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Chapter 8: Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management

Supply chain management (SCM) systems support business-to-business (B2B) transactions; customer relationship management (CRM) systems promote sales and long-term customer relationships

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Chapter 8 Learning Objectives

Supply Chain Management

Describe supply chain management systems and how they help to improve business-to-business processes.

Customer Relationship Management

Describe customer relationship management systems and how they help to improve the activities involved in promoting and selling products to customers as well as providing customer service and nourishing long-term relationships.

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Supply Chain Management

Describe supply chain management systems and how they help to improve business-to-business processes

Customer Relationship Management

Describe customer relationship management systems and how they help to improve the activities involved in promoting and selling products to customers as well as providing customer service and nourishing long-term relationships.

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What Is a Supply Chain?

A collection of companies and processes involved in moving a product from the suppliers of raw materials to the suppliers of intermediate components, then to final production, and, ultimately, to the customer
Referred to as a “chain” as one supplier feeds into the next, then the next, then the next
A “network” is more accurate because businesses have multiple suppliers, who have multiple suppliers

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A Typical Supply Network

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Business-to-Business Electronic Commerce: Exchanging Data in Supply Networks

Business-to-Business (B2B) Electronic commerce

90% of all EC in the United States
Involve Proprietary Information
Originally facilitated using Electronic Data Interchange (EDI) prior to the Internet
Now suppliers use Web-based EDI protocols
Companies also use Extranets (Chapter 3), Portals and Marketplaces to facilitate B2B EC

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Business-to-Business Electronic Commerce: Exchanging Data in Supply Networks

Portals

Supplier Portals
Customer Portals

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B2B Marketplaces

Link many supplies and customers together
Allow smaller businesses to participate in the markets
Many focused on vertical markets

A vertical market is a market within an industry sector
Highly efficient

Some more general—Alibaba.com

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Managing Complex Supply Networks

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Benefits of Effectively Managing Supply Chains

Just-in-Time Production

Inventory delivered just as it is needed
Minimizes stock and handling costs
Reduces obsolescence charges

Vendor-Managed Inventory

Vendors track usage and replenish supplies
Reduces procurement and inventory replenishment costs

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Benefits of Effectively Managing Supply Chains

Reducing the Bullwhip Effect

Ripple effects due to forecast errors
Coordinated supply chain helps mitigate this

Corporate Social Responsibility

Product recalls
Sustainable business practices

Demand forecasting can create errors. When demand forecasts are being adjusted too rapidly within the supply chain, these errors can create an oscillation of large and small orders. This oscillation will not level out to a steady state, resulting in wildly varying demand within a distribution chain.

As supply chains become global and products are sourced from countries with varying levels of quality standards, substandard parts can enter the supply chain without the knowledge of the downstream manufacturers, resulting in large product recalls or worse.

Good supply chain visibility allows companies to narrow down problems, recall only affected products, and take steps to ensure future quality.

A related issue is sourcing from suppliers that are not engaged in humane or sustainable business practices, resulting in damage to the environment, workers, and the company’s goodwill once the practice is discovered.

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Optimizing the Supply Chain Through SCM

Supply Chain Management (SCM)

Supply Chain Planning
Supply Chain Execution
Supply Chain Visibility and Analytics

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Functions the Optimize the Supply Network

SCM Module	Key Uses
Demand planning and forecasting	Forecast and plan anticipated demand
Safety stock planning	Assign optimal safety and target stock levels
Distribution planning	Optimize the allocation of available supply
Supply network collaboration	Work with partners across the supply network
Materials management	Ensure production materials are available
Manufacturing execution	Support production processes
Order promising	Provide answers to customer queries
Transportation execution	Manage logistics
Warehouse management	Support receiving, storing, and picking of goods
Supply chain analytics	Monitor key performance indicators

Source: Based on http://www.sap.com.

