Running Head: Impact of SCM and CRM 1

Impact of Supply Chain Management and Customer Relationship Management Gary Barton

December 1, 2015

Impact of SCM and CRM 2 Abstract

This paper will look at the impact supply chain management and customer relationship management is having on industries across the markets. The focus will be on the history of each value chain management technique, how they have evolved into the services they provide today, and what companies are successfully implementing these types of management services. The companies that are discussed in SCM include Cisco and Proctor & Gamble. This paper will show that Cisco has invested heavily into their supply chain management as they see it as a primary area of concentration for continued success. P&G has been the world leader in SCM but continues to find new ways to improve their use of SCM. The companies discussed in CRM include Activision and the airline industry with specific mentions of American Airlines and Delta Airlines. Activision has implemented CRM to provide better interaction with their customers. The Airline industry is using CRM for everything from account management to collaboration with partner carriers.

Impact of SCM and CRM 3 Impact of Supply Chain Management and Customer Relationship Management

A significant portion of a company’s time and resources are spent on its supply chain and their customers. As technology has advanced over the last 20 years, so has the way in which organizations manage their supply chains and their customers. These primary areas of value chain management include supply chain management (SCM) and customer relationship management (CRM). These forms of management now dominate across all industries and have provided organizations will the ability to better manage their supply lines and their customers. The first area of concentration will be on supply chain management. Supply Chain Management History Focus on supply chain management did not come into full force until the early 1980’s. This can be contributed to the explosion of technology and specifically, computers. Access to computers gave planners the ability to plan using a graphical environment. As a result spreadsheets and databases were created. New technology in map-based interfaces provided logistical planners significant improvements over the current methods (Robinson, 2015). In these early days, the design models of supply chain and the planning for distribution was spearheaded by the Production and Distribution Research Center. At the same time, material handling was being automated and new control technology was being created by the Material Handling Research Group. New algorithms for large-scale optimization were being created by the Computational Optimization Center to try and fix airline scheduling problems (Robinson, 2015). The contribution of these centers had a significant impact on the supply chain and quickly moved into commercial technology. One of the biggest outcomes for logistics in the 1980’s was the new recognition and attention for being important, complex, and expensive. This meant that organizational executives

Impact of SCM and CRM 4 would need to dedicate more resources to this area of management. A greater focus and an increase in the bottom line would require significant investments in both training and technology. This investment in both people and technology has brought logistics and supply chain management quickly into the 21st century (Robinson, 2015). Supply Chain Management Today Robert Handfield (2011) with Bank of America University has broken down Supply Chain Management into two primary core ideas. The first idea is that just about every product that finds its way to its intended end user got there through a cumulative effort spanning many organizations. The second core idea is that there have always been supply chains, but it has taken a long time for organizations to consider what was happening outside of their own organization. Most organizations did not, or could not, understand the activities that took place along the entire supply chain, leaving the chain too often inept or ineffective. Looking at both of the core ideas, supply chain management is “the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage” (Handfield, 2011). This means that the days of only looking at your end of the chain are no longer an option and that supply chain managers must be an active part of the process to ensure effectiveness and efficiency. The primary activities within supply chain management include production, product development, logistics, sourcing, and all of the information systems that are required to coordinate all of these activities. All of the organizations within the supply chain are connected with information flows and physical flows. The physical flows comprise the actual goods themselves as they are transformed, stored, and moved. Although the physical flows have the most visibility, the information flows are just as vital. Information flows make up the actual communication and coordination needed to control the physical controls. Long term plans

Impact of SCM and CRM 5 and the day to day operations are coordinated between the partners that make up the supply chain (Handfield, 2011). To gain a better understanding of the process, two companies successfully using supply chain management will be discussed. Examples of Successful Supply Chain Management The first company discussed will be Cisco Systems. Cisco is one of the world leaders when it comes to supply chain management and is currently ranked number six in the world on Gartner Supply Chain Top 25 (Aronow, 2015). Cisco is one the world’s largest tech firms and specializes in networking hardware and software with over $50 billion in revenue. Cisco’s niche was providing customer’s hardware with the software included for free. That model is no longer relevant as their customers are now looking for an integrated solution instead of just the hardware. Cisco’s senior director of supply chain transformation John O’Connor says “that’s a big shift” (Trebilcock, 2015). This transformation has led Cisco to a two-year project to replace their legacy systems with ERP and product lifestyle systems. Other systems include an upgraded data management platform and a logistics control tower. Cisco now boasts a global distribution network with 20 nodes, 2,500 internal supply chain managers, and over 25,000 personnel external to the organization that concentrates on Cisco’s global supply chain (Trebilcock, 2015). This transformation and substantial investment in Cisco’s supply chain management will be the groundwork for all of their strategies and technologies that the company will depend on for future success. Some of the ideas that Cisco wants to implement into their supply chain management include cloud mobility and big data. Big data and cloud mobility are seen as the future for maximizing efficiency and reducing costs.

