1. Chapter 8 - Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management
Supply chain management (SCM) systems supporting business-to-business (B2B) transactions, customer relationship management (CRM) systems promote sales and long-term customer relationships

2. Administrivia Project 2 – Due at the end of class
Project 3 – Due in two weeks
Exam #2 – In three weeks!

3. A short learning moment – System Crashes
You all experienced a moment of panic when a system went down
Several of you ~2pm today
Consider the role of an IT administrator – What might you want to do because of this?
What does this mean for organizations like eBay or Amazon or Healthcare.gov?

4. Societal Level Changes Facilitated By IT
Executing Firm Strategy
How This Influences Firm Positioning
How do we know where we should be?
Aligning the firm around the strategic objective
Supply Chain Management
(Upstream)
Management of Internal Firm Processes
(ERP)
Customer Relationship Management
(Downstream)

5. Agenda
Today we are going to talk about upstream supply chain management
Just In Time Production
Vendor Managed Inventory
We are then going to talk about CRM

6. Chapter 8 Learning Objectives
Supply Chain Management
Describe supply chain management systems and how they help to improve interorganizational 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.

7. Question Who works for a company which manufactures some product?
What do you make?
What stuff do you need to make your product?
Where do you get this stuff?
What happens to you if they run out of this stuff?

8. Recall the Game What happened when you had too much inventory on hand?
How would your task be complicated by additional suppliers?
How would your task be complicated by additional customers?

9. Your Warehouse at the end of Phase 2
Instead of picturing pallets of finished goods…
picture the capital that it took to produce your finished goods…
Not in the textbook
What is the total worth of all of the raw materials and finished goods tied up in the entire supply chain (your organization and your partner’s)

10. Question
The term ________ is commonly used to refer to a collection of companies and processes involved in moving a product from the suppliers of raw materials to the customer.
A) supply chain
B) distribution resource planning
C) procurement
D) demand chain
E) value network

11. Supply Network

12. Supply Chain for Apple’s iPhone

13. Supply chain for a ThinkPad
Video Card: Canada
Motherboard: Taiwan
LCD: South Korea
Hard drive: Japan
Mouse: Mexico
CPU: US
Assembly: China

14. Benefits and Problems with Supply Chains
Potential benefits (the well oiled machine!)
Process innovations
Just-In-time Production (JIT)
Vendor-Managed Inventory (VMI)
Potential problems (with primitive supply chains)
Distorted information
Excessive inventories
Inaccurate capacity plans
Missed product schedules

15. Question
Which of the following statements about just-in-time strategies is true?
A) Companies using this strategy allow the suppliers to manage the manufacturer's inventory levels based on preestablished service levels.
B) Companies using this strategy are trying to optimize their ordering quantities such that parts or raw material arrive just when they are needed for production.
C) Retailers using this strategy allow suppliers to maintain ownership of inventory within their
warehouses or stores until items are scanned at the point of sale.
D) The manufacturer or retailer using this strategy shares real-time sales data with their suppliers, who maintain inventory levels based on preestablished agreements.
E) Companies using this strategy maintain large inventories of supplies, parts, warehousing resources, and extra workers to meet production contingencies.

16. Question
Computer maker, Dell, realized the problems with keeping large inventories, especially because of the fast rate of obsolescence of electronics components. Dell now keeps only about two hours of inventory in its factories. The company is most likely using a ________.
A) vendor-managed inventory system
B) scan-based trading system
C) just-in-case inventory management system
D) customer-managed inventory system
E) just-in-time inventory management system

17. Just-in-Time Production (JIT)
Keeping inventory is costly (storage, capital, missed production schedules).
JIT optimizes ordering quantities.
Parts and raw materials arrive when needed for production.
As orders arriver in smaller quantities, but at higher frequency) investment in storage space and inventory is minimized.
The approach was pioneered by Toyota.
It is used extensively by computer manufacturers to avoid component obsolescence
e.g. Dell keeps only two hours of inventory in stock
JIT requires tight cooperation between all partners in the supply network.

18. Vendor-Managed Inventory (VMI)
VMI is a business model in which suppliers manage the manufacturer’s (or retailer’s) inventory levels based on pre-established service levels.
Supplier monitor’s stock levels and sales data.
VMI requires manufacturer (retailer) to share real-time data.
Benefits?
Cost savings
Minimized stock-out situations
Accurate forecasts
Reduced errors
Prioritized goods shipments

19. Functions That Optimize the Supply Network
Supply Chain Management (SCM) improves the coordination of suppliers, product or service production, and distribution.