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Developing an SCM Strategy

Trade-offs

Supply Chain Efficiency

Minimizes cost, but increased risk of stock-outs
May sacrifice customer service

Supply Chain Effectiveness

Maximizes likelihood of meeting objectives
Increased costs associated with

Redundancy
Sticking levels
Cross-functionality

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Developing an SCM Strategy

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Supply Chain Planning (SCP)

SCP involves multiple SCM tools and modules working together to meet business needs and customer demand

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SCP Processes

Demand Planning and Forecasting

Based on historical data, build a demand forecast

Distribution Planning

How to move products to distributors, transportation planning

Production Scheduling

Coordinate product/service creation, production plan

Inventory and Safety Stock Planning

Developing inventory estimates, determine optimal inventory levels, sourcing plan

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Supply Chain Execution (SCE)

SCE focuses on the efficient and effective flow of materials, information, and financial transactions

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SCE Flows

Product Flow

Movement of goods from supplier to production to distribution to consumer
RFID is an important enabling technology

Information Flow

Movement of information through supply chain (e.g., order processing and delivery status updates)
XML is an important enabling technology

Financial Flow

Movement of financial assets through supply chain
Payment schedules, consignment, ownership
Linkages to electronic banking and financial institutions

Financial Flow

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Key Technologies for Enhancing SCM

Radio Frequency Identification (RFID)

Replaces bar codes
As low as 10 cents

Extensible Markup Language

XML, much like HTML for Web sites, creates a standard many businesses can use to help facilitate data exchange

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Key Technologies for Enhancing SCM:�Radio Frequency Identification

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Key Technologies for Enhancing SCM:�Extensible Markup Language

Source: Courtesy of Microsoft Corporation.

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Managing B2B Financial Transactions

B2B Financial Transactions

B2C often uses e-payments such as PayPal
But B2C still primarily uses payment by check (75%)
Others: purchasing cards, letters of credit, Western union

Unknown suppliers and customers create significant fraud risk

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Supply Chain Visibility and Analytics

Supply chain visibility

Product tracking
Anticipating adverse impacts

Weather impacts
Labor negotiations

Supply chain analytics

Monitoring SC performance
Identifying problem spots

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Customer Relationship Management

Supply Chain Management

Describe supply chain management systems and how they help to improve business-to-business processes

Customer Relationship Management

Describe customer relationship management systems and how they help to improve the activities involved in promoting and selling products to customers as well as providing customer service and nourishing long-term relationships.

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Customer Relationships

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Customer Relationship Management (CRM) Benefits

Benefit	Examples
24/7/365 operation	Web-based interfaces
Individualized service	Learn how each customer defines product and service quality
Improved information	Integrate all information for all points of contact
Improved problem identification/resolution	Improved record keeping and efficient methods of capturing customer complaints
Optimized processes	Integrated information removes information handoffs
Improved integration	Information from the CRM can be integrated with other systems to streamline business processes
Improved product development	Tracking customer behavior over time helps to identify future product and service offerings
Improved planning	Provides mechanisms for managing and scheduling sales follow-ups

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Developing a CRM Strategy

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Key Elements of a CRM Strategy

Policies and Business Processes

Reflect a customer-focused culture

Customer Service

Quality, satisfaction, enhanced customer experience

Employee Training

For employees from all areas

Data Collection, Analysis, and Sharing

Track all aspects of the customer experience

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Architecture of a CRM System

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Operational CRM

Sales Force Automation (SFA)

Supports day-to-day sales force activities

Customer Service and Support (CSS)

Automates service requests, complaints, product returns, and information requests

Enterprise Marketing Management (EMM)

Improves the management of promotional campaigns

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Operational CRM:�Sales Force Automation

Source: Courtesy of Microsoft Corporation.