Impact of SCM and CRM 6 Cisco is looking at their supply chain from three different categories. These include the connect supply chain, mobile supply chain, and the analytic supply chain. The connected supply chain involves connecting everything from people to everything on the manufacturing floor using barcodes, sensors, and RFID. Once everything is linked, Cisco can control all their production from its control tower. The mobile supply chain involves moving all their applications to the cloud so that supply chain personnel can make instant decisions without being stuck behind a desk. The idea is to increase visibility all the way down the supply chain to ensure everyone can make the best decisions in real time. The analytic supply chain involves increasing the amount of data being captured to take advantage of big data. Once every node and device are sending data, then the big data can provide real-time information to take proactive steps instead of reacting to issues (Trebilcock, 2015). The next company we will look at is Proctor & Gamble. The only company that can be put in the same category when discussing supply chain management as P&G is Apple. P&G and Apple are considered the best in the world at supply chain management, but P&G is still looking for ways to improve. Even as P&G is looking to reduce the cost of its goods by $6 billion over the next five years, they are still investing heavily in their supply chain network. P&G boasts a supply network staff of 73,000 covering 130 manufacturing sites and 200 distribution centers covering the entire globe (Trebilcock, 2015). In addition to P&G’s focus on the cost of goods and their case fill rate, they are looking to measure their success based on the satisfaction of their customers. P&G plans to align 80 percent of their business and services in the same manner as customer tracking. The idea is to determine what is important to their customers. For some, it might be on time delivery, and for others EDI transmissions (Trebilcock, 2015).

Impact of SCM and CRM 7 In order to meet their goals, P&G announced they will be redesigning their supply networks in both North American and Europe. In North America P&G wants to be able to reach 80 percent of their retailers within one day. This will require six new distribution centers across the US. They will also move from a replenishment system that focuses on demand replenishment instead of forecast driven. P&G is also looking at the just-in-time model used in the automotive industry to encourage their suppliers to setup “supplier villages” next to their plants to be more responsive to P&G (Trebilcock, 2015). Customer Relationship Management History Like SCM, customer relationship management was born out of the technological advances of the 1980’s. Database marketing and collection was pioneered by Robert and Kate Kestnbaum. The data was put into statistical models in order to create custom communications with potential customers. In 1986 ACT! Released the first contact management software used like a Rolodex. This allowed for the efficient storage of customer information. As the 1980’s moved into the 90’s, software development started to explode (Switch Staff, 2013). In 1993, Tom Siebel left Oracle and started Siebel Systems. By 1995, Siebel had developed the modern version of what would be called CRM software and with it, created a new industry. By 1999 new market competition had forced CRM vendors to add more services like sales, marketing, and service applications. The year also brought market consolidations and the first major Software as a Service vendor (Switch Staff, 2013). Just like every other software industry, the CRM industry was hit hard by the dot-com bubble. This was an even bigger problem for e-CRM vendors as companies were hesitant to use their services. Oracle reported losses of twenty-five percent during this time. Soon after the bubble, Paul Greenberg wrote a book called “CRM at the speed of light” advocating for a more

Impact of SCM and CRM 8 robust CRM system that would manage all business relationships. This form of CRM would gain traction and become the standard by the end of the decade. During the second half of the decade, other important events included the entry of Microsoft and the acquisition of Siebel by Oracle. There have been two other significant events one with the entry of Salesforce.com in 2007. They answered the critics that said CRM was not customizable by bringing CRM to the cloud. The other event was Social CRM pioneered by Comcast that puts more focus on the interaction then on the transaction. This type of CRM has gained significant traction and most large organizations now implement Social CRM (Switch Staff, 2013). Customer Relationship Management Today The evolution of CRM has come a long way from a Rolodex based service in the 80’s. Today CRM offers a full suite of capabilities than can be used to analyze an organization's interactions with their customers during the entire lifecycle. This provides the capability to improve their relationships with the customer thus producing retention and increasing sales. CRM can gather data across multiple channels or individual points of contact that occur between the organization and the customer. Some of these interactions could include live chat, social media, direct mail, telephone, website, and marketing material. CRM can also be used to properly brief sales associates on customers buying preferences, history, personal information, and any concerns (Rouse, 2014). CRM software is used to manage the database that will store customer information. It is capable of taking all the different forms of information gathered and combining it into a single database that’s easily accessed and managed. The robust software can also perform many tasks using automation like recording customer interactions including phone calls, social media, email, etc. Other automation processes can include areas in workflow processes like calendars, alerts,

