacity planning.
 Integrated logistics:
 Accounting and Finance: Financial recordkeeping and managerial accounting applications.
 Human Resources: Personnel requirements planning to salary and benefits administration.
 Sales, Distribution and order Management: Sales analysis, sales planning, and pricing analysis, while
typical distribution applications include order management, purchasing, and logistics planning.

Some of the business process flows and customer and supplier information flows supported by ERP
systems.

Benefits of ERP
ERP systems can generate significant business benefits for a company.
i. Quality and Efficiency: ERP creates a framework for integrating and improving a company’s internal business
processes that results in significant improvements in the quality and efficiency of customer service, production,
and distribution.
ii. Decreased Costs: Many companies report significant reductions in transaction processing costs and hardware,
software, and IT support staff compared to the nonintegrated legacy systems that were replaced by their new ERP
systems.
iii. Decision Support: ERP provides vital cross-functional information on business performance to managers
quickly to significantly improve their ability to make better decisions in a timely manner across the entire business
enterprise.
iv. Enterprise Agility: Implementing ERP systems results in more flexible organizational structures, managerial
responsibilities, and work roles, and therefore a more agile and adaptive organization and workforce that can
more easily capitalize on new business opportunities.

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Costs and Risks of ERP:
Though the benefits of ERP are many, the costs and risks are also considerable.
The costs of hardware and software are a small part of total costs, and that the
costs of developing new business processes (reengineering) and preparing
employees for the new system (training and change management) make up the
bulk of implementing a new ERP system. Converting data from previous
legacy systems to the new cross-functional ERP system is another major
category of ERP implementation costs.
The costs and risks of failure in implementing a new ERP system are
substantial. Most companies have had successful ERP implementations, but a
sizable minority of firms experienced spectacular and costly failures that
heavily damaged their overall business. Big losses in revenue, profits, and
market share resulted when core business processes and information systems failed or did not work properly. In
many cases, orders and shipments were lost, inventory changes were not recorded correctly, and unreliable
inventory levels caused major stock-outs to occur for weeks or months.

Causes of ERP Failure

i) Indifference to the complexity of new ERP: The business managers and IT professionals of the company
underestimates the complexity of the planning, development, and training that were needed to prepare for a
new ERP system that would radically change their business processes and information systems.
ii) Introducing ERP without being ready: Failure to involve affected employees in the planning and
development phases and to change management programs, or trying to do too much too fast in the conversion
process are typical causes of failed ERP projects.
iii) Insufficient Training: Insufficient training in the new work tasks required by the ERP system and failure to
do enough data conversion and testing are other causes of failure.
iv) Overreliance on Vendors: In many cases, ERP failures are also due to overreliance by company or IT
management on the claims of ERP software vendors or on the assistance of prestigious consulting firms hired
to lead the implementation.
v) Lack of Management Support: Sometimes executive management does not actively support the adoption of
ERP in the business.
vi) Lack of Communication: For successful implementation of ERP, it is important to communicate
continuously with the new users at all levels in the organization.

Trends in ERP:
There are four major developments and trends that are evolving in ERP applications.
i) Flexible ERP: First, the ERP software packages that were the mainstay of ERP implementations in the 1990s,
and were often criticized for their inflexibility, have gradually been modified into more flexible products.
Companies that installed ERP systems pressured software vendors to adopt more open, flexible, standards-
based software architectures. An example is SAP R/3 Enterprise, released in 2002 by SAP AG as a successor
to earlier versions of SAP R/3. Other leading ERP vendors, including Oracle, PeopleSoft, and J.D. Edwards,
have also developed more flexible ERP products.
ii) Web-enabled ERP: The growth of the Internet and corporate intranets and extranets prompted software
companies to use Internet technologies to build Web interfaces and networking capabilities into ERP systems.
These features make ERP systems easier to use and connect to other internal applications, as well as to the
systems of a company’s business partners.
iii) Interenterprise ERP: This Internet connectivity has led to the development of interenterprise ERP systems
that provide Web-enabled links between key business systems of a company and its customers, suppliers,
distributors, and others.
iv) E-Business Suites: The major ERP software companies have developed modular, Web-enabled software
suites that integrate ERP, customer relationship management, supply chain management, procurement,
decision support, enterprise portals, health care functionality, and other business applications and functions.
Examples include Oracle’s e-Business Suite and SAP’s mySAP