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Operational CRM:�Customer Service and Support

Customer interaction centers (CIC) support multiple communication channels
Evolved from help desks and call centers
Phone—automatic call distribution systems, virtual hold technologies
Web—self-service technologies
Facebook
Industry blogs
Face-to-face

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Operational CRM:�Customer Service and Support

A CEC allows customers to use a variety of self-service and assisted technologies to interact with the organization

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Operational CRM:�Enterprise Marketing Management

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Analytical CRM

“Analyzing customer behavior and perceptions in order to provide the business intelligence necessary to identify new opportunities and to provide superior customer service”

Key Analytical Technologies (Chapter 6)

Data mining
Decision support
Other business intelligence technologies

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Analytical CRM:�Digital Dashboards

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Analytical CRM:�Online Identities

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Social CRM

Customers use Facebook and Twitter to comment on products and services
Monitoring social media conversations helps to understand public perceptions
Analytical CRM applications

Microsoft’s Social Networking Accelerator
Google Alerts
Dell’s Social Media Listening Command Center

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Collaborative CRM

“Systems for providing effective and efficient communication with the customer from the entire organization”

Greater Customer Focus

Understanding customer history and current needs

Lower Communication Barriers

Personnel have complete customer information
Personnel use customer-preferred communication methods

Increased Information Integration

Personnel know prior and ongoing communication

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Ethical Concerns with CRM

CRM systems may facilitate coercive sales practices
Systems may categorize customers in a way customers take offense to
Personalized communication may become too personal

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END OF CHAPTER CONTENT

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Managing in the Digital World: �Walmart

Walmart is known for cutting costs and prices
Effective use of technology for supply chain
Vendor-managed inventory

Suppliers monitor inventory in Walmart’s warehouses
Cross-docking: direct transfers from inbound to outbound truck trailers

Powerful CRM capabilities

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When Things Go Wrong: �Switching Switches—Failure at a Global Scale

Supply chains are increasingly global
Failure to carefully monitor partnerships can lead to expensive product recalls
Example: GM’s faulty ignition switches took 10 years to resolve
An engineer covered up a mistake by leaving part number unchanged
Led to difficulty identifying faulty switches

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Brief Case: The Formula for Success: Demand Media

Demand Media, Inc. focuses on providing answers to common questions

Uses search data and auction data to identify topics with high interest
Demand Media crowdsources solutions as articles and video clips and posts them to its own sites and YouTube
The traffic to view the answers generates advertising revenue
Demand Media has created a very large content base

45 sites with more traffic than ESPN and NBC combined
Now collaborating with Google

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Coming Attractions:�Saving Lives Through 3D Bioprinting

3D printing is an alternative to cutting and milling materials to create a part

3D printing builds a part up, eliminating waste
3D printing is now very precise and accurate

3D printing now moving into the world of medicine

Researchers in the Netherlands used 3D printing to replace a patient’s skull
A UK-based company is using 3D printing to print up to 150 prosthetic eyes an hour
3D bioprinting researchers attempting to print complete organs for transplants

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Key Players:�Salesforce.com

CRM software is becoming key to business success

Critical for most medium to large organizations
Becoming a necessity for many small businesses
Small business often don’t have the infrastructure to host complete CRM solutions

Salesforce.com hosts a CRM SaaS in an online cloud

The Sales Cloud
The Service Cloud
Chatter

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Who’s Going Mobile:�The Power of Mobile CRM

In many organizations, the sales staff is often in the field

Mobile CRM allows staff to use CRM features on the road
The best mobile CRM has all the functionality of desktop CRM
Mobile CRM promotes efficiency and effectiveness, with many benefits

Increased revenue growth and customer renewals
Larger deal size
Increased user adoption and higher quota attainment
Lower sales force turnover

CRM, including mobile CRM, spending is increasing faster than any other application software investment

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Ethical Dilemma:�CRM: Targeting or Exploiting?

CRM systems allow companies to look closely at customer behavior and send targeted offers to select customers
Benefits include less advertising to uninterested parties
Fine segmentation may allow companies to take advantage of population groups
Some companies also sell data, without user knowledge or consent, at times in violation of their own stated practices
Verizon’s “Relevant Mobile Advertising” campaign monitors customers’ Internet browsing habits
Often these practices are legal, but are they ethical?

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Industry Analysis:�Manufacturing

Computer-Aided Design (CAD)

Facilitates drawing, design, sharing, and collaboration
CAD design prototypes can be printed on 3D printers
This is called “fabbing,” and speeds up creation of models
3D printing adds successive layers of materials

SCP and ERP are used for inventory planning, job scheduling, and warehouse management