20. Given this, why would we want to integrate our SCM tools with our ERP?
ERP systems are primarily used to optimize business processes within the organization.
SCM is used to improve business processes that span organizational boundaries.

21. Question
________ involves the development of various resource plans to support the efficient and effective production of goods and services.
A) Supply chain analytics
B) Supply chain planning
C) Supply chain network
D) Supply chain execution
E) Supply chain visibility

22. Question Inventory and safety stock planning ________.
A) focuses on the coordination of all activities needed to create the product or service
B) focuses on the development of inventory estimates
C) leads to the development of the overall demand forecast
D) focuses on delivering products or services to consumers as well as warehousing
E) leads to the development of a transportation schedule

23. Supply Chain Visibility and Analytics
Supply chain visibility—the ability to track products as they move through the supply chain but also to foresee external events.
Supply chain analytics—the use of key performance indicators to monitor performance of the entire supply chain, including sourcing, planning, production, and distribution.

24. Radio Frequency Identification (RFID)
Source: METRO AG.

25. Bullwhip effect in SC

26. Bullwhip effect: causes and consequences
Downstream has incentive to exaggerate demand
Especially true for hot items
In fear of out of stock, retailers exaggerate demand to get more quota
Example: hot cell phone—orders are 3 times of real demand
Promotions
Distort the natural demand from consumers
Information not shared through the supply chain
Consequences
Higher production costs and transportation costs
More inventories in the supply chain
Overall, less efficient supply chain

27. Bullwhip effect Demand fluctuation is amplified up the supply chain
Pyke-Johnson, posted on BB

28. Solution to Bullwhip problem
Sharing information across the supply chain
All parties face the same demand information
Make decisions based on the same information
Exaggeration is eliminated
Example: vendor managed inventory
However, not everyone wants to share information
Holding information privately can give you stronger negotiation power
Recall Porter five forces model
Information advantage
Retailer or manufacturer?
Before the bar code revolution (1970s)
After the bar code revolution
Supply chain management system is reshaping the balance
Incentive design is the key to motivate partners to share information

29. The Big Picture

30. Time For a Break We just talked about Supply Chain Management
Specifically
Just in time production
Vendor Managed Inventory
Supply chain analytics
Bullwhip Effect

32. Societal Level Changes Facilitated By IT
Executing Firm Strategy
How This Influences Firm Positioning
How do we know where we should be?
Aligning the firm around the strategic objective
Supply Chain Management
(Upstream)
Management of Internal Firm Processes
(ERP)
Customer Relationship Management
(Downstream)

33. Agenda
Before the break we covered four parts of the supply chain as augmented by IT
Just in time production
Vendor Managed Inventory
Supply chain analytics
Bullwhip Effect
Now we are going to move to downstream supply chain
Customer relationship management (CRM)

34. Customer Relationship Management
Supply Chain Management
Describe supply chain management systems and how they help to improve interorganizational 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.

35. First Principles What is the objective of the firm?
How can this be done?
Given this information, how does IT fit into the equation at a conceptual level?
IT is not a means in and of itself. It is part of the system which furthers the firm towards its objective. The role of the business professional is to see how this tool can be exploited.

36. Question
Forget about MIS and technology and computer systems…as a business professional, what do you think about when it comes to attracting and retaining the most profitable customers?
What information do you need to do these things?

37. Sales - “Art” or “Science”?
This begs the immediate question, is sales an art or is sales a science?
The answer quite obviously is both
As a class you have heard my diatribes on the absurdity of relying solely on intuition
Ergo, data allows us to resolve issues of speculation so the firm can deploy skilled human capital to resolve market failures

38. Question
Which of the following is a main objective of customer relationship management applications focusing on downstream information flows?
A) to track global spend by supplier
B) to portray a positive corporate image
C) to develop demand forecasts
D) to collaborate demand and production planning
E) to encourage bullwhip effect

39. Customer Relationship Management (CRM)
The management of all aspects of the relationship between the firm and its customers
Objective?
Increase loyalty, retention, and above all, profitability
Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability
CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprise-wide level
CRM can enable an organization to:
Identify types of customers
Design individual customer marketing campaigns
Treat each customer as an individual
Understand customer buying behaviors

40. Customer Relationship Management (CRM)
What does this enable?
Identify customer types, i.e. classification
Customization of marketing
Comprehension of buying behaviors
Why would we do this?
Increase willingness to pay
Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability
CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprise-wide level
CRM can enable an organization to:
Identify types of customers
Design individual customer marketing campaigns
Treat each customer as an individual
Understand customer buying behaviors

41. Customer Relationship Management(CRM) (cont’d)
Companies search for ways to widen, lengthen, and deepen customer relationships.

