CHAPTER 3

Customer Relationship
Management in Supply Chain

Marzia Dulal
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LEARNING OBJECTIVES
1. Identify the primary functions of customer
relationship management and collaborative
CRM.
2. Describe how businesses might utilize
applications of each of the two major
components of operational CRM systems.
3. Discuss the benefits of analytical CRM
systems to businesses.

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LEARNING OBJECTIVES (continued)
4. Explain the advantages and disadvantages of
mobile CRM systems, on-demand CRM
systems, and open-source CRM systems.
5. Decribe the three components and the three
flows of a supply chain.

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LEARNING OBJECTIVES
(continued)
6. Identify popular strategies to solve different
challenges of a supply chain.
7. Explain the utility of each of the three major
technologies that supports supply chain
management.

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1. Defining Customer Relationship
Management

CRM is an organizational strategy that

is customer-focused
and customer-driven. 5
 From Neighborhood Stores…….

Personal
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To Today…..

Mobile population

The Web
Giant malls

Impersonal 7
 Customer Intimacy?
You

Your
competition

Your
customer

Customer intimacy is a marketing strategy where the supplier of a

product or a service (such as a retailer or a firm), wants to get
closer to the customer to understand their needs, wants and values 8
better. It goes beyond talking to customers.
 The Need for CRM
It costs six times more to sell to a new
customer than to sell to an existing one.
A typical dissatisfied customer will tell 8-10
people.

By increasing the customer retention rate by

5%, profits could increase by 85%.

70% of complaining customers will remain loyal

if their problem is solved

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 Tenets of CRM

 One-to-one relationship between a customer and a

seller.

 Treat different customers differently.

 Keep profitable customers and maximize lifetime

revenue from them.

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 Lifetime Customer Value
The value of a customer to a company depends on three dimensions: the
duration of the relationship, the number of relationships (e.g., the number of
products from a company that a customer purchases), and the profitability of
the relationship

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 Customer Touch Points
Web Computer
Physical
Smart
Store
Phone

Customer
Service

Sales
CUSTOMER Representative
Service
Center
Field
Service
Direct Technician
Email Mail 13
Data Consolidation = 360-Degree View of Customers

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 Data Consolidation

Accounting POM

Finance HR

Customer

Marketing MIS

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2. Operational Customer Relationship
Management Systems
 Operational CRM is the component of CRM
that supports the front-office business
processes.
 That is, those processes that directly interact
with customers; i.e., sales, marketing, and
service.
Two major components of operational CRM

Customer-facing applications
Customer-touching applications
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 Customer-Facing Applications
Customer-facing applications are those
Customer service and support applications where an organization’s sales, field
service,and customer interaction center
representatives actually interact with customers.
Customer service and support refers to systems
that automate requests, complaints, product
returns,
and requests for information.
Sales force automation automatically records all
Sales force the aspects in a sales transaction process.
automation Campaign management applications help
organizations plan campaigns so that the right
messages are sent to the right people through the
right channels.
Marketing

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Campaign management
Sales Force Automation

An example of a
configurator

A configurator is an online product-

building feature.
If you click on the Nike logo above, you will
go to Nike’s running shoe configurator.

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 Marketing
Cross selling is the practice of marketing additional, related products to customers
based on their previous purchases.
Up selling is a sales strategy in which the sales person will provide customers the
opportunity to purchase higher-value related products or services as opposed to, or
along with, the consumer’s initial product or service selection.
Bundling is a form of cross selling in which a business sells a group of products or
services together at a price that is lower than the combined individual prices of the
products.

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 Customer-Touching Applications
In customer-touching applications, customers interact
directly with online technologies and applications
rather than interact with a company representative.
Search and comparison capabilities
Technical and other information and
services

Customized products and services

Loyalty programs

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3. Analytical Customer Relationship
Management Systems
Analytical CRM systems analyze customer
behavior and perceptions in order to provide
actionable business intelligence.

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 The Relationship Between Operational
CRM and Analytical CRM
Customer-facing Applications
• Sales
• Marketing
• Customer Service and Customer
Support
• Campaign Management Data
Customer-touching Applications
Warehouse
• Search and Comparison
• Customized Products
• Technical Information
• Personalized Web Pages • Data Mining
• FAQ • Decision Support
• E-mail / Auto Response • Business Intelligence
• Loyalty Programs • OLAP

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 4. Other Types of Customer
Relationship Management Systems
On-demand CRM
is a CRM system that is hosted by an
external vendor in the vendor’s data center.

Mobile CRM: Pal Mickey at Disneyworld is an

interactive CRM system that enables an
organization to conduct communications related to
sales, marketing, and customer service activities
through a mobile medium for the purpose of
building and maintaining relationships with its
customers.

Open-source CRM is CRM software whose

source code is available to developers and users.
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5. Supply Chains

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Generic Supply Chain

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Supply Chain (recall Figure 1.5)

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A Look at Warehouse Operations

Note: warehouses are just one component of supply chains

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The Flows of the Supply Chain
 Material flows are the physical products, raw materials,
supplies and so forth that flow along the chain.
 Information flows are all data related to demand, shipments,
orders, returns and schedules as well as changes in any of
these data.
 Financial flows are all transfers of money, payments and
credit-related data.

Material flows
Information flows

Financial flows
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6. Supply Chain Management

 Supply chain management (SCM) is the

function of planning, organizing and
optimizing the supply chain’s activities.
 Interorganizational information system
(IOS) involves information flows among two
or more organizations.

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 Push Model

Mass production

Forecast

Salesperson

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Happy customer
 Pull Model

Dell factory
Dell customer order

Dell customer

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Problems Along the Supply Chain

Poor customer service

Poor quality product
High inventory costs
Loss of revenues

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 The Bullwhip Effect

Order Order Order Order

Quantity Quantity Quantity Quantity

Time Time Time Time

Customer Retail Orders Wholesaler Manufacturer
Sales To Wholesaler Orders to Orders to
Manufacturer Supplier

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Solutions to Supply Chain Problems

Using inventories
 Just-in-time inventory: a system in which a
supplier delivers the precise number of parts to
be assembled into a finished product at
precisely the right time.
Information sharing
 Vendor-managed inventory: an inventory
strategy where the supplier monitors a vendor’s
Inventory for a product or group of products
and replenishes products when needed.
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7. Information Technology Support for
Supply Chain Management
 Electronic data interchange (EDI) is a
communication standard that enables
business partners to exchange routine
documents, such as purchase orders,
electronically.
 Extranets link business partners to one
another over the Internet by providing access
to certain areas of each other’s corporate
intranets.
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 EDI Benefits
 Minimize data entry errors
 Length of messages are shorter
 Messages are secured
 Reduces cycle time
 Increases productivity
 Enhances customer service
 Minimizes paper usage and storage

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 EDI Limitations
 Significant initial investment to implement
 Ongoing operating costs are high due to
the use of expensive, private VANs
 Traditional EDI system is inflexible
 Long startup period
 Multiple EDI standards exist

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Comparing Purchase Order
Fulfillment Without EDI

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Comparing Purchase Order
Fulfillment With EDI

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 Extranets
The main goal of extranets is to foster
collaboration between business partners.

An extranet is open to selected B2B

suppliers, customers and other business
partners.

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The Structure of an Extranet

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 Types of Extranets
 A company and its dealers, customers or
suppliers – centers around one company.

 An industry’s extranet – major players in an

industry team up to create an extranet.

 Joint ventures and other business

partnerships – partners in a joint venture use
extranet as a vehicle for communications and
collaboration.
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