Chapter 14: ENTERPRISE APPLICATIONS Part 2: CRM and SCM

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Chapter 14ENTERPRISE APPLICATIONSPart 2 CRM
and SCM
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Three main classes of enterprise systems
Manage the organizations interactions with
customers front office
Manage the majority of an organizations core
internal processes back office
Customer Relationship Management
Enterprise Resource Planning
Supply Chain Management
Manage the movement of materials from suppliers
and the movement of finished products through the
distribution channel
Note some overlap between classes of systems
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Army ERP video

• How did ERP systems begin?
• What problem do the US Armed Forces have that ERP
  can address?
• What is BPI?

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CRM Systems
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Customer Relationship Management Systems (CRM)

• Customer Relationship Management is a holistic
  process by which an organization is driven by the
  wants and needs of its customers.
• Primary goal customer experience is consistent
  and satisfying across all touchpoints.
• Manages all of the ways used by firms to deal
  with existing and potential new customers
• CRM Uses information system to integrate entire
  business processes of a firms interaction with
  its customers.
• Provides end-to-end customer care ( from order
  receipt through delivery and after sale service
  and support)
• Provides a unified view of customer across the
  company
• Consolidates customer data from multiple sources
  (retail stores, phone, e-mail, the Web) and
  provides analytical tools for answering questions

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CRM Customer Relationship Management Systems
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Good CRM systems

• By consolidating customer data, should be able to
  answer questions such as
• Whats the value of particular customers over
  their lifetime?
• Who are the most loyal customers? ( costs 6 times
  more to sell to a new customer than an existing
  one)
• Who are firms most profitable customers?
  (80-90 of the firms profit are generated by
  10-20 of its customers)
• What do these profitable customers buy?
• Firms can then use the answers to these
  questions to acquire new customers.

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Business Value of Customer Relationship
Management Systems

• Increased customer satisfaction
• More effective marketing and reduced direct
  marketing costs
• Lower costs for customer acquisition
• Increased revenue from identifying most
  profitable customers and segments for marketing
• Reduced churn rate (Number of customers who stop
  using or purchasing products or services from a
  company)

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Three dimensions of CRM
Operational
Analytic
Integrated Customer Data
Collaborative
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Operational CRM

• Operational CRM provides support to "front
  office" business processes, including sales,
  marketing and service. Each interaction with a
  customer is generally added to a customer's
  contact history, and staff can retrieve
  information on customers from the database as
  necessary.
• Examples Campaign management, e-marketing,
  account and contact management, telemarketing,
  teleselling, e-selling, field sales

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Analytic CRM

• Applications that analyze customer data generated
  by operational CRM applications (and many other
  sources) to provide information about customers
  that can be used to build profitable
  relationships
• Examples Develop customer profiles analyze
  customer or product profitability identify
  trends in sales length cycle analyze leads
  generated and conversion rates develop
  predictive models to try and anticipate
  customer behavior

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Analytical CRM Data Warehouse
Third party data example
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Analytic CRM example - Cyberian Outpost

• US-based computer and computer products retailer.
• Built a website Outpost.com
• Built a data warehouse to analyze traffic and
  purchase behavior on the website
• Analysts using web site began to notice pattern
• Certain types of products and products that cost
  greater than X dollars were often abandoned.
• Based on this intelligence, Outpost ran a series
  of focus groups to understand why

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Cyberian Outpost

• Learned that
• Certain types of customers were afraid to spend
  large sums of money on the web.
• These customers would abandon their carts and
  call Cyberian Outpost to order the product
• Based on this information, Outpost redesigned
  their web site to make it much easier to call and
  complete orders. Sales increased dramatically

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Analytic CRM - Large US Bank

• Had a problem with credit card customer
  attrition customers leaving the bank for
  competitors
• Built a data warehouse and developed a
  predictive model using special statistical
  software.
• Looked at the descriptive characteristics and the
  behavior of customers who had left the bank in
  the past.
• The model was run against data from the warehouse
  and was able to identify those customers who
  looked like they might leave the bank.

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Large US Bank

• The model was extremely successful. It would
  generate lists of good customers who looked
  like they might leave. The bank would contact
  these customers and make special offers
  (favorable interest rates, etc.) to keep them
• Cost of the model 50,000 - 75,000
• Benefits derived 50,000,0000 per year

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Collaborative CRM
Collaborative CRM is used where customers self
serve. This can include a variety of channels,
such as internet, email, automated phone/
interactive voice response (IVR). A good
example of collaborative CRM is web page
personalization. Collaborative CRM uses the
output of analytic CRM..
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CRM Demos

• Microsoft Business Solutions CRM
• Microsoft CRM Business Solutions - Product Demo -
  Case Study (video)
• Microsoft CRM - What can it do for you? (video)
• Microsoft CRM Demo (Fun) (video)

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Mercedes and Saab

• Why do you think CRM is important to Mercedes and
  Saab? What kind of treatment do you think their
  customers expect?
• What kinds of problems did Saab have because of a
  lack of CRM tools?
• What kinds of capabilities does Mercedes new CRM
  system give them? How about Saab?

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SCM Systems
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Supply Chain

• A network of activities, such as manufacturing
  plants, distribution centers, retail outlets,
  people, and information, which are linked
  together into processes supplying goods/services
  from source through consumption.

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Supply Chain Management (SCM)

• The integration of suppliers, distributors, and
  customer logistics requirements into one cohesive
  process.
• Close linkage and coordination of activities
  involved in buying, making, and moving a product
• Reduces time, redundant effort, and inventory
  costs

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Supply Chain Management (SCM)

• Helps in distribution of the finished products to
  customers
• Includes reverse logistics returned items flow
  in the reverse direction from the buyer back to
  the seller

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Supply Chain Management and Collaborative Commerce
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The Bullwhip Effect

• Recurring problem in SCM
• Information about the demand for a product gets
  distorted as it passes from one entity to the
  next across the supply chain
• As a result, a slight rise in demand might cause
  different members in the supply chain
  distributors, manufacturers, suppliers, secondary
  supplier (supplier's supplier) and tertiary
  supplier ( supplier's suppliers supplier)- to
  stockpile inventory
• These changes ripple throughout the supply chain,
  creating excess inventory, production,
  warehousing and shipping cost

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The Bullwhip Effect
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Business Value of SCM

• Management decides when, what to produce, store,
  move
• Rapidly communicate orders
• Track the status of orders
• Check inventory availability, monitor levels
• Improve delivery service and track shipment
• Reduce paperwork
• Plan production based on actual customer demand
• Rapidly communicate product design change
• Provide product specifications
• Share information about defect rates, returns

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SCM Demos

• SCM Video (Ford Company)
• Xbox Supply Chain Management