Impact of SCM and CRM 9 and tasks. Some of the most prevalent features of CRM Software include marketing automation, sales force automation, contact center automation, and geolocation technology. There are currently four main software vendors for CRM systems. These include Oracle, Salesforce, Microsoft, and SAP. There are various other smaller providers, but these four are used by most medium to large sized organizations (Rouse, 2014). Examples of Successful Customer Relationship Management The first example of a company successfully implementing CRM is Activision. Activision is one of the biggest video game manufactures known for producing the Call of Duty gaming series. The company has over $4 billion in sales and has a staff of 7,700 employees. Activision wanted to find a solution for bringing together customers with questions or problems with not only Activision support, but other gamers within the community. Activision turned to Salesforce and implemented a cloud-based CRM service. With the new service, if a customer posts anything about Activision a notification will be sent to the cloud dashboard letting employees know there is a problem. Users can also search for themselves to see if there are any problems already being addressed and if there are any corrections they can make on their own to fix the problem. If the employee needs to respond to the customer they can send the answer directly to the customer from the cloud dashboard (Scott, 2012). The other problem is that the company has millions of gamers that can ask thousands of questions every day. Instead of trying to answer each and every question, Activision used CRM to create a community where all gamers could come together to help each other out and search for common questions. Activision adopted Salesforce enterprise social network allowing them to setup individual forums for each one of their games. Gamers can post questions or look at other questions and answers. Activision employees can also monitor the forums and answer questions

Impact of SCM and CRM 10 that have not been answered. Many times the gamers are able to provide answers to other gamers more quickly. This also has provided Activision with valuable information when putting together the next patches and software modifications (Scott, 2012). The Airline Industry has also implemented CRM solutions. American Airlines, Delta, United, and British Airways are now all using some form of CRM. American Airlines has been the latest of the industry to invest in CRM solutions. Derek DeCross, AA vice president, is looking at their new tools to help with speeding up contracting for travel procurements, speed up problem resolutions, and better coordination with their partners (Boehmer, 2013). The new system will allow AA’s account managers to access their client’s information, monitor market share performance, and view prism reports. AA is also looking to incorporate the software British Airways uses to zero in on their marketing campaigns (Boehmer, 2013). Delta has been using CRM solutions since 2007 and has been refining their tools since the startup. Like AA, Delta account managers are able to access account profiles, contracts, and various other account data like Sky Partner reports. This access has been crucial for multinational account managers who manage relationships throughout Europe, Asia, and Latin America (Boehmer, 2013). Conclusion Both Supply Chain Management and Customer Relationship Management have become industry standards by many of the largest organizations in the world. Today’s competitive world marketplace demands that organizations must invest in these types of management solutions if they want to gain a competitive advantage over their competitors. SCM is now one of the most important aspects that an organization can focus on and find real improvements. Even the top companies in the world using SCM including Cisco and P&G continue to try and improve their

Impact of SCM and CRM 11 systems to stay competitive. CRM has also found itself as a “must have” for any large organization. Entire industries are now utilizing this form of data management because of the versatility and capabilities it offers when combining data into one location. The ability to store, access, and share data is something that all organizations will have to become very proficient at to stay competitive in today’s Information technology economy.

Impact of SCM and CRM 12 References

Aronow, S. (2015, May 14). Supply chain top 25. Gartner. Retrieved November 29, 2015, from http://www.gartner.com/technology/supply-chain/top25.jsp

Boehmer, J. (2013, May 6). With CRM upgrades, airlines speed contracting, enhance client visibility. Business Travel News. Retrieved November 15, 2015, from http://www.businesstravelnews.com/More-News/With-CRM-Upgrades,-Airlines-Speed-Contracting,-Enhance-Client-Visibility/?ida=Airlines&a=proc

Handfield, R. (2011, January 11). Supply chain management, SCM, SCRC Supply Chain Resource Cooperative. Poole College of Management, North Carolina State University. Retrieved November 15, 2015, from https://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management

Robinson, A. (2015, January 23). The evolution and history of supply chain management. Cerasis. Retrieved November 15, 2015, from http://cerasis.com/2015/01/23/history-of-supply-chain-management/

Rouse, M. (2014, November 1). What is customer relationship management? TechTarget. Retrieved November 15, 2015, from http://searchcrm.techtarget.com/definition/CRM

Scott, J. (2012, September 20). Activision uses Salesforce to serve gaming community. Computer Weekly. Retrieved November 15, 2015, from http://www.computerweekly.com/news/2240163564/Activision-uses-Salesforce-to-serve-gaming-community

Switch Staff. (2013, September 12). A brief history of customer relationship management. CRM Switch. Retrieved November 16, 2015, from http://www.crmswitch.com/crm-industry/crm-industry-history/

Impact of SCM and CRM 13 Trebilcock, B. (2015, January 2). What does it take to remain a supply chain leader?

SupplyChain247. Retrieved November 15, 2015, from http://www.supplychain247.com/article/what_does_it_take_to_remain_a_supply_chain_leader