42. Customer Relationship Management
Like all enterprise systems, CRM spans many functional areas
Multiple Contact Points
The goal is to provide a single, integrated view of all customer activity, available to all employees who interact with the customer.
Feedback, Individual Needs, and Cross Selling
Having better information enables workers to provide better service, meet the individual needs of each customer.

43. Developing a CRM Strategy
More than just software purchase and installation
Enterprise-wide changes

44. Policy and Business Process Changes
Policies and procedures need to reflect customer-focused culture.

45. Customer Service Changes
Key metrics need to reflect customer-focused measures of quality.
Companies that implement successful CRM strategy, experience greater customer satisfaction.

46. Employee Training Changes
Employees from all business areas must value customer service and satisfaction.

47. Data Collection, Analysis, and Sharing Changes
All aspects of customer experience must be tracked, analyzed, and shared.
Consider ethical concerns.

48. Architecture of a CRM Environment

49. Question
________ includes the systems used to enable customer interaction and service.
A) Data warehouse
B) Operational CRM
C) Integrated CRM
D) Collaborative CRM
E) Analytical CRM

50. Question
Which of the following is a component of the operational CRM system?
A) business intelligence
B) data warehouses
C) ERP systems
D) data mining and visualization
E) sales force automation

51. Operational CRM Systems for customer interaction and service
Enables direct interaction with customers
Personalized and efficient customer service
Access to complete information about customer

52. Question
________ refers to systems that automate complaints, product returns, and information requests, among others.
A) Customer service and support
B) Sales force automation
C) Enterprise marketing management
D) Data warehouse
E) Execution management

53. Customer Service and Support (CSS)

54. Enterprise Marketing Management (EMM)
Third component of an operational CRM is Enterprise Marketing Management (EMM)
Improve management of promotional campaigns
Make sure right messages are sent to the right people through the right channels
Customer lists need to be managed carefully
Individualized attention to each potential customer
Extensive analytical capabilities that can help to analyze effectiveness of campaigns

55. Question
________ focuses on studying customer behavior and perceptions in order to provide the business intelligence necessary to identify new opportunities and to provide superior customer service.
A) Collaborative CRM
B) Integrated CRM
C) Analytical CRM
D) Sales force automation
E) Operational CRM

56. Analytical CRM Analysis of customer behavior and perceptions
Customized marketing
Up-selling, cross-selling
Retaining customers
Key technologies used to create predictive models
Data mining
Decision support systems
Continuous data collection and analysis is necessary.

57. Digital Dashboards for CRM
Digital dashboards help to visualize key CRM performance metrics.

58. Dealing with Multiple Identities
Many people have various different online identities
Different social networks
Multiple addresses
Analytical CRM helps merge different identities for the same person
Uses fuzzy logic-based algorithms

59. Question
Which of the following is a component of the collaborative CRM system?
A) technologies to facilitate communication
B) enterprise resource planning systems
C) enterprise marketing management
D) data mining and visualization
E) sales force automation

60. Collaborative CRM
CRM refers to systems providing effective and efficient communication with the customer from the entire organization.
Collaborative CRM enhances communication.
Greater customer focus
Understanding of historical and current needs
Lower communication barriers
Communication preferences of the customer considered
Increased information integration
Customer information shared across the organization

61. Critical Thinking…
The traditional approach to market research taken by firms has been to ask customers what they want
There are extreme shortcomings to this approach
Take five minutes to discuss, why might simply interviewing customers be the last thing we want to do?

62. Critical Thinking Do customers actually know what they want?
Steve Jobs would be the king of arguing no
Hawthorne Effect
Gregory House’s first principle
How can we extract this information?
Experimentation
Observe action

63. Recap Today we talked about CRM Types CRM Strategies Operational
Analytical
Collaborative CRM

64. Project 2
Hand it in