The Customer Relationship Management Process

Size: px

Start display at page:

Download "The Customer Relationship Management Process"

Gregory Laurence Norris
8 years ago
Views:

1 The Customer Relationship Management Process E d u c a t i n g t h e W o r l d s B e s t A i r F o r c e Slide 1

2 The Supply Chain Management Processes Information Flow Supply Chain Management Processes Tier 2 Supplier PRODUCT FLOW Tier 1 Supplier Purchasing Production Manufacturer Logistics R&D CUSTOMER RELATIONSHIP MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT CUSTOMER SERVICE MANAGEMENT DEMAND MANAGEMENT ORDER FULFILLMENT MANUFACTURING FLOW MANAGEMENT PRODUCT DEVELOPMENT AND COMMERCIALIZATION RETURNS MANAGEMENT Marketing Finance Customer Consumer/ End user Slide 2

3 What is Customer Relationship Management? 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. Slide 3

4 Why Is It Important? Customer retention Competitive intensity Customer selectivity Cost efficiency Supply Chain Management Institute. Slide 4

5 Benefits of CRM It can increase customer loyalty by providing customized products and services, as appropriate. It can have a significant impact on the bottom-line through: Increased sales Improved plant productivity Reduced customer service costs Improved asset utilization It provides the critical link with the customers in the supply chain. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 5

6 Customer Selectivity vs. Customer Retention $ Retention Zone Selectivity Zone Profit 0 Key Customers Subsidized Customers Profit Contribution Customers Supply Chain Management Institute. Adapted from presentation by Jag Sheth Slide 6

7 CRM Benefits the Customer Customers want to reduce the number of market choices because too many market choices requires a high investment of money, time and effort and customers want to reduce the risk due to uncertainty of outcomes - lack of trust Supply Chain Management Institute. Slide 7

8 The Critical Supply Chain Management Linkages Supplier D CRM SRM Manufacturer C CRM SRM Wholesaler/ Distributor B CRM SRM Retailer/ End User A P&L for C as customer Total Cost Report for D as supplier P&L for B as customer P&L for C as supplier P&L for A as customer P&L for B as supplier Revenue - Cost Profit Cost = Profit Revenue - Cost Profit Revenue - Cost Profit Revenue - Cost Profit Revenue - Cost Profit Supply Chain Performance = Increase in Profit for A, B, C, and D Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 16. Slide 8

9 Align Functional Expertise Customer Resources Category Manager Merchandising Logistics Accounts Payable Etc... Manufacturer Resources Sales Marketing Logistics Accounts Receivable Etc... Supply Chain Management Institute. Slide 9

10 Required Behaviors for the Customer Relationship Management Process Customer relationships are managed by customer teams which negotiate mutually beneficial product / service agreements with large, strategically significant customers. Customer teams develop and implement customer partnering programs. Product and service agreements are established. New customer interfaces are used to better predict customer demand and improve the way customers are serviced. Teams identify and eliminate sources of production variability. Key performance evaluation criteria (both company performance and customer account profitability) are used to measure results. Supply Chain Management Institute. Slide 10

11 The Strategic CRM Process Process Interfaces Strategic Sub-Processes Activities Customer Service Management Demand Management Order Fulfillment Manufacturing Flow Management Review Corporate and Marketing Strategy Identify Criteria for Categorizing Customers Provide Guidelines for the Degree of Differentiation in the Product/Service Agreement Identify customer segments that are key to the organization s success now and in the future Profitability Growth Volume Competitive positioning Market knowledge Market share goals/ penetration Margin Technology Resources Compatibility Trade channel Buying Behavior Consider revenue/cost implications of the various differentiation alternatives Select boundaries for degree of differentiation Supplier Relationship Management Product Development & Commercialization Returns Management Develop Framework of Metrics Develop Guidelines for Sharing Process Improvement Benefits with Customers Outline metrics of interest Relate metrics to the customer s impact on profitability and profitability for the customer Outline options for sharing the benefits of process improvement Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 30. Slide 11

12 Strategic Sub-Process #1 Review Corporate and Marketing Strategy Directional statements Commander s intent o Market to serve and customer segments to target o Positioning o Channels to reach the market o Scale and scope of activities Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 12

13 Strategic Sub-Process #2 Identify Criteria for Categorizing Customers Identify key criteria, which might include: Profitability Growth Volume Competitive positioning Market knowledge Market share goals/penetration Margin Technology Resources Compatibility Trade channel Buying behavior Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 13

14 Customer Profitability Reports The best overall measure of performance for the CRM process is the profitability of customers and customer segments over time. It is important to use a contribution approach, i.e. revenue minus avoidable costs. Using a full-cost approach can lead to the wrong decisions. Be sure to assign only variable costs, i.e. those costs that will disappear if the customer (or customer segment) disappears. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 14

15 Strategic Sub-Process #3 Provide Guidelines for the Degree of Differentiation in the Product and Service Agreement Consider revenue/cost implications of the various differentiation alternatives. Select boundaries for degree of differentiation. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 15

16 Strategic Sub-Process #4 Develop Framework of Metrics Outline metrics of interest Relate metrics to the customer s impact on profitability and profitability for the customer. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 16

17 How CRM Affects EVA ECONOMIC VALUE ADDED = NET PROFIT MARGIN COST OF CAPITAL NET PROFIT NET SALES CAPITAL CHARGE % TOTAL ASSETS GROSS MARGIN TOTAL EXPENSES CURRENT ASSETS + FIXED ASSETS SALES CGS INVENTORY + OTHER CURRENT ASSETS Strengthen relationships with profitable customers Sell higher margin products Improve share of customer Improve mix ( e.g. align services and costs to serve) Improve plant productivity Targeted marketing Improve trade spending Eliminate or reduce services provided to low-profit customers Optimize physical network/facilities Leverage new or alternative distribution channels Reduce customer service & order management costs Reduce HR costs / improve effectiveness Reduce overhead / management / admin. costs Improve demand planning Reduce safety stock Make to order, mass customization of inventories Reduce accounts receivable Improve asset utilization and rationalization Improve product development and asset investment Improve investment planning and deployment Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 19. Slide 17

18 Strategic Sub-Process #5 Develop Guidelines for Sharing Process Improvement Benefits with Customers Outline options for sharing the benefits of process improvements. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 18

19 Conclusions Customer relationship management provides the structure for how relationships with customers are developed and maintained. Along with supplier relationship management, CRM provides the critical linkages to connect firms in the supply chain. It is critical to have the capability to measure the impact of the process on revenues and costs for both the focal firm and the customers. Both risks and rewards should be shared so that all parties are interested in achieving the most efficient and effective supply chain. Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance. Slide 19

Manufacturing Flow Management

Manufacturing Flow Management Distribution D Distribution Authorized to Department of Defense and U.S. DoD Contractors Only Aim High Fly - Fight - Win Supply Chain Management Processes Information Flow