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 Supply Chain Management

Supply chain management is a cross-functional interenterprise system that integrates and automates the network of
business processes and relationships between a company and its suppliers, customers, distributors, and other
business partners.
Fundamentally, supply chain management helps a company get the right products to the right place at the right
time, in the proper quantity and at an acceptable cost.

Goal of SCM
The goal of SCM is to help a company achieve agility and responsiveness in meeting the demands of its customers
and needs of its suppliers, by enabling it to design, build, and sell its products using a fast, efficient, and low cost
network of business partners, processes, and relationships, or supply chain.

Electronic Data Interchange

Electronic data interchange (EDI) is one of the earliest uses of information technology for supply chain
management that involves the electronic exchange of business transaction documents over the Internet and other
networks between supply chain trading partners. Data representing a variety of business transaction documents are
automatically exchanged between computers using standard document message formats.
EDI automatically tracks inventory changes; triggers orders, invoices, and other documents related to transactions;
and schedules and confirms delivery and payment.

The Role of SCM

The top three levels of show the strategic, tactical, and operational objectives and outcomes of SCM planning,
which are then accomplished by the business partners in a supply chain at the execution level of SCM. The role of
information technology in SCM is to support these objectives with interenterprise information systems that produce
many of the outcomes a business needs to manage its supply chain effectively.

SCM Objectives SCM Outcomes

What? Strategic  Objectives
Establish objectives, policies, and operating  Supply policies (service levels)
footprint  Network design
How much? Tactical  Demand forecast
Deploy resources to match supply to demand  Production, procurement, logistics plan
 Inventory targets
When? Where? Operational  Work center scheduling
Schedule, monitor, control, and adjust production  Order/inventory tracking
Do Execution  Order cycle
Build and transport  Material movement

SCM is frequently subdivided into:

 Supply chain planning applications: such as Supply chain design, demand and supply forecasting.
 Supply chain execution applications: such as inventory management, collaborative manufacturing, collaborative
fulfillment, supply chain performance management, and warehouse management.

Benefits of SCM
The key business benefits provided by the SCM are as follow:
 Faster and more accurate order processing;
 reductions in inventory levels;
 quicker times to market;
 lower transaction and materials costs;
 strategic relationships with their suppliers.

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 Challenges of SCM:
Achieving the goals and objectives of supply chain management is a major challenge for many companies.

Failure of SCM:

i. A lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM failure.
Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and other business
problems, no matter how efficient the rest of the supply chain management process is constructed.
ii. Inaccurate production, inventory, and other business data provided by a company’s other information systems
are a frequent cause of SCM problems.
iii. Lack of adequate collaboration among marketing, production, and inventory management departments within a
company, and with suppliers, distributors, and others, will sabotage any SCM system.
iv. Many companies that are installing SCM systems consider even the SCM software tools themselves to be
immature, incomplete, and hard to implement.

Trends in SCM
i. In the first stage, a company concentrates on making improvements to its internal supply chain processes and its
external processes and relationships with suppliers and customers. Its e-commerce Web site and those of some of
its trading partners provide access to online catalogs and useful supply chain information as they support limited
online transactions.
ii. In stage two, a company accomplishes substantial supply chain management applications by using selected SCM
software programs internally, as well as externally via intranet and extranet links among suppliers, distributors,
customers, and other trading partners.
iii. In the third stage, a company begins to develop and implement cutting-edge collaborative supply chain
management applications using advanced SCM software, full-service extranet links, and private and public e-
commerce exchanges. Examples include collaborative supply chain planning and fulfillment applications like
collaborative product design and delivery, and collaborative planning, forecasting, and replenishment (CPFR).
Companies in this third stage strive to optimize the development and management of their supply chains in order
to meet their strategic customer value and business value goals.

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